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In a previous article, we discussed the difference between corporate learning – which includes company-directed operational training, compliance training, and competency training delivered through an LMS – and meaningful upskilling, such as courses, coaching, bootcamps, and executive education.
Hopefully, we’ve convinced you of the need to invest in both corporate learning and upskilling as part of your learning and development (L&D) program. When companies give each domain the focus and attention it deserves, we see higher overall engagement, which boosts employee satisfaction and business outcomes.
But how much should you allocate for each? In this article, we’ll help you think through this question. First, we’ll consider total spending on learning and development, and then we’ll discuss business considerations for investing in corporate learning vs. upskilling. Finally, we’ll wrap up with a quiz to help you assess your level of investment in L&D and identify ways to grow your program.
Total spending on L&D should be 1-6% of employee salaries
In general, HR experts suggest spending between 1-5% of your total investment in salaries on learning and development. So, if you spend $1,000,000 on salaries, then you should spend between $10,000 – $50,000 annually on learning and development. We suggest getting as close as possible to the top of that range. As an upskilling company, we might be biased toward maximizing L&D investment, but our claims are backed by data.
Professional development (including corporate training and upskilling) is proven to be one of the most effective ways companies can invest in their people. Guild Education, a career development provider, found that for every $1 invested in career education and upskilling, their corporate partners generated $2.84 in cost savings, or 184% ROI. Even more dramatically, DeakinCo. and Deloitte found that every $1 invested in professional development generated an additional $4.70 in business revenue per employee, or 370% ROI. Check out our article on the ROI of upskilling for even more examples.
Spend at least $2,500 per employee on learning and development
We advocate spending a minimum of 3% of salaries on learning and development, and up to 6% if you can afford it. Another way to think about this is the average cost of learning and development per employee. We recommend spending at least $2,500 per employee on a mix of upskilling and corporate learning. If we go back to our previous example of a company that spends $1,000,000 on salaries and now assume that they have 12 employees, that means they would spend $2,500 x 12 = $30,000 on total learning and development, or 3% of total salaries.
Large franchises should spend more on training; tech innovators should spend more on upskilling
How that spending breaks down across corporate learning and upskilling will depend largely on your industry, business model, and goals. Companies where standardization is extremely important (think large fast food chains) and businesses that are heavily regulated (think oil and gas companies) will likely have to spend a larger share of their L&D budget on corporate learning vs. upskilling, potentially as much as 80% on training and 20% on upskilling.
Companies with business models built on innovation, and organizations that require professionals to constantly update their skills, will have to invest more in professional development and upskilling. Examples of this include technology companies whose engineers must be up on the latest coding languages and AI advancements, and educational institutions whose instructors must learn the newest teaching techniques and pedagogies. For these organizations, we recommend spending as much as 80% on upskilling and 20% on corporate learning.
What about organizations that are both highly regulated and innovative, such as hospitals and pharmaceutical companies that must adhere to strict standards, and whose doctors and scientists must participate in frequent continuing education activities? These groups should invest a higher overall share of their budget on learning and development (e.g., 5-6% of salaries), and they should allocate funding more evenly between corporate learning (~50%) and upskilling (~50%).
Check out the chart below to better understand how investments in corporate learning and upskilling support different types of businesses with different types of goals.
Corporate training vs. professional development business objectives
Example: Learning & development breakdown for an innovation-focused technology company
Now, let’s take a closer look at an example of how this might break down across various types of L&D programs. For an innovation-focused technology company spending $2,500 on total learning and development per employee, that 80/20 split could look like $1,000 on an individualized upskilling stipend, $600 on other professional development activities (e.g. a group seminar taught by external experts) and $400 on corporate learning (e.g., compliance, operational training).
__________________________________________________________________________________
$1,000 = upskilling stipend (50%)
+ $600 = other upskilling activities (30%)
+ $400 = corporate learning programs (20%)
_________
$2,500 = total per person investment in learning & development
__________________________________________________________________________________
We hope this discussion has helped you look at learning and development spending in a new light. Like all investments, it’s important to find the mix of learning programs and tools that works for your company at your current stage of development. The quiz below can help you get started assessing your L&D investments and programs. As always, the OneRange team is happy to help. We’d love to hear from you at [email protected].
QUIZ: How mature is your learning & development program?
Basic questions
- Do you offer corporate learning, including a) operational training b) compliance training and c) competency training? (Add 1 point for each.)
- Do you deliver training through an LMS? (Add 1 point if yes.)
- Do you offer educational tuition reimbursement for college-level courses? (Add 1 point if yes.)
- Do you offer access to an external course platform like OneRange, LinkedIn Learning or Udemy? (Add 2 points if yes.)
- Do you offer an individual upskilling stipend? (Add 3 points if yes.)
Bonus questions
- Do at least 25% or more of your employees participate in optional professional development or upskilling? (Add 2 points for 25-49%, 3 points for 50-74%, and 4 points for 75%+)
- How much do you spend on corporate training and upskilling as a % of salaries? (Add 1 point for each percentage point up to 5%.)
Results
0-4 Points: L&D Beginner
You know upskilling is important, and you’ve started to build up your L&D budget. You likely have a few corporate learning programs, and maybe a tuition reimbursement program that together amount to about 1-2% of total salaries. Your next focus should be on adding upskilling programs and ensuring that employees have more choice in their learning.
5-9 Points: L&D Investor
You’re making solid investments in learning and development. You offer both corporate learning and upskilling, and spend at least 2-3% of salaries on L&D. But participation in optional programs is low – likely no more than 10-20%. Your next step should be to add an individual upskilling stipend program and work on ways to boost employee participation.
10-14 Points: L&D Advocate
Learning and development is a top priority for your organization. You offer robust corporate learning and professional development programs, and you may have recently rolled out individual upskilling budget program. Total spending on L&D ranges from 3-4% of salaries. Participation in optional programs is admirable – around 25 – 40%. However, you’d like to increase it to 50% or more to ensure you’re getting the full value out of your investments.
15-20 Points: L&D Trailblazer
You are a leader in your field who has built a powerful culture of lifelong learning and continuous improvement. When employees talk about working for your company, upskilling and opportunities for advancement are often some of the first things they mention. You spend 5% or more of salaries on learning and development, and employee participation in optional programs is 40% or more. Your next step should be to work with a OneRange consultant to stay up on the latest trends and make sure your L&D program remains ahead of the pack.
Whether you’re just starting your upskilling journey or seeking to maintain your leadership position, the OneRange team can support you with information on the latest upskilling trends, technologies, and opportunities to grow your program. Send us a note at [email protected].
