HR Management··5 min read

The Pros And Cons Of Upskilling Employees vs Hiring New Workers

Upskilling Employees vs Hiring New Workers

The rapid rate of change the modern business world has to cope with often means that businesses are confronted with a difficult choice between hiring new workers or upskilling employees. This is a particularly hard decision to make when it involves work that requires state-of-the-art technological skills. Let us take a closer look at both sides of the coin to see when upskilling employees will be the best option and when hiring new workers should work out better.

Upskilling Employees: What does it Involve?

In its most basic form, the term upskilling employees refers to training one or more members of your current workforce in certain competencies in order to fill a gap in their skills. With new technologies and new ways to do things emerging virtually on a daily basis, this is becoming necessary more and more frequently. The only alternative is to hire new workers, which we will discuss a little later.

Benefits of Upskilling Employees

Upskilling current workers doesn’t come free, but upskilling benefits typically outweigh the costs. Pros include:

  • Enhanced worker retention, engagement, and motivation. Once they have acquired a fresh set of skills, most workers are able to face new challenges with confidence. At the same time, it makes it easier for them to compete for more senior jobs. From the firm’s viewpoint, retaining current employees comes with the benefit of having more engaged and better motivated workers who perform better.
  • Less disruptive. Appointing a new employee to fill a core position instead of upskill training one or more of your current workers could cause a major disruption in business activities. The new worker could take months to adjust to your firm’s way of doing things and to fit in with the business culture and ethos. Training and promoting current staff might be much less disruptive.
  • Creating the image of a caring employer. For many companies, upskilling employees could actually make it easier to attract top-quality staff in the future because your firm will become known as an organization that is prepared to invest in its workforce.
  • Cultivating a sense of ownership among your staff members. Empowering your current employees through workforce upskilling will make them feel that they are working for a business that cares about developing the careers of its workers. This will typically have a positive impact on staff morale and motivation.
  • Making use of existing knowledge. By upskilling employees instead of importing external talent, you will retain the wealth of experience and knowledge of your business and its mission, vision, and corporate culture possessed by current staff members.
  • Creating a culture of learning. Regularly upskilling employees will help foster a culture of learning, creativity, and innovation in your firm. It will also help to stimulate healthy competition and a culture of achievement.
  • Building a more flexible team. Cross-training your current staff members is a great way to build a more flexible team that are able to assume different responsibilities as and when the need arises.

The Cons of Upskilling Employees

Now that we’ve had a closer look at the undeniable benefits of upskilling employees, let’s be fair and also consider the cons.

  • Resistance to change. Upskilling workers often mean that they will be required to do things differently in the future. And many people, particularly those who have been doing things in a certain way for a long time, might resist that.
  • High cost. When done properly, an effective upskilling/training program might require a relatively large financial investment. In this regard, the only way to make a logical decision is to compare apples with apples. This can be done by calculating the ROI (Return On Investment) of the two choices that you are faced with. According to a report entitled The Lost Workforce that was released by the World Government Summit two years ago. every Euro invested in upskilling employees on average generates a benefit of 2 Euros. On the other hand, every time an organization replaces a salaried worker, the financial cost of replacing him or her on average amounts to 9 months’ salary.
  • Staff being pinched by your competitors. Once an employee has been equipped with the latest skills in his or her field (at a relatively high cost), they might be targeted by your competitors - unless you also upgrade their remuneration package.

Pros and Cons of Hiring New Workers

Just like upskilling employees, hiring new workers also comes with many pros and cons. Let’s briefly look at a few.

Benefits of Hiring New Workers

  • A new worker might bring a fresh perspective on old problems precisely because he or she has not been schooled in your firm’s current ways of thinking and doing things.
  • Appointing someone from the outside might be your only option if situation demands a highly skilled individual with expertise that is not currently available in organization.

Cons of Hiring New Workers

  • It will take time for him or her to familiarize themselves with your corporate culture, your systems, and your business ethos. This could easily disrupt the smooth flow of business operations.
  • Hiring external staff will typically cost significantly more than upskilling your existing workers.

Tax Benefits can Tip the Balance

Depending on the state, the type of work, and the skills involved, the tax benefits of an upskilling program could tip the scale in its favor. At other times the tax credits earned for providing a new job opportunity could become a deciding factor.

The WOTC (Work Opportunity Tax Credit) can, for example, slash an employer’s tax liability by as much as $9 600 for every new position created.

On the other hand, if your firm refunds or pays for a worker’s education expenses these could be tax deductible, provided they meet certain criteria. Apart from that, businesses are allowed to exclude as much as $5,250 in respect of educational assistance from a worker’s salary/wages, also provided the payments meet certain criteria.

The Bottom Line

In most cases, your organization will be better off by upskilling employees instead of hunting for external talent. One exception is when it would be extremely costly and time-consuming to train an employee because the levels of technical skills and/or expert knowledge involved are very high. Another exception could be if the tax benefits of creating a new position outweigh those offered by upskilling employees.

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