How to Establish a Budget for Your Employee Training

With proper planning and budget allocation, employers can provide training for their employees without cutting on quality.


Training your employees is a sure way to keep your company on a steady path. It not only ensures that your employees excel in their work-specific tasks, but it can also foster camaraderie among their colleagues.

Like every other investment, human capital is representative of your company’s growth. The more you invest in boosting your employees’ professional skills, the more you cement your company’s place in the industry. But do you need to spend big to have quality employee training? How much should you spend?

This budgeting guide will help you set the amount your employee training needs without sacrificing the quality.

Steps in Establishing Your Employee’s Training Budget

Below are the steps to take when establishing your company’s budget for employee training:

1. Choose between Two Training Methods

The initial step in creating your employee’s training budget is to choose between online training or in-person training, depending on which suits your objective the better.

In-person training suits companies that look to foster better connections among their employees but typically comes with higher expenses. This training method will generally have you considering the costs of training materials, venues, travel, accommodation, catering, and printing.

However, since your employees can meet face-to-face with this method, it enhances their team-oriented skills, creates fewer distractions, and gives them better memories with your company, which may amplify your retention rate.

On the other hand, online training is generally less expensive (depending on other factors, this could be more expensive) but less connection-oriented as well. This only requires you to purchase online training materials such as a Learning Management System and the instructional package (you can further cut costs by making this on your own).

Your employees also need reliable internet access with equally reliable gadgets to access the online training materials. If you haven’t yet included this on your company’s incentive budget, then you’ll have to factor that as well. Otherwise, your employees won’t have the optimum training experience.

Online training is also less effective if you’re looking to connect your employees with each other. Its distant setup also provides for more distractions should you conduct the training remotely in your employees’ homes.

2. Define Your Objectives

Aligning your company’s goals with the training objectives is crucial in creating a budget plan for your employees’ training. As with your company’s initial business plan, pinpointing the foundational necessities in the industry is instrumental to your company’s success.

Do you want bigger transaction sizes? Do you want more first-time transactions or repeat transactions? Do you want boosted office productivity rates? These are some of the things you should consider when planning the training.

For example, if you want to boost your company’s sales revenue, you should focus on sales training programs instead of disaster and emergency training. This enables you to gauge better and forecast the return of investments acquired from particular training.

You can also ask for your employees’ assessments before planning a training. Being at the forefront of your company’s transactions makes them especially sensitive to what the company needs.

3. Look at Available Comparative Data

You can also search for other companies’ training budgets to give you a benchmark for your expenses. Try to look at similar training packages that cater to a similar number of participants and gauge which looks the best for your needs.

Alternatively, you can look at your training budgets from the past to see which was most effective and improve on it with updates on focus and strategies.

4. Choose Your Budget Metrics

Choosing the appropriate budget metrics is the next step in setting your employee training budget annually. We’ll base some of them on this 2017 US-based training report. Below are five of them:

Training Budget per Employee

An employee-based training budget highly depends on your company’s size and individual employee needs; hence using it as a benchmark can be significantly harder. If your company is dependent on your human resources and needs specialized training packages based on an employee’s area of expertise, then you can consider using this metric.

This budget metric typically sets companies back for around up to $1400 per employee, depending on the number of employees.

Training Budget per Salary

This metric uses the total budget for the annual salary and multiplies it by 1% to 3% depending on the company size, to get the ideal employee training budget. However, if you used a specific percentage before, which proved to be successful, you can continue using the same amount.

Training Budget per Revenue Percentage

Determining your training budget by your company’s revenue can also be used. Most analyses on benchmarks suggest that companies allocate an average of 0.5% to 2.0% of their annual revenue to the employees’ training budget. This percentage depends on how big your company is.

Training Budget per Needs

There’s really no set formula for calculating your training budget per need. You only have to conduct canvassing and estimates on what each item will cost, such as the aforementioned training materials, such as venues, travel, accommodation, catering, printing, Learning Management System, and instructional package.

Setting a training budget based on what your training needs is best done before the year starts to give you enough time for revisions and canvassing. You also need to strategize better since this method takes more time and research to calculate.

Cost-effective Employee Training

Training your employees is one way to give you increased work productivity and efficiency, and it need not be unnecessarily expensive.

With proper planning and budget allocation, you can provide training for your employees without cutting on quality. You have to know the proper budget calculation methods to get things started.

Jim Hughes
Jim Hughes has significant experience covering financial and business topics. He’s been a financial advisor and also provided consulting and advice. At the moment he is the Director of Content at