This article was updated on September 12, 2018.
When a small business hires someone new, the employer often considers salary costs but may not factor in the costs of new employee training. To prevent those costs from sneaking up on you, be sure to budget for them. Here's what you need to consider:
This is probably the biggest hidden cost of training new employees. Every minute you spend showing someone how to do her job is a minute you're not doing your own. This can either manifest through you accomplishing less and therefore bringing less money into your business, or you spending extra time working, thus spending less time with your family and friends.
Depending on the size of your business and your current employees, you may be able to assign someone else to train new employees. Consider adjusting their workload if they spend most of their day teaching a new hire.
The New Employee's Time
The DOL states that employers must pay workers for all training they receive, unless four criteria are met: "it is outside normal hours, it is voluntary, not job related and no other work is concurrently performed." A business may have to pay a cashier for the time she spends learning how to work the register, for example, because that business won't benefit from someone who doesn't know how to run one.
How much time training takes varies by employee and by job. For instance, if your florist business hires a new flower arranger who has 10 years of experience, training will primarily consist of showing the new florist where the equipment is and the processes for recording sales and ordering new inventory. You might only need to budget for a few hours of training.
On the other hand, if you hire someone who has never worked in a florist shop before and only took one flower arranging course, it may take weeks before you can stop overseeing her work. This is one of the reasons people with more experience are paid more than people new to a business — it takes time to reach maximum productivity.
Let's say that Jane has been your salesperson for 10 years. She knows the business inside and out and can answer any question imaginable. If Jane doesn't know it, no one does. Then she quits and you have to replace her. You hire Steve, who is a fantastic salesperson. He could sell ice in a blizzard. Unfortunately, Steve doesn't have 10 years of knowledge about your business. He needs to look things up.
Customers who are used to instant answers might get frustrated by the new salesperson. This doesn't mean you made a bad hire; it's simply a hidden training cost. Expect to have some bumps along the way.
New employee training can be expensive, but it's a short-term cost that can lead to long-term success for your business.
SIGN UP FOR THE SPARK NEWSLETTER