Planning a language training budget: realistic cost calculation

Planning a language training budget: why a sound calculation pays off

In many companies the training budget is simply last year’s figure plus or minus a few per cent. For language training this rarely works, because demand fluctuates sharply: a major new client in the UK, a subsidiary in Poland or ten new specialists recruited from abroad can change your language needs overnight. A calculation based on real needs is far more reliable.

Calculating from concrete needs has three advantages. It creates transparency for senior management and the finance team, it stops money flowing into courses that nobody needs, and it shows what impact you can expect for every euro invested.

The starting point of any budget plan is therefore the question of which roles need which language skills. Professional language courses for companies begin with a needs analysis. Only then can you say how many people should learn in which format, for how long, and what it will cost.

The right time to plan the budget

Plan the language budget alongside your general annual planning, which in many German companies happens in the autumn. The results of the needs analysis should be ready by then. It also makes sense to keep a reserve for events during the year: new clients, international hires or a project that suddenly requires English. A reserve of roughly one fifth of the total budget has proved workable in many organisations. If you plan without a reserve, you will have to apply for new funds mid-year, and that often takes longer than the project can wait.

What costs arise with language courses for employees?

A language course budget consists of direct and indirect costs. Direct costs include course fees, diagnostics such as placement tests, and materials and platforms, plus optional certificate exams. Indirect costs are the learners’ working time and the internal effort for coordination and reporting. Working time is often the largest block, while internal effort is frequently underestimated.

What the statistics say about training costs

The IW continuing training survey shows how much indirect costs matter. According to the German Economic Institute (IW, in German), companies in Germany invested more than €1,200 per employee in training in 2019, and each employee spent an average of more than 18 hours a year on training. This average covers all forms of training. Effective language training usually needs more time, because language competence develops through regular practice over months.

How do you calculate the budget for corporate language courses?

The annual budget equals lessons per week times learning weeks times price per lesson times the number of courses, plus diagnostics, internal effort and the cost of working time. Corporate courses at choices® start from €40 net plus VAT per 45-minute lesson. In the example below, with four courses, two lessons a week and 40 learning weeks, you arrive at 320 lessons.

A simple formula lets you calculate the budget for one year:

Budget = (lessons per week × weeks × price per lesson × number of courses) + diagnostics + internal effort + cost of working time

Step by step

1. Number of courses: how many one-to-one trainings and how many small groups result from the needs analysis?
2. Intensity: one or two 45-minute lessons per week have proved effective for learning alongside work.
3. Duration: work with realistic learning weeks. Holidays, public holidays and busy periods reduce the number of sessions that actually take place.
4. Price per lesson: at choices®, corporate courses start from €40 net plus VAT per 45-minute lesson. The exact price depends on format, group size and scope.
5. Cost of working time: participants × lesson hours × internal hourly rate.

Worked example with placeholders

A company plans two small groups of four people and two one-to-one trainings for managers for the coming year. All courses meet once a week for two lessons, over 40 learning weeks.

The example reveals an important effect: the learners’ working time is often as large as, or larger than, the course fee. That is why investing in quality makes economic sense. An hour with an excellently prepared teacher in a small group costs the same working time as a weak hour in a large group, but delivers many times the progress.

One-to-one or group course: how the format affects the budget

The format determines both the price and the impact per hour. One-to-one training costs the most per person but offers the highest speaking time and suits managers and key roles. Small groups of four are ideal for teams at a similar level, with six as the upper limit. Large groups of eight or more are the cheapest but not recommended for speaking skills.

A rule of thumb from practice: if the goal is speaking, meaning meetings, phone calls and negotiations, groups should not be larger than six. One-to-one training is the most effective and, for key roles, almost always the most economical choice, because the goal is reached faster. For many companies a mix works best: one-to-one training for a few key people and small groups for the wider workforce, for example as part of Business English courses or online German courses for international staff.

Prioritising the training budget: who gets language training first?

Language training should go first to roles with high business impact and a large gap to the target level, usually as intensive training, often one-to-one. Next come roles with high impact and a small gap, then roles with lower impact in small groups. Self-study options are enough where both impact and gap are small. Prioritise by business impact, not by who asks loudest.

Prioritisation matrix

The data for this matrix comes from a needs analysis or a comprehensive language audit. How to organise the whole process from analysis to launch is described in our article on planning corporate language training.

