SUBMISSION ON A NATIONAL SKILLS STRATEGY

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1 SMALL FIRMS ASSOCIATION SUBMISSION ON A NATIONAL SKILLS STRATEGY Presented to: Department of Education and Skills December 2015

2 Introduction The Small Firms Association (SFA) is the trusted partner of small businesses in Ireland, with 8,500 members and six affiliated organisations in all sectors and parts of the country. Its mission is to deliver business-focused advice and insights to member companies, influence government policy to the benefit of small businesses and connect its members in a thriving community. The SFA has a vision of Ireland as the most vibrant small business community in the world supporting entrepreneurship, valuing small business and rewarding risk takers. In this context, the SFA welcomes the opportunity to make a submission to the Department of Education and Skills on a National Skills Strategy This document will provide insights into Ireland s current skills system and the future skills needs of enterprise, based on our knowledge and experience of the small business community, which comprises over 182,000 businesses, employing half of the private sector workforce. Overview The comprehensive consultation document published by the Department of Education and Skills demonstrates the quantity and variety of initiatives already underway in the area of skills. We welcome many of the new and upcoming measures, such as the development of a Workforce Development Policy and Strategy by Solas and the establishment of an Employer Services Division in the Department of Social Protection, which we are already in contact with. The SFA and our member companies have direct experience of many of the programmes outlined, including JobBridge, JobsPlus and Skillnets and the feedback is mainly positive. However, programmes that have been effective over the past number of years are not necessarily fit-for-purpose as the economy shifts from crisis to recovery to growth. For this reason, a full review of the overarching approach to skills in Ireland as well as of each individual initiative is required to ensure that they are appropriate for the period The single biggest implication of such a review would be for the allocation of funding. As stated in the consultation document, Currently the vast majority of places in training, except apprenticeship, are reserved for unemployed persons referred to training by the Department of Social Protection. With the unemployment rate now at 8.9% and steadily decreasing, the economic and public policy context has shifted significantly. The priority of Government must change to focus on in-work training and upskilling to reflect this. Significantly more of the National Training Fund, which is financed by businesses, must be allocated to developing skills for those in employment. The SFA calls for the proportion of the National Training Fund spent in this way to be increased from 20% to 60%. Theme 1: Developing relevant skills Relevant skills: What do you consider to be the relevant skills for development in the period to 2025?

3 For small businesses, the need for management skills and capacity within the organisation is a perennial issue. Irish domestic firms rank second last internationally for management practices. Addressing this shortfall would have a positive impact for all those involved in the small business sector, as strong managers have the ability to identify their own strengths and those of their staff, as well as the individual and organisational gaps that need to be filled through recruitment and training. Thus a positive cycle of identification of skills needs, feedback to education providers and the labour market and engagement with in-work training and lifelong learning will be created. Financial literacy is another area in which we have identified a need in small firms. As highlighted in the consultation document, numeracy and other mathematical skills in Ireland fall below the EU average. The lack of financial management skills has been highlighted as a barrier to accessing bank finance and other forms of funding. While Enterprise Ireland and Skillnets ManagementWorks have developed some interventions, more needs to be done, as financial expertise is a vital skill for small companies. In this regard, a Finance Voucher Scheme should be introduced (similar to the Trading Online Voucher Scheme) which would be open to all small firms for training staff in financial management or to assist them in gaining specialist advice on preparing funding applications. The consultation document points out that the Employer Survey published in 2015 shows that there are low satisfaction rates among employers with the language skills, business acumen/awareness and entrepreneurial skills of graduates. The SFA carries out periodic surveys of its members in relation to training needs, the most recent of which was conducted in September As part of the latest survey, members were asked to rank a list of topics according to the level of need for those skills by the owner-manager of the business and employees in the company. The topics of greatest need for owner-managers were: 1. Human resources and industrial relations 2. Leadership/management skills 3. Strategy 4. Sales/business development 5. Business/employment law The topics of greatest need for employees were: 1. Customer service 2. IT/computing 3. General management 4. Marketing 5. Digital marketing/social media Lifelong Learning: As highlighted in the consultation document, Ireland does not have a strong track record when it comes to lifelong learning. Comparing lifelong learning rates in Ireland with the EU average reveals some notable trends:

