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How much should we invest in employee training?

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Question: We're a small manufacturing firm with fewer that 50 employees. It's getting harder to find qualified people, so I'm advocating a stepped up training program. Management is balking at the cost. We currently spend a little over 1% of payroll on training. I think we should at least spend 2% and preferably more. Am I off base? How can I make the case? -- Carol C., Oregon


The percentage is not the point because 1 % of a $10,000,000 business is whole lot more than 2% of a $2,000,000 business. The question should be: How much higher salary do we have to pay a hard-to-find qualified EE (& how much will that cost in annual raises given the higher starting wage)? Compare those answers against the costs of available training courses, programs, &/or online training.

P. S. Also, I don't think you should cost it as payroll, because training & education are expensed as one-time overhead costs, not direct labor.

National Association of Manufacturers recommends 3% of payroll. See if you can contact a Workforce Investment Board (WIB) or in your state. They very well may be able to connect you with training grants to help offset your costs. You might also try you Dept. of Labor for WIA funds if you can't find a WIB. They may also help you do the grant process.

Training costs are an expense, you should know what each position you are training for is worth. In other words if the job you are hiring for is a 30k/yr job to start and 35k max for the next couple of years, then during your interview process you find out who is willing to start for less, say 27k/yr then explain the sooner they learn and become productive they will move up to your 30k mark. If you know your ranges and ask the prospective employee what their salary's goals are, you have something to work with. You can now help that employee map out a route to their goal which should take you and your company to it's goal.

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