The impact of sectoral training and development funds

“The impact of sectoral training and development funds in the Netherlands on employee-training and the possible link with payback clauses”

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This presentation uses information from 2 ecbo studies: -O&O monitor (study sector funds for training and development, or STDF’s) -Monitor post initial education

Sectoral funds for training and development

Sectoral Funds for Training and Development (O&O funds)? • Funds= money. A small percentage (0, 5 tot 2%) of the total wage bill within a branch/sector creates a fund. • Governing board exists of social partners in a branch / sector • Original (and primary) goal is “anti poaching” (investment in training by company A; hiring of employee by company B) • Usage of the funds is broadly determined by the collective agreement (CAO) • Funds often have an organisation, sometimes one or two persons, sometimes over 40.

Collective agreements • The Dutch model of wage setting is often centralised in collective agreements. • These agreements are wider than wages and hours. • There are 200 sector collective agreements, and about 800 (large) company collective agreements. • About 84 % of all employees work within a collective agreement.

Study, STDF’s and collective agreements? • Collective agreements can only be classified by the ministry as “generaly extended” if they also provide in agreements on training • STDF’s, deriving from these extended collective agreements can only be recognized if they operate transparently • Only recognized STDF’s can apply for ESF subsidies via the department • Ergo: recognized STDF’s are only active when collective agreements provide clauses on training.

STDF’s 2006 2007 2008 2009 Sectoral Funds 156 connected to collective agreements (CAO) 148 132 135 . . with the goal 88 of training and development (STF) 91 86 92

Finances STDF’s (mil) Income Expences Reserve 2006 510 451 640 2007 537 490 682 2008 469 522 645 2009 461 571 540

Expenses • In 2006 STF’s spend around 188 mil on Training and development. In 2009 this was 336 mil euro: almost double. • One can expect a rise in expenses in 2010 due to the measures taken as a reaction to the financial crisis. • In the perspective of life long learning: OSA studies show that approx 35% of companies use a variety of subsidies to fund training. About half of them use STF’s.

Primary goals of funds. Goal mentioned by funds Number Financing training 32 Employability 11 Labour relations 16 Optimize inflow in sector 2 Advice, research 9 Development of training 4 Improving trade quality 8

Collective agreements: training • Regardless what goals they have: funds need to follow the collective agreements • Researched 105 agreements in 118 branches. • Training agreements are primary focussed on functioning in the company, in the ‘own’ sector. • Compared to 2005 the focus did not really change.

Stipulations on training in 105 collective agreements Stipulations Number of agreements Training in dual system 31 Personal development plan 29 Training leave, one or more days All Leave to take exams 36 Accreditation of prior learning 15 Training for specific groups (45+) 29 Training for union, employee participation 38

Results of STDF’s? • There’s a lot of critisism towards funds. Are they too “rich”? Do they spend their money “well”? • Research did not show effects. • The existance of STDF in particular sectors did not show a higher training rate. • But it is difficult to measure succes: • No clear goals (what is succes? ) • Relative small share in the training market

Post initial training

Post initial training in prior 12 months. (n = 3061 employees. repres. NL) 2010 Participation total 50, 3 1 47, 0 30, 9 12, 0 5, 4 4, 7 training course 2 training courses 3 training courses 4 training courses 5 or more training courses

Pay back clauses • 85% of post initial training is paid by the employer • In 2010 47% employees report a payback clause • In 1999 this was 10%, in 2000 28%, in 2005 46%.

Payback clauses by sector Q: Payback clause in case of training in your company/organisation yes, don't all some no n/a know n Agriculture / fishery 4% 37% 11% 30% 17% Industrial sector 19% 33% 18% 11% 20% Construction 13% 20% 31% 16% Trade 20% 26% 17% 23% 14% Transport 17% 28% 17% 21% 17% Catering industry 5% 21% 25% 23% 26% Financial 21% 45% 15% 7% 12% Business services 19% 33% 17% 24% 6% Education 16% 28% 27% 10% 20% Health 16% 33% 22% 11% 18% Culture 5% 26% 11% 47% 11% ICT 16% 42% 16% 14% 12% Other 13% 30% 19% 18% 21% 46 245 166 230 138 57 104 264 218 609 19 165 796

Payback clauses by level Q: Payback clause in case of training in your company/organisation yes, all some no n/a Low middle high 14% 16% 20% 30% 41% 20% 17% 22% 17% 14% don't know n 23% 649 18% 1410 12% 973 “Low” level = primary, lower secundary education (lo, lbo, vmbo) “Middle” level= higher secundary education (mbo, havo, vwo) “High” level = tertiary education (hbo, wo)

Payback clauses • Grew from 10% in 1999 to 47% in 2010 • Present in all sectors: – most in financial sector (66%) and ICT (58%) – least in cultural sector (31%) and construction (33%) • Almost 1/5 of employees are unaware – Higher educated are more often aware • Higher educated employees have a higher chance to have to deal with payback clauses, particularly for selected trainings.

STF’s and communality with pay back clauses? • They are both a reaction to the fear that investments by company A are used by company B • They both find their basis in the collective agreement • STDF’s: originally to prevent free riders by sharing risks. • Pay back: to prevent free riding by forcing extra ‘loyalty’ from employees • STDF’s seem to have less influence over the years, payback clauses are rising

What impact? • Employers also invest without STF’s – The financial incentive to train employees is smaller that we think – The STF’s seem large but are not always know (and some bureacraty is feared) by employers) • The role of STF’s is changing from ‘banks’ to ‘centres of knowledge’ • But funds have to react on collective agreements. Hence the enormous growth in spending on training and development. These agreements are focussed on the own company / sector.

Finally • Modern times ask for a more flexible workforce, the need for inter sector mobility is more and more frequently being discussed. • This requires flexible and ‘easy accessible’ training. • Training agreements that are primary company or sector oriented (based on companies fear of loosing investment through poachers) should be adapted to these needs.