Optimizing Internal Training Costs: Standardization and Budgeting Insights

Dear HR Practitioners,

I need assistance in determining standard costs for internal training interventions. An example is determining what the cost per person will be for a day's session of induction.

Key to my dilemma is the cost per person that anyone attending that session can be charged. Currently, the cost per person is derived by dividing the total cost of the intervention by the number of people who attended. However, we want to establish standard costs for each internal intervention regardless of the number of attendees.

Please assist.

From Raymond

Dear Raymond,

I don't think we can arrive at standard training cost because of various reasons involved. Kindly provide me relevant information for the queries listed below:

1) Did you hire an external trainer to cater to your training needs?
2) Is the trainer's fee (one or two-day program) the same/fixed for various modules?

Since it is on-the-job training, to derive the training cost per employee per module or for the respective module, add one day's salary of the respective employee to the training cost per employee.

I wonder why you want to charge your employees. Is it a good practice? To my knowledge, there is an organization that pays their employees a certain amount to get themselves trained for better performance. If they fail to perform, they will not receive a pay raise.

With profound regards,

[Your Name]

Thank you, Shaik, for the response.

By standard cost, I am referring to one cost for a particular intervention. For example, if an employee attends Time Management, then the cost per person is $25, irrespective of the number of people who attended. This cost will assist in estimating training budgets for departments in our company.

Dear Raynet,

Honestly speaking, I found your organization's training strategy very strange. If you charge your employees, then it's going to be a different ball game. Post-training, that too paid (investment) by employees, what if your employees expect a higher pay raise if their performance is found to be outstanding? What is the major objective of organizing training for your employees? Is it a need-based training or generic? What if employees hesitate to undergo training as they need to invest from their pocket?

It is the responsibility of the organization to develop employee competencies/skills by offering training, applying mentoring & coaching strategies; this is part of performance analysis and OD as well. By doing so, management will have the upper hand on employees, or else it's difficult to meet employee expectations.

With profound regards

Our internal training is mainly generic. We do not charge employees but need to determine what costs the training department has incurred for conducting a particular course. We are able to determine the cost of the entire course and divide that by the number of people.

My challenge is determining a standard cost for generic training like customer service, which we conduct on a monthly basis.

Dear All,

Training cannot be a cost; it is an investment. Look at the benefits of the trainings. Training and awareness improve the culture of an organization. For arriving at the budgets, refer to the Training Need Identification matrix. (If you have it) Calculate the number of training programs. Take approximate quotes from faculties and provide 1.5 times of the same while budgeting.

Thanks & Regards,
Sudhir

As I told you earlier, we cannot arrive at the standard training cost per employee unless your management has appointed an in-house trainer who is responsible for training your employees on various modules. This is the best, cost-effective, and proven strategy to develop your employees' competencies as the in-house trainer will be available within the organization, able to interact with your employees regularly, and keep monitoring their performance.

Kindly share your email ID; I will send some information that will be of help to you and your organization.

With profound regards

Hi Raymond,

You can calculate internal training costs. Below is the calculation:

Salary of the trainer (if it is a staff member) divided by 21.67 (average working days) = Rate per day. You then take the rate per day divided by 8 (average working hours) = Hourly Rate. If your training is only 3 hours a day, you take your hourly rate and multiply it by the number of hours trained. This will give you a cost to allocate for in-house training.

I hope this helps.

Suret

Raymond,

Many companies we work with use the same methods of calculation that you already do. A crucial part of your question does not take into account the limit of the training class size.

While your training process may be internalized and the topics covered may not require a limit on the class size, you could do either or both of these things:

Look at an "average class size" and figure out per person training costs by dividing the training fee if it's an external trainer (especially for special behavioral training or coaching).

Find the effective training class size for your regular class and divide the internal training budget by this number.