How to Calculate Training Labor

Rachael Nemeth
12
Co-founder, CEO
November 22, 2020

Establishing well-defined budgets and keeping organizations at or under the agreed upon dollar amounts is critical, especially in the food industry. As the fiscal year for many comes to a close, what training budget to allocate is a challenge. Training is critical to keeping employees safe, maintaining quality products and consistent processes, and ensuring customer service is high quality in a time when same-store sales are more important than ever. We know that training should include the cost of trainers and the admin time those trainers need on order to develop training. There is an additional cost that is often overlooked when projecting for the year ahead, yet it is arguably the most important number to calculate: training labor.

What is training labor?

Training labor is the total hours spent teaching and learning on the job. It is a "hidden" expense and is typically miscalculated. By considering the training labor that goes into your operating expenses, you can better project your budget and even lower your labor costs altogether.

Every business has training expenses, but the spend will vary from business to business. A 500-unit QSR might allocate more for new employee training more than a 500-employee commissary. Nonetheless, studies show that almost 2 out of every 3 dollars spent on training goes to front-of-house (guest-facing) and back-of-house (production) hourly employees (1). In other words, the biggest line item in your training budget is time your hourly team spends in training. That's why the largest portion of your training costs are coming from your operating expenses. Labor = operating budget.

Why is training labor overlooked?

Training in and of itself is undoubtedly part of the employee lifecycle. So why is training labor overlooked as a budget item?

Good training is embedded into daily work culture at each stage of employee development. When it's woven into each stage of the employe lifecycle, it's easy to miss it. If you're sitting at your desk right now, a relevant analogy to training labor is the cost of checking email as an executive. It is an essential part of your job. A communication tool you cannot do without. Have you ever calculated how much time you spend responding to emails each day? We think about project work and meetings, but the time to check email is often a hidden cost to admin work. So too is training labor a hidden cost to frontline work.

When is training labor most expensive?

Especially in industries like restaurants and food manufacturing, obvious training labor expenses are at the start of an employee's tenure. The non-obvious training labor expenses come right after that. 5 minutes here or 15 minutes there and suddenly you have racked up more than 20 hours per employee per year.

Training is proportionate to the level of skill and growth required of an employee at any stage in an organization. The more skilled the employee, the more you are likely to spend developing that employee. Here are the stages of the employee lifecycle as they relate to training. This chart exemplifies how learning and development impacts each employee, regardless of their stage of growth in an organization.  And so, training budgets cannot only be allocated to one stage. It must be averaged across all stages.

So how much training labor should you allocate?

Training labor includes the time spent actually training and not producing or serving. It is often the highest cost for an organization. As we mentioned in the beginning of this article, it's important allocate for more than just your facilitators and curriculum developers.

Admin time will always be a part of your training budget. It's important to remember that admin time is spent on the manager side as well as the employee side. Admin time is not the same as training labor. Training labor is when an employee is actively learning. So when we think about admin time, there are two factors to consider.

  1. Traveling to and from on-site or online training sites outside of working hours. Also known as "spread of hours", this is when pay is due when the length of time between the beginning and end of a workday is greater than 10 hours. All employees who work a covered spread of hours in a single workday are entitled to one additional hour's pay at minimum wage for that day. Bottom line, this adds up.
  2. Admin time is assumed for managers, but it is also to be considered for employees. We account for between 2 and 5 minutes per week for time spent looking for and changing passwords, logging and documenting training, and also searching for a space to learn. Whether on-site or online, there minutes that add up. This employee admin cost accounts for an average of 1.7 hours per employee per year. For an organization of 500 employees who pay their hourly team $11/hour, that's an added cost of $9,533.

Technology is a clear cost. Since on average 86% of businesses already have some form of training technology, we have included it in the breakdown below as 15% of the total per-employee training costs to consider. This could vary from business to business.

In consideration of admin and technology costs for hourly employees, we still found that training labor was handily the largest expense for employees. It is unavoidable but can be predicted.

Now that you've gone through a crash course in training labor, I encourage you to take a few moments and calculate your organization's training labor. This will help you maintain a strong culture of learning and development while also helping you better manage

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