Funding and tax: what companies in Germany should check

Companies should check three points. The Federal Employment Agency only funds training for employees when it exceeds 120 hours and the course is approved, which rarely fits part-time language courses. Employer-paid job-related training can be tax-free under Section 3 No. 19 of the Income Tax Act and is usually a business expense. Bavaria has no Bildungsurlaub (educational leave).

Funding from the Federal Employment Agency

The Bundesagentur für Arbeit (Federal Employment Agency) funds training for employees under certain conditions. Among other things, the course must exceed 120 hours and go beyond a short-term adjustment to the workplace. For individual and group funding, both the course and the provider must also be approved (Federal Employment Agency, in German). This instrument therefore often does not suit typical language courses taken alongside work. The local employer service (Arbeitgeber-Service) can give you a binding answer.

Tax treatment

Job-related training paid for by the employer can be tax-free for employees under Section 3 No. 19 of the Einkommensteuergesetz (Income Tax Act), provided it improves employability and is not primarily a reward (Section 3 EStG, in German). For the company, the costs are usually deductible business expenses (Betriebsausgaben). Please clarify the details with your tax adviser.

Educational leave

In most German federal states employees are entitled to paid leave for recognised training, known as Bildungsurlaub, but not in Bavaria. What this means for language courses is explained in our article on educational leave for language courses.

Justifying the budget: presenting the ROI of language training to senior management

You can present the ROI of language training with three arguments: a concrete business problem, such as tenders lost because of weak presentations in English; measurable goals such as level gains per quarter or attendance rate; and a comparison with alternatives such as interpreters, translations or slower onboarding. A budget is approved more easily when the benefit and how it will be measured are clear upfront.

1. A concrete business problem: “We are losing tenders because our sales team is not convincing in English-language presentations.”
2. Measurable goals: level gain per quarter, attendance rate, feedback from line managers, number of client meetings run independently.
3. Comparison with alternatives: what do external interpreters, translations, mistakes or slower onboarding of new specialists cost?

How to turn these goals into key figures is shown in our article on measuring language training success. You will find a fully worked numerical example in the ROI of Business English: a worked example. For methodological background, we recommend the articles by our Head of Studies, Łukasz Pakuła, on the Pearson blog about KPIs in Business English and language data and business value.

Template: a budget request for corporate language training

A budget request for language training has seven sections: the reason, the target group with current and target levels, the measure with format and duration, direct and indirect costs, the benefit stated in measurable terms, key figures with dates, and risks. The outline below fits on one or two pages and answers the questions that senior management and finance typically ask.

Hidden costs to clarify in advance

• Cancellation rules: at how short notice can sessions be moved without the lesson being charged?
• Changes in the group: what happens when someone leaves the company or joins?
• Teacher changes: frequent changes cost learning time because content has to be realigned, so ask how the handover is organised.
• Additional services: are placement tests, materials and reports included in the price or invoiced separately?

If you clarify these points before signing the contract, you avoid surprises during the year and can keep reliably to the budget.

Checklist and common mistakes in budgeting for language courses

Sound budget planning for language courses rests on a needs analysis with target levels for each role, agreed formats, realistic learning weeks and direct and indirect costs shown separately. Common mistakes are choosing on the lowest hourly price alone, ignoring working time, spreading the budget evenly across everyone and failing to agree on reporting with the provider.

Checklist

• Needs analysis carried out and target levels defined for each role
• Formats agreed: one-to-one, small groups or a mix
• A realistic number of learning weeks assumed
• Direct and indirect costs shown separately
• Diagnostics and reporting planned in
• Funding and tax questions checked
• Key figures and reporting dates agreed
• A buffer for new employees during the year included

Common mistakes

• Choosing on the lowest hourly price alone. What counts is the cost per learning goal achieved.
• Ignoring working time. Cancelled lessons still cost planning effort and motivation.
• Spreading the budget evenly. A watering-can approach instead of prioritising by business impact.
• No resources for motivation and support. Without backing from managers, attendance drops. You will find tips in our article on motivating employees to learn languages.
• No agreed reporting. Without data, renewal next year becomes a matter of faith. What good reporting looks like is shown in our article on language training reporting for HR.

Would you like a concrete quote as the basis for your budget planning? Find out more about our corporate language courses or get in touch via our contact page.

Sources

1. iwkoeln.de: susanne seyda beate placke betriebliche weiterbildung erreicht rekor…
2. arbeitsagentur.de: foerderung von weiterbildung
3. gesetze-im-internet.de
4. pearson.com: gse roi business english measurable advantage 11 25
5. pearson.com: gse roi pt 2 language data and business value 12 25

Frequently asked questions