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“A ‘training fund’ is a dedicated stock or flow of financing outside normal government budgetary channels for the purpose of developing productive skills for work.”[1].

Training funds in the EU are very heterogeneous. The differences concern the governance models (bipartite or tripartite nature), the number of funds established per country, the type of (education and training) activities and target groups supported, and the way the money is collected and redistributed.

Training funds may be created voluntarily and managed by social partners, as part of collective agreements at sectoral level (e.g. Denmark, France, the Netherlands). In some countries, this may result in a high number of training funds covering the majority of economic sectors (e.g. approx. 100 training funds in the Netherlands), whereas in other countries, training funds may be present only in a few, particular sectors (e.g. UK, Germany). Finally, some countries opt to create a single national training fund, governed by the State, often in partnership with social partners (e.g. Cyprus, Spain).

Beyond these two basic types of trainings funds (national and sectoral), other solutions can be found among EU countries. Training funds in Italy, for example, allow for the voluntary association of employers linked to a particular subfield of the economy or a particular occupational or professional field (inter-professional funds). The funds, therefore, do not correspond to established economic sectors and their particular industrial relations (e.g. with regard to wage bargaining).

Training funds source their income mainly as compulsory training levy on company payroll. However, there can be also other, additional sources, e.g. national/regional government own resources collected via general taxation, EU funds (ESF), interest, donations or voluntary contributions. In some countries, the function of training fund has been adopted by the public employment service, where employers and employees co-fund training of employees as part of their overall contribution to the unemployment insurance system.

Training funds typically collect financial resources from all companies (in the economy or sector), irrespectively of the levels of their training investment, and redistribute the collected funds back to companies for training purposes (‘pay and receive’, ‘levy-grant’ mechanisms). Alternatively, training funds collect financial resources only from the companies which do not meet a predefined minimum level of training activity/contribution (‘train or pay’, ‘levy exemption’ mechanism) and create training opportunities with the means collected.

The collected funds may be redirected to:

  • employers via different subsidy-schemes, in which case co-financing from employers may be required;
  • employees via different subsidy-schemes or through supply side funding, in which case co-financing from employees may be required;
  • unemployed via supply side funding or work-based learning. In the latter case, co-financing from the employer providing the training may be required.

Training funds may have a single purpose, but most have multiple objectives, such as: pooling the resources for training from various sources, distributing the costs of training between employers and employees, building training capacities, increasing the volume of company training, avoiding the free-rider problem[2], ensuring access to training for disadvantaged groups or developing competitive training markets. Sectoral training funds are usually set up to respond to specific sectoral training needs.

Training funds are among the oldest funding instruments supporting training/adult learning. They were established in the 1960s and 1970s in many countries. While some countries have discontinued their schemes, others have introduced training funds in the past decade.

[1] Johanson, Richard. (2009). A review of national training funds World Bank http://siteresources. worldbank. org/SOCIALPROTECTION/Resources/SP-Discussion-papers/Labor-Market-DP/0922. pdf: World Bank., 3

[2] When a company does not provide training yet poaches workers trained by another company.