The Cost of Training New Employees

Updated August 15, 2022

Providing comprehensive on-the-job training for new employees not only ensures they know exactly how to perform within their roles, but also increases overall productivity. In order to train a new hire efficiently, an organization will need to invest a sufficient amount of time and money into the cause. The cost of training new employees can vary depending on a number of circumstances. In this article, we'll explore how much it costs to train a new employee, the costs that training may incur and how to make training employees more cost effective.

Is training new employees worth it?

It's beneficial for your company to view training as an investment rather than an expense. You will save money in the long term if you employ the necessary time and resources needed to train your employees instead of sending them directly into their roles without any background knowledge of the position. When an employee feels confident in their skills and abilities, they tend to complete assignments more quickly and efficiently. Proper on-the-job training can also lead to improved employee retention rates.

How much does it cost to train new employees?

The cost of training new employees extends beyond their salary and benefits, though not every new hire will require the same process. According to data provided by the Association for Talent Development, the average training cost per employee is $1,252. The same report states that employers dedicate an average of 33 hours of training time for new employees. There are several variables that determine how much it will cost a business owner to train and onboard a new employee, including:

Organization size and industry: Smaller businesses tend to invest more on training new employees, while larger organizations spend more time during the onboarding process. Costs are also industry-dependent, since positions in complex sectors like law and medicine will require more specialized knowledge.
New hire's prior experience and skills: An employee that has worked in a field for years will likely require less hands-on training than someone hired in an entry-level position. However, even experienced professionals sometimes need training on workplace practices and culture when accepting a new role.
Complexity and length of training: On-site training tends to be more cost-efficient than sending new employees off-site, and shorter training courses tend to cost less than those that are longer. These variables are specific to your organization and industry.

Types of training for new employees

There are a variety of different programs and techniques you can use to help train new hires, including:

I**nstructor-led training:** Though this is one of the more costly techniques, instructor-led training can be extremely effective and offer invaluable benefits for new employees because they work with an expert.
Self-paced online learning programs: A cheaper alternative to instructor-led training is a self-paced online learning program, which relies on interactive videos, activities and tests to relay information to a new employee. This is also one of the easiest types of trainings since it allows companies to train several employees at once.
Coaching or mentoring: One-on-one coaching from a mentor is similar to instructor-led training, but with the added benefit that the new employee gains an opportunity to build a professional relationship with their supervisor or mentor.
Hands-on learning: If the role is technical and involves the use of machinery or other complex equipment, hands-on training may prove to be a helpful training technique for new employees so that they receive guidance as they learn the tools.
In-person group training: While slightly less personal than one-on-one training, in-person group training still provides new employees with several benefits. It allows them to practice collaborating within teams, and it is a relatively inexpensive onboarding method.
Formal outside courses: Some employers choose to send their new employees to formal outside courses for their initial training. This often proves to be a cost-efficient strategy for companies, since it requires them to dedicate minimal time and resources to conducting training.

What are the hidden costs of training a new employee?

In addition to the standard fees businesses handle when training employees, there are often hidden costs associated with bringing on new hires. Some of these hidden costs include:

Recruiting new employees: Advertising job openings, reviewing resumes, conducting background checks and holding job interviews for potential candidates is one area where hidden costs can manifest.
Loss of productivity: Whether you opt for instructor-led training or in-person group training, you'll likely incur expenses related to the loss of productivity, since the responsibility of leading sessions and taking care of onboarding paperwork falls on another employee or manager.
Equipment fees: Since many new employees need technology and other supplies in order to perform their roles sufficiently, it's beneficial to account for this when devising training budgets.
Instruction materials: Depending on which programs and devices you decide to use for training, you may also need to pay for instruction materials for an employee to use during early training stages.

Get interview-ready with tips from Indeed

Prepare for interviews with practice questions and tips

How can you make employee training more cost-effective?

There are several things you can do to make employee training more cost-effective, such as:

Striving to improve employee retention: Continued education and refresher courses are typically less expensive than training a brand new employee. You can focus on retaining workers by providing them with a healthy work environment and ensuring job satisfaction.
Recruiting highly-skilled employees: Whether you're looking to replace a former employee or create a new role, by hiring workers who already possess the skills needed to excel in a role, you can minimize training costs. For example, a legal secretary who has worked in a law office for five years may only need a few days of training at your legal practice, whereas someone with very little experience might need weeks of hands-on training.
Digitalizing onboarding paperwork: If all the required forms an employee needs to fill out are available online, they can choose to complete these before their start date, leaving them with more time for on-the-job training.
Using performance reviews: When you can identify which areas someone can improve upon early on, you can reduce the chance of long-term performance issues arising. A performance review is an extremely helpful tool for employers to develop well-thought out goals and metrics for future training courses.