Small businesses would receive new grants or tax credits for work-related training expenses, under new pilot programs put forward by the Productivity Commission.
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In the fourth of five reports on Australia’s productivity ‘pillars’, the commission on Tuesday said fresh financial incentives could help SMEs invest in training for their workforce.
Upskilling workers can make them more efficient, improving individual business outcomes while helping to lift national productivity, the report says.
But participation in workplace training is low in Australia compared to other OECD nations, and fell 4% between 2007 and 2022.
The cost and time of work-related training can discourage businesses from investing in courses and programs likely to improve staff skills.
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“SMEs in particular face higher barriers and disincentives to providing training” compared to large businesses, the report says.
Put simply, bigger employers often have greater capital to deploy on workforce training than smaller competitors.
In addition, extra career advancement opportunities at large businesses may siphon workers away from ambitious but financially constrained small businesses.
Financial incentives recommended for SMEs
Revamped tax breaks or grants targeted to the SME sector could help to bridge that gap, according to the Productivity Commission.
“Financial incentives for training should focus on SMEs, where training rates are lowest,” it says.
Targeting SMEs can help reduce the risk that financial support goes to businesses that would do training anyway.
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It puts tax credits, or training grants and vouchers, as two potential options to support more work-related training.
For now, “more evidence is needed on what financial incentives work best to encourage training and improve Australia’s skills,” it says.
The commission suggests the government could evaluate the most cost-effective model through pilot programs.
The report notes previous government efforts to encourage extra workplace training, like the Skills and Training Boost, which provided SMEs an extra 20% tax deduction on eligible courses for staff.
But that scheme saw relatively little take-up in its first year, as legislative uncertainty discouraged some employers from spending big on training courses.
It now is seeking views on the design and implementation of new financial incentives for work-related training within SMEs, ahead of any limited pilot program.
Advisory services to bolster uptake
At the same time, the Productivity Commission has also called on the federal government to establish SME advisory services to support that training push.
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Advisory services already exist, but are focused on generic advice around the fundamentals of owning and operating a small business.
Tailored services could be delivered by “changing or expanding the functions of one or more of these institutions to incorporate work-related training advice,” the report says.
The report shies away from recommending training levies, which require businesses to spend a set percentage of their payroll on employee training programs.
Those proposals have been welcomed by the Council of Small Business Organisations Australia (COSBOA), whose chair Matthew Addison agreed training can be time-consuming and expensive.
“Targeted, incentivised work-related training would not only allow employers to offer the right education opportunities to staff, it would also support innovation, increase specialised skills and improve small business service offerings,” he said Tuesday.
COSBOA, which delivers the government-backed Cyber Wardens and Small Business Peak programs, also welcomed the call for updated advisory services helping SMEs understand what training would benefit their workforces.
Occupational entry requirements, artificial intelligence in focus
Beyond its focus on SME funding, the latest Productivity Commission report also calls for states and territories to rethink their occupational entry regulations.
These entry requirements can exist in some jurisdictions but not others, affecting air conditioning and refrigeration mechanics, hairdressers, and painters and decorators.
“While these individual regulations may not cause major economic harm, they limit labour mobility, reduce competition and unnecessarily drive up costs,” the report says.
The report says states and territories should consider if accelerated apprenticeships and non-apprenticeship pathways into the trades are safe and feasible, noting a “bottle-neck” of trainees entering occupations facing skills shortages.
Other recommendations include a national framework to assess if educational technology, including new artificial intelligence systems, are beneficial — and if so, a strategy to ensure they are rolled out nationwide.
Stakeholders can make a submission to the Productivity Commission before September 15.