4 Ireland EU average Lifelong learning participation rate 7.3% 10.5% Participation rate: Employed persons 6.2% 11.4% Participation rate: Economically inactive persons 10.7% 7.7% In terms of the headline rate, Ireland s distance from the EU average is a concern and this gap is widening. Examining the breakdown, Ireland is well ahead of the EU average when it comes to training the economically inactive. The stark shortfall is seen when the participation rates of employed persons are compared. Ireland falls 5.2 percentage points below the EU average on this metric. Ireland also bucks the trend seen across the EU where participation rates are higher amongst employed persons than economically inactive persons. SFA members have clearly signalled their understanding of the importance of lifelong learning, with 85% saying that the organisation has provided training for employees over the past year. However, significant barriers remain in terms of working time lost, which poses particular challenges for small firms to absorb, the cost of training and the difficulty of finding the right training for their needs. How can we motivate more people to participate in lifelong learning? What are the attitudinal and structural barriers to learning that need to be overcome? In terms of motivating people to participate in lifelong learning, the first challenge is to help them to recognise the need for and value of training, and then to direct them to appropriate training in terms of topic, cost and location. A difficulty that has been identified in small firms with regards training is that often they don t know what they don t know, i.e. those involved in small companies do not recognise a need for training or find it difficult to conduct an objective gap analysis on themselves or their own business. There are a number of possible ways to address this, including by enhancing management capabilities as described above (whether through the education system or increasing awareness of the Skillnets ManagementWorks programme), via mentoring or by providing a framework for a competence assessment in small firms. One recommendation from the most recent report of the Advisory Group for Small Business, in which the SFA was involved, is to use the Companies Registration Office business name/company registration as a trigger to direct applicants to information on Start Your Own Business (SYOB) courses or advisory services. Such programmes and services are available through the network of Local Enterprise Offices, so should be easily accessible to people around the country. What actions can be taken by the State to support and encourage increased participation in lifelong learning? Cost is one of the principal barriers identified by small companies, and the State has the potential to play a positive role in subsidising training for small firms. As outlined above, the SFA proposes that 60% of the National Training Fund is dedicated to training for people in employment. Another way in which the State could have an impact on participation rates in lifelong leaning is by providing visibility to the range of training options and subsidies available. Currently, even those schemes that do exist and have effective outcomes for participants are not sufficiently well publicised. A single Government portal for all State supported/subsidies training would be a welcome initiative.

5 How can we give recognition to prior learning including skills acquired in work, home or community settings? The SFA recently worked with Accenture and a wide range of other partners including the National Youth Council of Ireland, Volunteer Ireland, Social Entrepreneurs Ireland, The Wheel and the Department of Children and Youth Affairs to develop a model for the formal recognition of non-formal learning and skills. The project was primarily focused on young people but the output is equally relevant for all ages. The outcome of this Skill Summary project was the creation of a standard format careers passport that provides the means to communicate the experience and skills gained outside formal education, which can be populated online or through an app and made available to potential employers in digital or hard copy. This initiative was an example of how skills acquired in work, home and community settings could be captured and communicated effectively using a common framework which would be understood by all parties. It could also be used to identify skills gaps by an individual or an employer. What barriers need to be addressed in order to stimulate investment in training by Irish enterprises? In the September 2015 SFA training needs survey, members were given a list of reasons why owner managers say they cannot always provide the level of training they would like to in their organisations and asked to rank them according to how much they apply to their organisations. The following was the order which emerged, starting with the biggest barriers: 1. Managers of small businesses cannot afford the time to attend training programmes 2. Releasing employees for training courses is too disruptive to business 3. The costs are prohibitively expensive 4. Management training courses are often conducted in places that are inconvenient for me 5. Management training courses tend to be too long 6. It is too difficult to find the right training for my needs 7. The lack of a quality guarantee when it comes to training concerns me 8. Management training should be provided outside of office hours 9. Training key employees means they may be lost to other firms or poached by competitors 10. Management training and development in Ireland is generally quite poor quality Real world experiences for learners: How can the range of work place experiences be expanded, particularly in SMEs, to increase opportunities for learners to gain practical experience as part of their education and training programme? Internships are one of the keys to gaining practical experience in the workplace. Despite some negative publicity, the JobBridge Scheme continues to be well received by our members, with many converting the internships into ongoing jobs after the completion of the programme.

