Why you should be prioritising training budgets for employee development

The new financial year is just around the corner, so you and your team are probably making the final adjustments to your budget for 2025-26. The Chancellor’s Autumn Budget announced some significant changes for businesses, which may have resulted in your organisation tightening its purse strings. And, unfortunately, training budget cuts are often the first to happen.

According to the New Economics Foundation (NEF), the amount employers are spending on training has dropped by almost a fifth in the last decade. While reducing your learning and development budget can seem like the easiest option for saving money, the truth is that it could cost you much more in the long term.

A report from the Financial Services Skills Commission (FSSC) and PwC UK found that reskilling employees could save firms up to £49,100 per employee compared to hiring someone new with the relevant skills.

Plus, we know that upskilled employees stay at companies for longer – in fact, a LinkedIn Workplace Learning Report found that 94% of employees would stay longer at a company if it invested in their learning and development.

There are many benefits to employee development that work both for you (as the employer) and for your employees.

In this guide, we’ll explain the benefits of employee development and how you can ensure you allocate your training budget properly, ready to take your employee skillset to the next level.

The importance of employee development

Employee development is a crucial element to successful businesses. It’s not just important to keep your employees happy; organisations that prioritise learning and development have better business outcomes.

The top benefits of training employees include:

• Reduces turnover: A Deloitte study found that organisations with a strong learning culture have 30-50% higher retention rates than their competitors.
• Boosts productivity: The same study found that organisations are 52% more productive when they develop their staff.
• Attracts top talent: Top candidates think that ongoing training and development is important in a role – particularly among younger employees. A survey by Docebo found that 83% of millennials and 79% of Gen Z say they are more likely to choose an employer that prioritises learning and development opportunities.
• Improves employee engagement: According to Gallup, employees who have access to continuous learning are 47% more likely to be engaged at work.
• Helps build workplace relationships: When teams complete training together, it can strengthen their working relationships and help them understand how they can work more effectively together.
• Guides succession planning: When you upskill your staff, it makes succession planning easier as you’ll know who is available to take on a role if another employee leaves or gets promoted.

Types of employee development

Employee development can come in many forms. The types of employee development that are right for your organisation will depend on what industry you work in. Different sets of employees are likely to need different types of training, too.

Here’s a quick summary of some of the types of employee development that can make up part of your learning and development strategy:

• Statutory and mandatory training: Statutory training is training required by law, such as fire safety and manual handling, whereas mandatory training is specific training you require your employees to do – for example, you may decide that you would like all employees to have equity, inclusion and diversity (EDI) training.
• On-the-job training: Training that can happen as a normal part of an employee’s job role, both on an ad hoc basis and as planned sessions. This may include things like manager or peer coaching, mentoring, shadowing, role play, job rotation, demonstrations and ‘lunch-and-learns’.
• External training courses: Courses led by external training companies; you can usually choose for them to be completed online, at your workplace or another venue.
• External coaching/mentoring: External coaching or mentoring is when you use people from outside your organisation rather than peers or managers to support your employees.
• Conferences and seminars: Many industries have conferences and training sessions available for people to attend, and some can be low-cost or even free. They can be a cost-effective way to upskill your staff when you don’t have much training budget.
• Apprenticeships and other qualifications: Accredited training courses where your employees will receive a qualification on completion. Some qualifications, particularly apprenticeships, require employees to spend some working days in a local college.
• Distance learning: Short or long courses that employees can complete online.

Each type of employee development can have benefits and drawbacks and can vary in cost. For example, on-the-job training can be very low-cost as it often only requires your or your managers’ time to organise and run. Whereas the costs for accredited qualifications can run into the thousands of pounds, but they may be vital to your employees’ career development and progression within your company.

Training budget allocation

When you’re planning your training budget, you need to think strategically – what are your business objectives for the coming year? And what skills do you need your staff to have to achieve them?

Make sure you do a full skills gap analysis to help you allocate your training budget effectively:

1.     Assess the skills you need

To allocate your training budget to the right areas, you need to assess the skills you need for the next financial year. Are there any statutory training requirements you need to fulfil? After that, you should focus on your business objectives for the year. What skills, knowledge and behaviours do you need your staff to have to help you achieve them?

2.    Assess the skills you have

Once you know the skills that you need your team to have, it’s time to assess what skills they’ve already got. In small businesses, it may be enough to discuss with the management team to help you understand where you have skills gaps, but if you’re in a larger company, it may help to conduct a needs analysis survey and create a skills matrix to identify behavioural and knowledge gaps.

3.    Prioritise

Now you know the skills you need and the ones you have, you can prioritise what is most important to your business. Focus on the most critical areas and then identify the best method(s) for developing your team.

There’s a handy way to help you decide on the best learning and development methods for your team: the 70-20-10 rule.

