Reasons for training: Why Australian employers train their workers

Irrespective of whether a country’s economy is prospering or experiencing a downturn, employers can benefit from a skilled workforce able to respond to changing economic circumstances. Training their workers is one means of building such a workforce.

But what influences the decisions by employers to train their workers? This report examines this question through a statistical analysis of data from the National Centre for Vocational Education Research (NCVER) 2005 Survey of Employer Use and Views of the VET system. The authors look at the decisions made by employers in relation to four different types of training: vocational qualifications; the employment of apprentices and trainees; nationally recognised training; and unaccredited training.

Key messages

• The need for skills, whether specific to a particular job or general skills upgrading, is a pivotal driver of vocational training by employers. Compliance with regulation is also a factor.

• The study isolated three factors that powerfully influence decisions about training: the overall importance of training to the organisation; the level of workforce skills in the organisation; and recruitment difficulties.

• Training is being integrated with other human resource objectives in some organisations. In light of this, training providers need to take a more business-oriented approach with the organisations.

The authors argue that decisions about training are quite complex, and therefore governments need to be wary of one-dimensional approaches—such as training levies—to increasing employer investment in training.

Tom Karmel
Managing Director, NCVER

Employers play a critical role in the national vocational education and training (VET) system as the ultimate users of the skills developed through training. However, little is known about how training operates within organisations. National collections of statistics in Australia and overseas have produced evidence of the scale of employer expenditure on training and what training employers provide for their workers. However, how employers make decisions about training remains something of a ‘black box’. Previous research has shown that the reasons are often unique to the organisation (Smith & Hayton 1999).

This study is an attempt to identify how employers make decisions about training. To do this we analysed the data produced by the National Centre for Vocational Education Research (NCVER) in its biennial Survey of Employer Use and Views of the VET system (SEUV). The survey asks employers about their use of and satisfaction with four forms of VET—vocational qualifications, apprentices and trainees, nationally recognised training and unaccredited training—and a number of supplementary questions relating to the employers’ skills and training strategies. A total of 4601 employers were interviewed in the 2005 survey.

While the specific objective of the research was to identify the reasons why employers provide different forms of training to their workers, we also wanted to gauge the effect of the organisation’s characteristics on their decisions to provide training. Complex statistical data analyses were undertaken and involved two processes. In the first process a cluster analysis of the reasons given by employers for providing the different forms of training was carried out. Although employers gave multiple reasons for providing training in the survey, these were not ranked according to their importance to the employer. The clustering allowed us to determine the major reasons for providing the different forms of training. The second process involved statistical modelling of the reasons given by employers against various organisational characteristics such as size, industry sector, whether training appeared in the business plan and skills level of the workforce.

Findings

Each of the two data-analysis processes—cluster analysis and statistical modelling—examined reasons for employers’ choice of various types of vocational training for their organisation, specifically: vocational qualifications, employing apprentices and trainees, nationally recognised training and unaccredited training. The following summarises the reasons for employers adopting each of these categories of training.

Vocational qualifications

Those employers who make use of vocational qualifications for their employees do so for the following reasons.

• These qualifications are primarily used to provide skills for certain jobs.

• Vocational qualifications are used to comply with external regulations (such as licensing requirements) or internal regulations (such as the provisions of industrial agreements) or professional or industry standards.

• Organisational commitment to training is important to the reasons for the use of vocational qualifications. Organisations with a low commitment to training are likely to use vocational qualifications as a substitute for their own internal training. Organisations with a high commitment to training are more likely to use vocational qualifications to meet regulatory requirements or for competitive reasons.

• Workforce skills levels are important to making decisions about training. Organisations with high levels of workforce skill are likely to use vocational qualifications to meet standards or to enhance competitiveness, while organisations with low skills levels are likely to require vocational qualifications to gain skills not developed through their own internal training.

Employing apprentices and trainees

Those employers who make use of apprenticeships and traineeships for their employees do so for the following reasons.

• Apprenticeships and traineeships are normally used for specific, business-related reasons, particularly filling a specific skills need or a specific job vacancy in the organisation. Employers who employ apprentices and trainees for these reasons are likely to do so because they are experiencing difficulties in recruitment. These employers are also likely to have a highly skilled workforce and use internal training to raise the overall skills levels of the organisation.

