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Should Your Company Upskill Employees or Hire New Ones?

By Jack Flynn - Jan. 8, 2023
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No successful business is ever stagnant. As an employer, you’ll have to create new roles in catering to a changing landscape. Then, you’ll have to fill them.

And, to do that, you have two options — you can either promote your existing team or seek out new employees. Each path has unique benefits and pitfalls, which means it’s up to you to decide which course of action is best for the company. Here are some factors to consider that might make it easier to choose:

Key Takeaways:

  • Consider the cost of compensation with upskilling a current employee versus hiring a new one before you make a decision.

  • Determine if your current staff is willing to be flexible and take on a new challenge.

  • Investing in your current employees career development can boost employee morale and make them more productive.

Should Your Company Upskill Employees or Hire New Ones?

Consider the cost of compensation

The logical place to start the decision-making process is here, especially if you’re in charge of the company’s finances. Which will cost you more — hiring a new employee or promoting someone internally?

  • Onboarding new talent requires more cash. Although the amount varies by job and industry. In general, though, the Society for Human Research Management found it costs up to 50 to 60 percent of a new hire’s salary to situate them in the role. Turnover costs, therefore, can reach between 90 and 200 percent their average when new talent is brought in.

  • On the other hand, the same organization found training new employees in the human resources field cost only a fraction of the salary of a new hire. That applies in other industries, too, meaning it’s typically more cost-effective to pluck from the talent pool you already have. Still, it does cost money to train a new employee, regardless of whether they come from an internal or external hire. And, during training, companies will lose a small fraction of revenue as they ramp a person up to perform in their new role.

  • You should also factor in any potential tax incentives for hiring someone new or training in-house. Depending on the state, you could get a credit of almost $10,000 for doing so, depending on the type of job, industry, etc. However, this type of money would undoubtedly make it easier for you to bring someone new on board, and it would defray the cost of training, too. Reach out to your state’s department of labor to see what incentives you are eligible for.

In most cases, though, the question isn’t whether you’re going to lose money — you will initially with any new hire, even with a tax credit. The real factor to consider is: How much money can you stand to spend on a new staff member? A smaller budget might require hiring someone you already have on staff.

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Analyze Your Schedule

Every business has its busy season. If yours is fast approaching, you might want to consider the amount of time it’ll take to train your current employee, or how long you’ll need to find the right candidate.

Let’s say one of your employees resigns. You have to go through a multitude of steps to see them off and bring someone new onto the team. Typically, you’ll perform exit interviews and spend time transitioning their paychecks, remaining vacation time, benefits, etc. Then, of course, there’s the search for their replacement — job postings, resume reading, interviewing, hiring and training all take time, too.

So, when a new role becomes available, consider if you have time to spare to conduct a full-on candidate search. On the one hand, you might save time by training someone in-house to save yourself the trouble of finding the right person externally. However, if the job is highly specialized, it could be worth looking outside — you might not have the time or resources to train someone for the necessary position.

Determine Staff’s Flexibility — and Take Advantage of it

How adaptable are your team members? If they are willing to take on new challenges, it might be worth your while to train them to adapt to different roles within the company.

Once you have a cross-trained an existing employee, you’re unlocking the doors to a more flexible team who can assume different responsibilities as work ebbs and flows. It can be an excellent resource, especially if you’re in the midst of growing or developing your business — rather than hiring staff for new to-dos that pop up, a more adaptable team can move from role to role as required, saving you time and money.

To that end, you can use the talent you have already as trainers in their area of expertise. Employees with more years and experience on the job value the opportunity to take on a mentorship role. Not only will this make up-and-comers more prepared to take on leadership, but it also gives them the chance to help out in different departments or areas when a particular team gets swamped.

Of course, this setup won’t work if your business is highly specialized or too busy to consider activities like team-to-team training. In that case, it might be better to find the right person for the job, rather than preparing them as they rise through the ranks.

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Envision Their Career Trajectory

Every business model is different, of course, so there’s no single answer as to whether or not training is better than hiring. However, there is a benefit to training and cultivating employees that new recruitment can’t provide — this type of treatment prepares your staff to take on managerial roles down the line.

The time you spend training will prepare your team for the next steps in their career. Plus, the longer they stay on board with your company, the more versed they’ll be in company conduct and culture. Their dedication to improving and to the brand are both factors that make them great candidates for leadership roles down the line. And, of course, you’ll slash the costs of finding, hiring and training an outsider to lead.

Again, there are always going to be great candidates to hop on board and become great leaders, even without intimate knowledge of how your business works right off the bat. But if your company culture revolves around retention and leadership-building, continued training and promotional opportunities might be the way to go.

Weigh the Rest of Your Pros and Cons

Ultimately, this decision varies from business to business, and it’s up to you to figure out all the pros and cons of each option. In general, though, your new hire will cost more, which is a negative. But they could bring in a wealth of new skills, as well as a fresh perspective — that might be more valuable than the dollar sign next to their name.

Then again, someone who already works with you knows what the company is about, and they have the desire to contribute more to your greater good — they want new challenges and responsibilities, after all. They’ll save you money, although someone trained in the field could get the hang of it more quickly.

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Upskilling Employees or Hiring New Ones FAQ

  1. Why is it important to upskill workers?

    It’s important to upskill workers because it helps improve their productivity and efficiency, improves the quality of work, and help enhance problem-solving abilities. When employees learn new things and are able to advance in their careers, they will be happier which be beneficial to the company. Employees will also want to be at the company longer so your employee retention rate will increase.

  2. What does it mean to upskill an employee?

    Upskilling is the process of training employees about any new technologies to help them advance in their current position. Upskilling can be done with training courses or training employees to work in a different department or job. Having your employees have the opportunity to develop new skills makes your company more attractive to new talent.

  3. What is an advantage to hiring new employees?

    Hiring new employees allows for a new perspective and ideas to be introduced to the business. Bringing in new employees that have worked elsewhere can bring in new ideas that can make things more efficient or offer new ideas to existing problems. Having someone who brings in new and creative ideas will offer some friendly office competition to allow all other employees to produce their best work.

Final Thoughts

So, there’s no right answer as to whether you should hire internally or externally. Most companies do a bit of both, depending on the role and the candidate pool they have already. It’ll be up to you to analyze your business, its needs and the many talents of your staff — if they’re up for the challenge, train away. If not, you know what to do.

Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.


Jack Flynn

Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.

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