Training fund

Definition and description

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] (Johanson, 2009, p. 3).

Training funds in the EU are very heterogeneous. The differences concern the objectives, governance models (bipartite or tripartite nature), the level of operation, 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. Belgium, Denmark, 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. Germany, Luxembourg). Finally, some countries opt to create a single national training fund, governed by the State, often in partnership with social partners (e.g. Cyprus, Ireland, Spain).

Beyond these two basic types of trainings funds (national and sectoral), other solutions can be found among EU countries. For example, the so-called inter-professional funds for CVT in Italy are linked to a particular sub-field of the economy or a particular occupational or professional field or size of the company. The funds, therefore, do not correspond to established economic sectors and their particular industrial relations (e.g. with regard to wage bargaining). In France, the level of levy is set at natonal level, however, funds are distributed through OPCO organisations operating at sectoral level.

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.

Training funds typically collect financial resources from all companies in the economy or sector (or from companies and employees), irrespectively of the levels of their training investment, and redistribute the collected funds back to companies for training purposes (‘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 (dedicated budget for training covering IVET, CVET or both) may be used in the following forms:

• Demand-side funding arrangements where companies (and sometimes individual workers) enjoy a contribution to the costs of training stemming from the funds collected by the levy. Grants received can either be limited to a certain share of the levy payments made (‘cost reimbursement’) or exceed the levy contributions made (‘cost redistribution’)
• Supply-side funding arrangements, supporting dedicated training organisations (public institutions, institutions run by employer associations or/and trade-unions) or providing funds for the provision of specific training programmes. Companies (and employees) profit from training provision requiring no or low fees available based on the contributions collected.

Training funds maybe also support training by providing various training-related services, e.g. advisory/consulting services for employers, research on skill needs, development of pilot, novel training projects, mediation between employers and jobseekers.

Beyond remaining a mere funding arrangement, training funds often develop into multifaceted organisations with a staff of dedicated experts which resume a key role in the governance, foresight, quality assurance and provision of CVET. Training funds may run significant training facilities of their own.

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.

It should be noted, that in some countries there are organisations named ‘Training Funds’, however, which are funded based on general taxes or social security contributions (including unemployment insurance) and a discretionary decision on the size of the budget to be allocated to these organisations. While these organisations often provide type of activities and support similar to those provided by the funds based on training-specific levies, they are not considered as training funds according to the approach adopted by Cedefop

While the proposed definition for a training fund requires that a specific levy on companies is collected and resulting funds are devoted to training, in various countries, the are organisations named ‘Training Funds’, however, which are funded based on general taxes or social security contributions (including unemployment insurance), based on a discretionary decision on the size of the budget to be allocated to these organisations. While these organisations often provide type of activities and support similar to thse provided by training funds based ontraining-specific levies, the y are not considered as training funds according to the approach adopted by Cedefop and therefore are not included in the database[3] (although their support schemes, e.g. the grants, are included in the database, under the respective section). Moreover, there are borderline cases as in the case of Hungary, where a training levy is collected from companies, however, the collected funds are used for a broad range of activities and a budget for the support of training activity is earmarked based on a discretionary decision only. Finally, contributions for education and training may be collected as part of the unemployment insurance system (e.g. in Austria or Germany), however, funds made available for training still rests on a discretionary decision.

Furthermore, when taking a cross-country comparative view, it is important to consider that in various countries, the support for continuous training for the employed (and not only the unemployed or the inactive) and therefore demand-side support schemes targeting companies or employees is defined as one responsibility of the Public Employment Service (PES). The PES might be entitled to use means stemming from the unemployment insurance contributions of employers and employees for supporting training of the employed. Occasionally, a ‘surcharge’ of the payroll based contribution to the unemployment insurance had been implemented to extend the leeway of funding training for the employed. In countries with such a tradition, as for example Austria, the PES become a key actor in both supply-side and demand-side funding approaches for CVT, although the contributions made by employers and employees via their unemployment insurance payments are less visible than in cases, where contributions are made to a dedicated training fund.