Leitch Review of skills sets employers an engaging challenge

Employers must play their part in achieving a world-class skills base in the UK, raising their investment in skills at all levels and using skills effectively.

A prerequisite for increasing employer investment in skills is a delivery system that meets their needs. The Leitch Review sets out proposals to give employers greater strategic control of the skills delivery and vocational qualification systems. But to ensure that these systems meet the needs of industry, employers must exercise this power.

UK employers already spend £33bn a year on training. However, one-third of employers do little or no training at all. A number of barriers, including awareness and the time and cost of training, constrain employer investment in skills.

In some parts of the economy, relatively poor management and leadership can affect both the demand for skills and whether they are used effectively in the workplace. These barriers affect different types of firms and sectors in different ways.

An important chapter of the Leitch Review proposes shared action from the government and employers to increase the skill levels of their workforce and ensure their effective use in the workplace. This will be a ‘something for something’ deal that ties rights to responsibilities, coupling increased and improved government effort with increased action by employers.

This will deliver:

  • Effective use of skills. The review recommends additional support and advice to ensure businesses can effectively invest in and use skills. Tied to this, employers have a responsibility to use these services effectively, improving the quality of their leadership and management.
  • A labour force with a basic platform of skills. The review recommends the government commits to funding and delivering training in a flexible way that meets employers’ needs. In return, employers must commit to enabling staff to access work-based skills development through a new entitlement to Train to Gain in England if the UK is falling short.
  • World-class intermediate skills. Employers, through their Sector Skills Councils (SSCs), should control apprenticeships. Employers must make specific commitments to increase their investment in intermediate skills, including through sector skills agreements (SSAs).
  • World-class high skills. The review recommends widening the target to improve high skills so it focuses on workforce development and providing additional incentives for employers to invest. In return, employers must commit to greater investment in high skills, including through hard targets in SSAs.

Management skills

The UK has to have world-class management skills to deliver the benefits of world-class skills. Improving management and leadership is a complex and a challenging problem. Management training will only make a full contribution to tackling this problem if management qualifications meet the needs of employers.

To ensure this, the review proposes that the Leadership and Management Advisory Panel advise a newly established Commission for Employment and Skills (CES) on developing national occupational standards for management with the Management Standards Centre. The panel must work closely with individual SSCs so that key management qualifications are identified as part of sector qualification strategies.

The leadership and management programme has already successfully supported management development for firms with between 20 and 250 employees and attracted significant private investment. The review now recommends that it be extended to firms with between 10 and 20 employees, so that smaller firms are able to access its help and grow.

Employer engagement with higher education and commitment to continuous professional development can also help to drive up the quality of management, keeping the UK on track for world-class status.

The growth in UK business school provision shows that employers and universities can successfully work together. The recommendation that the focus of higher education be expanded to focus on workforce development should make this easier.

It is vital that larger employers are fully engaged, aware of skill needs and able to source appropriate training if the UK is to meet longer-term ambitions. Large employers, both public and private sector, account for more than 50% of employment and more than 40% of all low-skilled staff.

For larger firms, the Learning and Skills Council (LSC) funds the National Employer Service (NES). As Train to Gain rolls out nationwide, the NES should be reformed and re-energised so that it provides a credible, professional, single-point advisory service for large employers. While large firms are more likely to engage in the programme in any case, their size means that increasing the number that sign up can make a significant contribution to the UK’s world-class ambition.

Volunteership

Much will be able to be done by voluntary employer actions, such as the basic skills pledge already common in Wales. This involves employers committing to ensuring all their staff are able to improve their basic skills. The Welsh Assembly has set a target of 50% of employees being covered by 2010.

The review recommends a similar initiative across the UK. A major campaign would encourage employers to make a pledge that every relevant employee be enabled to gain basic and Level 2 equivalent skills – with course funding from the government and time allowances at work.

This initiative will need high-profile ‘champions’. If enough employers make this pledge, this could make a major contribution to the UK’s skills position.

Such voluntary action should help to move the UK toward its world-class ambition. However, there remains a strong risk that voluntary action is not sufficient to deliver the rate of change required and will not fill the gap identified above.

The Leitch Review has considered a range of compulsory mechanisms that could be introduced if the government and the CES judge that the UK is not on track to be world-class.

Compulsory mechanisms to ensure training for low-skilled employees, including licences to practise, levies on employers and rights to time off, have been introduced in the past. These have tended to be blunt instruments, and only where employers are engaged and can design relevant training, and where individuals are motivated, can such measures increase training and productivity significantly.

Train to Gain

In England, Train to Gain is an effective mechanism for achieving productive training and engaging both individuals and their employers.

  • The individual benefits from training that partially takes place during work time and is more likely to deliver wage returns. Evidence shows that Level 2 NVQs delivered in the workplace have returns of about 6%. The employee bears the cost of learning outside of work time.
  • The employer benefits from increased productivity, motivational and retention effects of training, and has a final choice over the course from SSC-identified qualifications ensuring training is relevant to their needs. The firm will pay the opportunity costs of giving the individual time to train while at work.
  • The government benefits because training through Train to Gain is more effective and has a higher success rate than through a college route, while it also delivers transferable key skills. The government picks up the full cost of the training and brokerage (and wage compensation for small firms).

In England, therefore, the review has concluded that increasing the take up and scope of Train to Gain is the most appropriate way to become world-class. If voluntary participation in Train to Gain increases substantially, it is likely to be oversubscribed in its early years, but there is a real risk that demand will fall short of that required over the next decade, even with additional voluntary action.

The review therefore recommends that the government introduces an entitlement to workplace training for all staff lacking a Level 2 qualification or equivalent.

This should come into force in 2010 across all sectors if the government and the CES judge that the UK is not on course to deliver the world-class ambition of 95% of the working-age population qualified to at least Level 2. This will allow time for further voluntary effort, but ensure that action is in place if this effort is not sufficient.

Apprenticeships

Apprenticeships should also be driven by employers, not by the supply side. As with qualifications, SSCs should control the content of apprenticeships and set targets by sector. This will enable them to simplify the process and ensure that apprenticeships meet employers’ needs, rather than being a tool for the government to raise attainment of qualifications.

This should help to raise the number of apprenticeships to a more ambitious level and employers should be encouraged to operate more ‘bespoke’ programmes with different types of funding incentives.

The mechanisms for addressing skill needs will vary by sector, and even within sectors. The Leitch Review looks to key employers in each sector to be innovative in the approaches taken to addressing skill needs through their SSCs.

There are already many innovative schemes currently being developed by SSCs to address skill problems in their sectors, which range from projects with schoolchildren, to use of on-site training facilities to reach contract workers on large scale construction projects, to designing and subsidising degree courses.

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