Research

Summary page

Research

Group Training in Australia: A study of group training organisations and host employers

Group training is a uniquely Australian phenomenon designed to encourage the employment of apprentices and trainees. It involves an organisation employing an apprentice or trainee under an apprenticeship/traineeship training contract and placing them with a host employer (ANTA 2002). The first group training companies were established in the early 1970s and have grown from employing a small percentage of the total number of apprentices and trainees, to employing today, around 14% of the total. There are approximately 200 group training companies in Australia operating in all states and territories and across most regions.

The rationale for group training lies in a series of increasingly significant impediments to investment in training by individual employers, including reduced organisational size, competitive and budgetary pressures and fragmentation, specialisation of work processes and increased complexity of the training regime.

This study, undertaken by the Employment Studies Centre at the University of Newcastle, involved a literature review and two surveys, one of group training companies and one of host employersó the organisations hosting the apprentices and trainees employed by group training companies. The reports of these two surveys are titled: The structure and function of group training companies in Australia and Group training and host employers in Australia. The first survey focused on the supply side of group training and was a comprehensive study of the structure of group training, including elements such as the age, type of legal incorporation and size of group training companies; the types of apprentices and trainees employed; and the functions or range of services offered to apprentices, trainees, employers and the community. The second survey examined the demand side of the group training system and attempted to identify the reasons for host employersí use of group training company services. This survey was also designed to explore their experience of these services.

There are two main findings from this research. First, group training is a critical component in the Australian skill formation system and, second, increasing commercialisation of group training has the potential to threaten the quality of training generally and, in particular, training opportunities for the more disadvantaged.

The invaluable contribution of group training is demonstrated by the manner in which group training companies have been found, by this study and other research, to be meeting their foundation objective of redressing the impediments to private investment in vocational education. Three facts support this finding. First, the rate of growth of apprenticeship employment in group training over the last seven years is five times greater than the growth of apprentices in training among non-group training employers. Indeed, the overall training rate for apprentices has declined markedly over the last decade, indicative of increasing impediments to private investment in apprenticeship training.

The second issue to support this finding is that the only broad trade occupational group experiencing a buoyant labour market is that of the food trades, yet it is the only one in which group training has a lower rate of growth of employment than for non-group training employers. Group training has half the rate of growth of food trade apprentices as non-group training employers.

Finally, group training has less than half the rate of employment growth of trainees compared with non-group training company employers. The dramatic and sustained increase in trainee numbers over the past seven years is prima facie evidence that there are few impediments to private sector investment in this form of vocational training.

Accordingly, demands that group training should more closely mirror the occupational structure of New Apprenticeships in the broader economy should be treated with caution. Overall, the evidence from this study supports the claim that group training companies complement rather than act as substitutes for non-group training company investment in apprentice training.

On the other hand, it should be remembered that the main motivation for employers to host apprentices and trainees from group training companies, according to the results of our survey, has been the saving in time and resources associated with the employment of these people. The main reasons cited for using group training were the opportunities it provided to avoid the costs and administrative complexity incurred in employing apprentices and trainees. This is surprising, since we expected, given the predominance of small employers, the reason for using group training related to difficulties in providing training opportunities.

While this finding obviously needs to be tested further, one possible interpretation is that group training is used by employers to reduce the various costs associated with the employment of apprentices and trainees, costs which have been increased substantially by the well-documented administrative complexity of the training system. Perhaps then, to the extent that government assists group training, and thus indirectly subsidises the training costs of employers, it is only compensating them for expenses arising from the complex administrative system it has established.

Regardless of motivations underpinning the demand for their services, group training companies have demonstrated, especially over the last decade, an ability to respond judiciously to the changing policy and commercial environment in which they operate. This is evident from the growth in the scope of their operations since the early 1990s, to include a very broad range of labour market and training-related activities, in addition to their ëcoreí group training functions. For many group training companies, these other activities account for the bulk of their employment.

Indeed, around three-quarters of those employed by group training companies are engaged in noncore group training activities, implying that a large share of their income is derived from such activities. This figure also reflects the growth in commercial opportunities due to the privatisation of government-funded labour market and training programs and the development of ëuser choiceí, designed to create a ëmarketí for training. In turn, the participation of group training companies in these commercial opportunities was driven, in large part, by government policy introduced in the early 1990s to make group training less reliant on direct government grants to fund their core activities.

These findings suggest group training companies have not become less financially dependent on government; rather, the mode of funding has changed from being predominately direct grants for the conduct of core group training functions, to indirect financing based on the operation of government-funded labour market and training programs. An important corollary of this is that government policy needs to be cognisant of the effects of changes to these programs, as they could adversely influence the viability and growth of individual group training companies as well as group training as a whole. This study found evidence for some degree of cross-subsidisation of core activity by non-core activities. These are issues that require further policy and empirical research.

This shift into related labour market activities was found to be only one aspect, albeit a very important one, of the increased commercialisation of group training. For example, there has been an expansion of for-profit group training companies over the last decade, but it has been driven largely by the expanding commercial opportunities as a result of the sustained growth of traineeships and privatisation of labour market and training programs. For sound commercial reasons these group training companies are focused on traineeships, in which there is high growth and high turnover and which have less of a traditional ëpastoral careí orientation and are less focused on disadvantaged groups.

The survey results indicate that these newer group training companies are less likely to offer rotation of apprentices and trainees and support services. They are also much less likely to receive government grants for the operation of their core group training company function. According to the Australian National Training Authority (ANTA), in order to be competitive, these newer group training companies have, in the servicing of host employers, shifted more towards price and away from the provision of a broader range of services. This shift could make it difficult for older group training companies to continue to provide the range of support services, which are not only traditionally expected of group training companies receiving joint policy funding, but are now formally defined in the national standards for group training organisations. These standards do not apply to group training companies which do not seek joint policy funding.

A monitoring regime is required to determine the effect of national standards for group training organisations in terms of the range and quality of services offered. This monitoring regime should also examine the effects of group training companies which operate outside the national standards on those which are standards-compliant. Tied to this are considerations of equity, given the likelihood that it will suffer, as group training becomes more commercialised.

In addition, it seems there is considerable scope for further expansion of group training in certain states, such as New South Wales, where group training has a much lower share by comparison with other states. This has increased importance in the light of the finding that group training companies complement other forms of New Apprenticeship provision. Moreover, it is likely that their participation in New Apprenticeships increases the level overall. It is suggested that further research be devoted to this topic.

Finally, the survey found that group training companies nominate, as one of the key reasons for apprentice and trainee non-completion, ëthe apprentice or trainee deciding they were unsuited to the jobí. This suggests there is some scope for improved recruitment procedures, whereby prospective apprentices and trainees are alerted to the types of work and wages and conditions they are likely to experience in their employment. An expansion of pre-vocational courses conducted inhouse or elsewhere, to act as a feeder mechanism for employment in group training companies, could be established to act in this role.

The large number of apprentices and trainees transferring their contract of employment to host employers and other employers is another area warranting further research. In particular, it is important to determine whether there is a significant difference in rate of transfer to other employers between group training and non-group training apprentices and trainees. Host employers reported that, when they wished to employ an apprentice or trainee directly, those they had previously hosted through group training were an important source of such labour. A high rate of transfer of apprentices and trainees to host and other employers while the apprentice or trainee is still in training may mean that the conventional approach to measuring completion of group training may require some evaluation.