The cost of training new employees: Everything you need to know

How much does it cost to train a new employee?

According to a 2024 report by ​​Training magazine, companies spend an average of $774 on training per learner. This translates to a total annual training cost of $98 billion for US employers. 

While this figure has decreased from previous years, it’s still a significant investment when multiplied across new hires. 

What are the costs associated with training new employees?

Several components contribute to training costs. 

Direct costs

• Training materials like printouts and other resources

• Technology and equipment, including software, learning management systems (LMSs), digital training tools, video conferencing tools, and laptops

• Administrative costs – for example, maintaining employee learning records

• Training staff salaries

• External course fees

Indirect costs

• Employee wages, as you should pay employees for the time they spend in training 

• Opportunity cost – while employees are training, they’re not performing their regular duties

• The time an in-house trainer or HR takes to develop and deliver training

The hidden costs of poor training

There are also hidden costs of delivering inadequate or ineffective training to new employees. 

1. Increased turnover

Employees who feel ill-equipped to do their jobs are more likely to leave: A Paychex survey found that 80% of new hires planned to quit because they felt undertrained due to poor onboarding. Since replacing an employee costs six to nine months of their annual salary, this is a huge hidden cost to employers. 

2. Loss of productivity due to skill gaps

When new employees don’t have the skills they need to perform in their roles, this costs the employer. According to McKinsey research, these skill gaps result in a 22% loss in productivity. 

3. Increased compliance risks

Failing to provide employees with mandatory training can lead to compliance issues, including fines, penalties, and lawsuits. 

4. Reduced employee safety

New employee training often includes a component of workplace safety and health. Without quality training, there’s a higher risk of workplace accidents or illnesses. 

Which factors influence training costs?

The costs of your employee training programs depend on various factors. 

1. Company size

Perhaps due to economies of scale, smaller employers tend to pay more in training costs. 

According to the Training magazine’s 2024 survey, the average training cost per learner based on business size is:

• Small businesses (with 100 to 999 employees): $1,047 per learner

• Midsize businesses (1,000 to 9,999 employees): $739 per learner

• Large businesses (10,000+ employees): $398 per learner

2. Amount of training

Training during the onboarding process typically focuses on the essentials new employees must know to do their job. This may include the organization’s internal processes, workplace health and safety training, and job-specific skills training.  

The more training you provide new hires, the costlier your training will be. However, you can provide more training later by offering employees professional development opportunities. 

The trick is ensuring employees are fully equipped to start in their roles without delivering excessive training programs (costs can add up!) that overwhelm trainees. 

3. Training methods

How you deliver employee training also influences the overall cost – some employee training programs may be more cost-effective in certain situations. For example:

• For some employers, developing training materials and programs in-house is cheaper than hiring an external training provider. 

• Online training courses remove the need to hire someone to deliver the training but require investment in the necessary software or LMS. 

• Remote training can be more affordable than onsite training, as it eliminates physical space and travel costs. 

How to know whether your training programs are effective

Here are tips for ensuring you’re getting a good return on investment (ROI) on new employee training. 

1. Track training outcomes

Identify the key performance indicators (KPIs) that’ll give you insights into your training programs and help you measure their success. Specific KPIs vary between organizations and depend on the desired training outcomes. 

Training-specific KPIs may include course completion rates, time-to-completion rates, post-training quiz scores, and learner feedback scores. Broader KPIs that may help measure the effectiveness of your training programs include productivity, error rates, customer satisfaction scores, and employee satisfaction. 

To track these KPIs, you might use LMSs that automatically capture things like course completion rates and quiz scores – or organizational performance tools like customer feedback forms that directly assess customer satisfaction and service quality post-training.

Measuring these KPIs can help you determine whether you’re providing enough – and effective – training. Some (like productivity and customer satisfaction) can even be measured before and after new training programs to assess improvements and direct impacts of these training initiatives.

2. Conduct employee pulse surveys

One way to collect qualitative feedback on your training is to ask each employee to complete a quick survey after they’ve completed it. Ask whether they found the training effective and invite them to provide constructive feedback. 

This can give you immediate insights into how to tweak your training for new employees to maximize effectiveness. 

How to reduce the cost of training new employees

It’s impossible to remove your training costs completely – all employees need some training when starting with a new employer. However, there are several strategies you can use to reduce costs. 

1. Take a skills-based approach to hiring

Adopting a skills-based approach to hiring – where you evaluate candidates’ abilities through skills tests and similar methods – ensures you hire people with the right skills, reducing the need for job-specific training when they start. In fact, 90% of employers report reduced mis-hires by taking a skills-first approach to hiring. 

It also helps you deliver more targeted training to new hires, giving you more bang for your buck. For example, you can use skills testing results to quickly identify new hires’ specific skill gaps and address them during their onboarding. 

2. Develop a scalable onboarding process

Setting up a standardized, repeatable onboarding process means you don’t have to reinvent the wheel for each new employee. This approach works well for new hire training, as the type of training they need is usually the same – information about how the company works and any mandatory training. 

A good way to do this is to use onboarding software that enables you to deliver the same training modules to employees in the office and remotely. 

While you may need to add some job- and worker-specific training modules, a well-structured process maintains consistency and reduces the cost of onboarding new hires. 

3. Set up a mentoring program

A formal mentoring program is a great way to provide on-the-job training to employees. While it can’t replace the onboarding process entirely, it can help reduce the training you must provide new hires and the associated costs. 

Mentoring allows your current employees to share highly relevant, job-specific information with new starters. It leverages internal expertise – rather than outsourcing it. Mentoring also helps new hires build strong workplace relationships, helping them feel supported in their first few months. 

Level up your remote hiring process with talent assessments

The average training cost per employee is $744. When working out the costs for your company, consider factors like the amount and type of training you intend to deliver. While the initial cost can sting, the benefits of providing effective training to new hires include increased retention, compliance, and employee safety. 

The good news? There are ways to ensure you get a good ROI on your new hire training. You can measure its effectiveness and make any necessary changes. Adopting a skills-based approach to hiring also helps you hire people who need less training and develop more targeted – and therefore effective – training programs.

Sign up for a free trial to learn how TestGorilla can help you take a skills-based approach to hiring and improve your training for new employees. 

FAQs

How long does it take to train a new hire?

This varies greatly depending on the type of training they need. Generally speaking, preparing new hires with a few hours of training is possible. Realistically, it may take three to six months of training for a new employee to feel thoroughly familiar with and confident in their role. 

How much training does a new employee need?

This varies depending on their experience, skill gaps, and industry regulations. At minimum, all new employees need orientation training to familiarize themselves with the company’s internal processes – plus any mandatory training, like workplace health and safety.