• The idea behind this rule is that 70% of employee learning takes place through experience – that is, on-the-job learning through stretch projects or simply by continuing to do their job well.
• Then, 20% is through social learning, such as coaching and mentoring or peer-to-peer learning.
• The final 10% is through formal workshops, external courses or qualifications, which is usually the most expensive form of training.

So, investing in employee development doesn’t have to cost the earth. While you’ll need to allocate some budget for formal training, there are a lot of low-cost employee development strategies you can use that will upskill your employees and keep them engaged.

4.    Decide how to allocate your training budget

Once you’ve completed your gap analysis and have prioritised the skills your organisation needs most, you’ll need to consider how to allocate your training budget. There are a few different ways to do this:

• By employee: Allocate a set amount or percentage of your training budget to each employee. This gives all employees an equal opportunity for development, but it can get expensive if you have a lot of staff.
• By department: Allocating training budget by department helps you to tailor your learning and development strategy to the skills required in each team. One drawback to this approach is that some departments will get more investment than others, creating imbalances between teams that may seem unfair to teams with a lower allocation.
• By project: Project-based allocation can work well to ensure that your employees have the right training in time for important business milestones. For example, if your marketing team will be launching a big new campaign this year, you could allocate a budget for training the team on the hard and soft skills they will need to run the campaign successfully.
• By need: A needs-based allocation method involves allocating your training budget based on the specific needs of each employee or team. This approach works well in small businesses with few employees, but it can get tricky in larger organisations. There’s also the risk that employees who are more vocal about their training needs get allocated more budget than those who are more reserved or that high-performing employees get left out because they’re exceeding expectations already.

There’s no right or wrong approach here. Put simply, the budget allocation method that is right for you depends on your organisation, workplace culture, the number of employees you have, and how much training budget you have available. 

Training agreements

Whether you’re offering an average training budget per employee or allocating budget by team or project, you’ll want to protect the financial investment you’ve made in your employees’ development. That’s where training agreements come in.

It’s sensible to have training agreements in place so employees understand that if they leave the company within a certain timeframe after completing their training, they may be required to repay some or all the costs.

Make sure you consult an expert before you draft your training agreement, as you need to ensure that your repayment scales are fair and justifiable. You also need to make sure that you avoid writing clauses that could be seen as ‘restraint of trade’, which means unreasonably preventing an employee from changing jobs.

Low-cost employee development strategies to implement

But let’s face it. When budgets are tight, you want to maximise every penny available. The key is to blend the most important paid training opportunities with low-cost or even free employee development strategies to ensure your staff get the training they deserve.

Here are some strategies you can try:

• Stretch employees within their roles: Give your team members stretch projects, like helping on more complex tasks or cross-functional working.
• Make mentoring and coaching the norm: Get managers and more senior team members on board with mentoring juniors and encourage all staff to shadow each other.
• Offer internal training: Your employees have a wealth of knowledge to share. Incentivise them to run ‘lunch-and-learns’ to share their skills between teams.
• Signpost to free resources: There’s a wealth of free training out there. Spend time looking for materials like webinars, e-learning, articles and podcasts that can help boost your employees’ skills when used alongside other training methods.

Using these low-cost methods as part of your learning and development strategy helps you make continuous learning a part of your workplace culture. Making informal training part of the normal working week shows your team that you’re committed to their development.

Creating a culture of continuous learning

Building a culture of continuous learning isn’t just important for keeping your team happy. Deloitte’s study found that organisations with a robust learning culture are 92% more likely to develop innovative products and processes.

A continuous learning culture is key to business success. Change might not happen overnight, but here are some tips for building a culture where everyone is committed to learning:

• Make it part of conversations: Learning and development should be a key element of many conversations you have with your team, both informal and formal. Make sure there’s time to discuss training opportunities in 1-1s and appraisals, and don’t shy away from the topic in day-to-day conversations, too.
• Provide the opportunities: Even when budgets are tight, use some of our low-cost strategies to upskill teams and keep them agile.
• Recognise achievements: When your employees complete training or achieve qualifications, celebrate them. Make it known that continuous learning is one of your organisation’s values.
• Encourage cross-collaboration: Knowledge sharing is an underrated development strategy. Make time for your teams to get together to share their skills – this also shows that you value your employees’ knowledge and role in your organisation.
• Make it safe to fail: In continuous learning cultures, it’s ok to fail. Create a non-judgemental environment where your employees feel safe to make mistakes and learn from them through exploring why they happened.
• Be an example: Senior leadership needs to set the tone for any workplace culture transformation. Demonstrate that you are committed to learning and developing yourself, and tell your team when you complete training courses or qualifications.

How we can help

At Fitzgerald, we help businesses of all sizes create learning and development strategies that make a difference. Our specialist team can help you with a range of L&D services, including:

• Behaviours, skills and competencies frameworks
• Bespoke training courses
• Coaching and mentoring
• Employee engagement
• Leadership development
• Learning and development strategies
• Line management training
• Succession planning

Book a free consultation or give us a call on 0330 223 5253 to see how we can help.