If the cost of training a new employee is less than the cost of a new employee’s skillshare, it makes economic sense to hire the new employee. But if skillsshare is an investment, then payback for the initial spending on skills may be less than the initial investment on the skills. The same is true for training costs. If the investment is worth it to get to another level of expertise, it makes sense to hire the person who will achieve that level in time. But if it’s less than that, it’s better to spend the money on new employees.
That said, many companies don’t use this sort of cost/benefit analysis. They may use a skillshare calculation to select someone as the right candidate with skills that might be worth their initial investment but may not work for the job.
So, how much does training cost? You can answer that question on a per hour basis and estimate the training hour cost.
If training is too expensive to start with, then that’s one metric to judge what to invest in: pay an employee an average of the hourly rate they are paid to do the job. Or, pay an employee a more modest hourly rate.
If training is too expensive to continue throughout an employee’s working career or if it may be too expensive to do at all in most cases, then the employee must be rehired. Again, pay their average wage. Or, find someone new who can perform the job with less training required.
Here are the figures for various levels of training requirements for different job classes:
Note that I’ve included two categories in the figure: One for employees at the employee’s level and one for people at the higher levels of management. If an company pays some of the employees their hourly rate, then this would mean that it would also pay at higher levels of management. The idea is that if an employee is paid an hourly rate, then they’ll have a level of training in this category and must be rehired at that rate.
There are some additional factors to consider, including:
The length of the employee’s tenure. If an employee is only there for a year, then the cost of learning the job is less, but they would be rehired at the reduced hourly rate. If a period of several years has elapsed, then the cost of learning the job is more for the lower level employees. If an employee learns the job for ten years at a minimum wage rate, then it makes more sense
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