6 In terms of a successor programme to JobBridge, the SFA is in favour of a new accredited internship scheme focused on improving the employability of young people, which would permit employers to provide top-ups to social welfare payments. Skills infrastructure: Is the structure and architecture for the education and training system fit for purpose? One aspect of the architecture on which SFA members have provided concrete feedback is apprenticeships. The SFA welcomes the recent expansion of the apprenticeship scheme and would encourage its further expansion over the coming years. However, feedback from our members indicates that more small companies would take on apprentices if a number of challenges were addressed: - Excessively high costs in years three and four. Under the present scheme, the wages in year four are 90% of full wages. 75% in year four and 60% for year three would be more appropriate. - Companies should be facilitated in planning when apprentices are taken in. Currently Solas does not allow companies to control this and it leads to timelines that are not optimal for the companies. - The age restriction should be removed. How can we encourage the provision of a range of programme offerings by education and training providers that are relevant to learners and enterprise needs? It is crucial that training is enterprise-led and aligned with the needs of enterprise. This is one of the main strengths of the Skillnets model, which small companies have already engaged with extensively. The SFA is in favour of enhancing enterprise-led education and training in particular through Skillnets, the funding for which should be restored to its 2008 level. What can institutions do to ensure their policies and practices are inclusive and open to people with disabilities and other under-represented groups? Ex-offenders are a group which deserves special attention in terms of skills and access to the workforce. The SFA works with the Irish Association for the Social Integration of Offenders (IASIO) to facilitate the integration of this cohort into the workforce as a deterrent to re-offending. IASIO s work on skill development in prisons and after release is an important input to the broader skills debate. Expungement of sentences after a certain period of time, in particular for minor offences, should be introduced to remove the stigma. Best practice examples and practical case-studies should be developed and communicated about small employers hiring people with disabilities and under-represented groups. Many small companies are fearful of claims under various pieces of employment law arising if they make a mistake in recruiting and managing under-represented groups and this can in fact make them more fearful of engaging. The Government should examine relaxing employment legislation as an incentive to get companies over this initial hurdle (particularly smaller companies who do not have a HR professional employed which is necessary to manage such employees). Financial supports should continue to be made available for any required workplace changes to accommodate these employees. Theme 2: Activating skills supply

7 What changes can be made to the approach to training and skills development to improve the employment prospects of people who are long-term unemployed? The SFA has called on Government to remove social welfare traps and introduce improved structures to incentivise social welfare recipients to take up work, including casual and part time work. Part time work has been shown to be a stepping stone to full time employment across Europe. However, the Irish social welfare system disincentivises jobseekers from taking up part time work. To encourage jobseekers to take up part time work, social welfare should be calculated on an hourly basis or aggregated over the course of a week. This would allow casual and part time workers to sign off only for those periods when they are working and not be penalised. Furthermore, it should be made easier for a small business to hire casual staff. Currently there is a plethora of unnecessary paperwork and responsibility if an employer wants to hire someone casually. This would remove obstacles and make it easier for businesses to grow organically. At the moment, the legal responsibilities, the unfair judicial system, paperwork and regulations concerning hiring employees (or subcontracting) is a major deterrent to recruiting. The current consultation being undertaken on as and when contracts by Minister for Business and Employment, Ged Nash, TD, will serve to further restrict access to flexible work and will close off many of the opportunities employers currently provide to longterm unemployed people to get them back into the workforce. It is critical that Government policy is joined up across Departments to ensure that one Department is proposing policies which will destroy the good work of another Department. How can we encourage people with disabilities and other under-represented groups to return to education or to retrain for employment? One underrepresented group in the labour force with a high latent skill supply is women or, more specifically, mothers. The prohibitive cost of childcare is forcing many skilled people to leave the workplace. Net childcare costs in Ireland are the highest in Europe at 35% of family income, which is three times the OECD average. While the SFA welcomes the recent measures in Budget 2016, it is critical that Government increases its supports for working parents through introducing a tax credit for childcare costs. Labour market flexibility is also a key factor in attracting parents and other underrepresented groups into the labour force. References, including in the consultation document, to the phenomenon of zero hours contract when this has been shown not to be a prevalent issue, is unhelpful and creates negative connotations around flexible working conditions. In reality, flexible terms that suit both the employer and employee can be a key factor in attracting talent and increasing the presence of certain groups in the workforce. What can we do to facilitate and support the return of skilled Irish migrants in the coming years? As highlighted at a recent National Youth Council of Ireland conference, failure to attract emigrants back to Ireland has serious social and economic policy implications. Even as the economy and the labour market in Ireland improve, there are a number of barriers to attracting Irish emigrants to return. A major factor is the punitive tax system that they would face, including one of the highest marginal tax rates in the EU, even after the

