Companies understand the importance of developing training budgets as part of the master budget process for their organizations. Implementing training programs to enhance the skills and abilities of new and current employees improves the overall level of performance. Creating a training budget requires planning to ensure the most efficient use of limited resources. Conducting a training assessment, determining objectives and figuring the costs are key components of the training budget. In addition, calculating the return on investment will help sell senior management on the benefits of making the investment.

Training Assessment Needs

A training needs assessment helps justify the company's need for making an expenditure. Take the time to identify the training the organization's employees need. This will make you aware of the best use for a limited budget and put you in a position to negotiate for a larger budget. Identify who needs the training, the training's importance to the organization and the method of delivery. Perform a survey of the employees to determine what skills they possess and where skill deficits exist. Compare employees' skills to the division's or company's needs so you can make a knowledgeable estimate of the training that's required.


Consider initiatives and objectives planned for the coming year, which will help clarify how to spend the available funds for training. A key step involves determining the current jobs that are critical for accomplishing the objectives. Assess whether the organization has people with the skills required to execute projects or if the staff needs specific training to improve its skill sets. Ascertain the employees' response to new initiatives to anticipate if motivation may become a challenge to overcome. Analyze goals and objectives to help decide the specific areas of performance where funds should be spent for training, and identify any challenges unrelated to training.

Training Costs

Many companies tend to cut back on training during lean times. To sell the need for training to the decision makers, get an accurate account of what it costs for proposed training sessions. Include expenses for the number of training participants; training materials and equipment; and meals, board and travel. Calculate the cost of the training per employee. Do not overlook other expenses, such as man hours lost to productivity or overtime for staff persons who cover for personnel attending the training. Make sure each line item in the budget represents the best use of the company's resources. This entails taking the most cost-effective route to delivering the training program. Investigate different scenarios for executing the necessary training. For example, save money by having the training conducted on-site instead of renting space at a local hotel.

Return on Investment

A valuable component for any training budget is the return on investment for the employer. When presenting the budget, discuss how the training will provide employees with the critical skills the company needs to move in a tactical direction. Emphasize the behavior changes that will contribute to the company's values. Another approach quantifies the training in terms of the work hours and dollars saved by having skilled staff take less time to complete certain tasks.