Offering a staff training budget is an important strategic decision, helping attract and retain employees. Some staff training budgets can be tax exempt in certain conditions too.
One of the trickiest issues when running an SME is ensuring you recruit and retain a solid team. Offering opportunities for staff training and professional development can be a good way of investing in your team, and ensuring that your business has the right skillset to help you achieve your goals.
Why offer a training budget for staff
There are several key reasons why it might make sense to offer staff training budgets:
- Boosts performance – trained team members are likely to be more efficient and adapt better to new tools or processes. They may also be more confident in suggesting fresh ideas. If you work in a regulated market, proper training can prevent compliance issues, accidents or costly mistakes.
- Improves loyalty – making an investment in your employees will show you are serious about developing them as individuals and want to help progress their careers. This can foster retention and loyalty, which has the knock-on effect of reducing turnover and recruitment costs.
- Develops skills – training schemes can be tailored to focus on what your business needs — whether that’s digital marketing, customer service, project management or leadership. Regular training can also give you a competitive edge, ensuring your team stays abreast of new working practices and processes.
- Attracts talent – in today’s job market potential employees will be looking at the package available – from flexible and hybrid working to professional development and training opportunities. Offering a training budget is a benefit indicating how much your business values learning and development.
- Supports business culture – a good training programme will set the tone for your business; that learning is part of every job, and thatcuriosity, collaboration, and continuous improvement is a fundamental part of your company culture.
How much should I allocate to staff training?
A good rule of thumb is to allocate 1% to 5% of the annual payroll bill to employee training and development. Bear in mind that you might need to help your team develop skills for a range of reasons; growth, compliance, innovation or retention. Technical or leadership training can cost more, but there are a variety of methods available from online courses to in-person workshops and mentoring.
Is staff training exempt from tax?
Staff training budgets can be tax-exempt under certain conditions. HMRC offers a tax exemption for employer-funded or reimbursed training expenses, provided the training is ‘work-related’. The exemption also covers related costs such as:
- Course fees, examination fees and essential books.
- Travel and subsistence expenses during training.
- Additional childcare expenses directly related to the training.
For employers, training costs are generally tax-deductible if they are incurred “wholly and exclusively” for the purposes of the business. If the training is not exempt, employers may need to report the cost on a P11D and pay Class 1A National Insurance on the costs.
To discuss any aspect of your business costs, including staff training, please contact our friendly team.