8 recent Budget announcements. The SFA supports the introduction of a temporary tax credit for recent emigrants to encourage them to return to Ireland. Housing is another challenge that must be addressed if we are to attract highly-skilled emigrants to return and settle in Ireland. Urgent action is needed to increase the supply of residential property if returning emigrants are to view Ireland favourably in terms of quality of life. Theme 3: Developing relevant skills How can the new network of Regional Skills Fora best contribute to the development of the skills base in each region? The SFA welcomes the development of a network of Regional Skills Fora and has put forward a number of members to participate in their local forums. An initial observation is that there may be simply too many parties on these Fora to practically be able to achieve much, so perhaps a narrower steering group model should be introduced as well. What additional measures are required to support entrepreneurial education and entrepreneurship skills in Ireland? There is no doubt that entrepreneurial skills need to be enhanced in the Irish education system. The data from the Global Entrepreneurship Monitor shows that Ireland lags behind the EU average in terms of primary and secondary education. Ireland should aim to surpass the EU average on these metrics and compete with the most innovative, entrepreneurial regions of the world. The issue is not necessarily to have entrepreneurship or business studies classes taken by more students, but rather to introduce key skills such as resilience, critical thinking, intelligent risk taking and collaboration across the curriculum from primary to higher education. These skills are crucial for budding entrepreneurs but are also highly valuable for those looking for employment after leaving education. Other suggestions on how to enhance entrepreneurial skills throughout the education system include: - Companies donating products to schools to take apart and learn how to put back together - Mentoring of student enterprises/entrepreneurs by established businesses - Partnerships between business organisations and teachers organisations to bring teachers and entrepreneurs together to share insights - Real small company case studies on the curriculum - Integrating entrepreneurial skills into a range of higher education courses, including engineering, science, journalism and ICT How can SMEs be better supported and encouraged to engage with training? As stated in the consultation document, there is a constant need for enterprises to ensure they have people with the right skills for their business as it develops. This can be particularly challenging for small and micro firms as they compete with medium and large firms to attract talent. On this basis there is a need for small companies to receive target support from government to engage with training and development.

9 The first element of this support is financial. As explained above, the focus of the National Training Fund should be shifted to in-work training, with a focus on small firms. Our research indicates that the average price point accepted by small firms as value for money for training is 190 per day, therefore government subsidies are required to make most training accessible. Another factor that would encourage small firms to engage with training is to make programmes available which match the expectations and requirements of those firms. The September 2015 SFA training survey found a preference for formal training at their place of work. Members ranked the suitability of a range of training formats in the following order: 1. Formal training at your place of work 2. On the job training provided by other managers/employees 3. Formal courses provided off-site 4. Online or web-based training 5. One-to-one coaching by external experts 6. One-to-one mentoring by external experts 7. Evening courses 8. Distance learning programmes The survey also found a two-thirds preference for attending open courses with other companies. In terms of the maximum length training course that SFA members would consider, two days was the most popular response, with an equal number opting for less (half day or one day) and more (five days or more). Offering training to small firms in a format that suits them, at a price they can afford is crucial to securing their engagement for training and skills development. Conclusion For further information on any of the issues raised in this submission, please contact Linda Barry, SFA Assistant Director, on or linda.barry@sfa.ie More information about the SFA is available on and on