One of the more controversial proposals relates to alternative funding streams to support those employers who train. With only 10% of firms training, we must grow that number but we shouldn’t continuously be going to the Government with our hand out as the industry has an obligation to play its part.
The industry training system requires all ITOs to be co-funded by their industries as well as the government. This is an important principle as it ensures our industries have ‘skin in the game’, and consequently that our standards and qualifications reflect genuine industry demand.
However, this cost can also dampen the willingness and ability of individual employers to take on trainees. As well as the direct financial cost involved in training, employers effectively provide a significant ‘in-kind’ contribution when they take on a trainee in the form of lower staff productivity, the cost of materials required for rework, and the like. While larger employers may be able to carry this relatively easily, it can be an excessive burden for the SMEs that constitute the majority of construction firms (over 90% of firms have 5 staff or less).
There are a variety of ways in which the need for an industry contribution can be reconciled with making training more financially sustainable for employers. Within our industry, some support exists for the introduction of a training levy on employers from which a training subsidy might be paid. The UK government recently introduced an Apprenticeship Levy on the payroll of large employers, and both Western Australia and Queensland operate similar schemes. Not only does this system make training more accessible for smaller businesses, but it encourages firms to train in order to gain benefits from the levy funds that they contribute.
The possible effect of providing direct support to employers can be seen in the impact of the 2013 ’Apprenticeship Reboot’ initiative. This scheme provided an additional public subsidy for employers’ training costs when apprentices signed up and saw apprentice numbers grow by 92% and employer numbers by 73%. This suggests that a relatively modest subsidy – under the Reboot scheme this was $1,000 or $2,000 per apprentice depending on the trade – can have a significant impact on the willingness of firms to take on trainees.
The concept of an industry-wide levy is not new to New Zealand; we already have a building levy that is used for various purposes. Similarly, the Primary ITO has long used a levy model to supplement the funding secured from individual clients.
A levy system is not the only way of providing direct support for employers, but it provides a model in which such subsidies effectively come from the industry itself – thus preserving the key principle of industry contribution. As a starting point, trialling such a system could involve the use of surplus funds from the existing building levy.
Chief Executive BCITO
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