• Employers who use apprenticeships and traineeships often do so to improve the overall level of skills in the workforce. However, these employers are likely not to be experiencing recruitment difficulties and they are also unlikely to use internal training to raise the skills levels of their workers.

• A number of the organisations which employ apprentices and trainees do so for altruistic reasons—to help young people or to give something back to the industry—although this practice is more likely to be to be related to factors at the organisational level such as managerial attitudes rather than industry-wide factors.

• Few of the employers who make use of this type of training hire apprentices and trainees for financial reasons and, if they do, it is often in combination with a wide variety of other reasons. The importance of financial considerations such as the availability of government subsidies to support the employment of apprentices and trainees has been significantly overstated in recent years.

Nationally recognised training

Those employers who make use of nationally recognised training for their employees do so for the following reasons.

• Meeting external regulations such as legislative or licensing requirements, or fulfilling the provisions of industrial agreements, awards or enterprise agreements is the dominant reason for employers using nationally recognised training.

• The provision of specific job-or business-related skills for their organisations is the second most important reason cited by employers.

• Many employers who use nationally recognised training do so to enhance their competitiveness by improving quality or by responding to the demands of new technology. This is usually associated with large organisations with a specialised skilled workforce. Here nationally recognised training is viewed as a means of achieving specific competitive business goals rather than raising the general level of workforce skills.

• Many organisations with a high level of workforce skills and experiencing difficulties in recruitment use this form of training to improve their overall management of human resources. This involves an ‘exchange’, whereby employers provide workers with nationally recognised qualifications in return for greater loyalty to the organisation, thereby improving retention.

Unaccredited training

Those employers who make use of unaccredited training for their employees do so for the following reasons.

• The major reason that employers give for using unaccredited training is to improve the overall skills levels of their workforces.

• Enhancing their competitive position in business, particularly to enable organisations to respond to the demands of new technology, is another reason given by a large number of employers who use unaccredited training.

• In contrast to the other forms of training, in many of those organisations that make use of unaccredited training for their employees, especially larger ones, this type of training shows a high level of integration with other human resource practices. Unaccredited training is being used by a significant number of employers to develop a more strategic approach to human resource management.

• The use of unaccredited training for internal organisational development reasons, including skills enhancement and developing a responsive workforce, is widespread, encompassing over 63% of all employers who used this type of training, and is found in almost all industry sectors.

• Organisations with a low level of workforce skills and which do not attach a high level of importance to training (that is, training does not appear in the strategic plan of the organisation) will use unaccredited training to improve the overall level of skills in their workforce. Conversely, organisations with a high level of skill and which attach a high level of importance to training will use unaccredited training to develop a more strategic approach to the use of human resources.

Conclusions

This study has shown that the process of making decisions about training in organisations is complex and is influenced by a wide variety of factors. Policy-makers in the VET area should be aware therefore that one-dimensional approaches, such as training levies, to increase the level of employer training are unlikely to be successful. A more sophisticated and nuanced approach to encouraging employers to invest in the training and development of their workers is necessary.

The need for skills—including specific skills for the business and raising the overall level of workforce—is the major factor driving those Australian organisations that adopted these forms of training for their employees. Employers need to take a more strategic approach to skills in enhancing their competitiveness and, as a consequence, place training in a more central position in their strategic planning.

The research has also identified a group of strategic and skill factors that exert a powerful influence on decisions about training in those organisations that used the four types of training covered by the Survey of Employer Use and Views of the VET system. These are: the overall importance of training to the organisation, the level of workforce skills in the organisation, and the difficulties that the organisation faces in recruiting good staff. Separately and in combination, these are critical factors which employers need to consider in their decisions to invest in training.

The study also provides evidence that training is becoming more integrated with other human resource objectives in some Australian organisations. In light of this and the use of training by employers to meet skill needs, registered training organisations need to take a more business-oriented approach to their relations with employers. Rather than simply selling ‘off the shelf’ training ‘products’ to businesses, these providers need to take a more consultative approach, whereby they address the overall business and competitive needs of the organisation and demonstrate to employers how training can help to position them strategically for a more competitive future.