Training Incentives- The Good, The Bad, and The Ugly
Monday, August 17, 2009
Incentives for employee training can help a company to defray costs and increase efficiency, while also building a state’s intellectual capital.
Investment in economic development has become increasingly more strategic as many states attempt to attract specific industries such as life sciences, advanced manufacturing, and information technology that create high-skill jobs commanding high wages. Talent is the key issue in attracting these types of jobs, making training incentives a requirement for states to stay competitive. States financially support the training of highly skilled employees in hopes that they will stay and make the state a better place in which to live, thereby also attracting other companies. For companies, training assistance mitigates some of the risk of work force turnover before recovering the training investment.
Since training increases the competitiveness of a work force, why does it seem that companies are becoming less inclined to train employees and more inclined to hire an already trained work force? One answer is that companies seem to be more focused on project incentives that impact the direct cost of the company’s proposed project, like property tax abatement, infrastructure assistance, or corporate income tax credits. Also, some companies may have had an unpleasant introduction to working with state authorities and/or difficulties with government training or incentive programs.
The Good
Many states are beginning to recognize that training programs must address the needs of the employer as well as employees.
States use various ways to encourage training. Traditionally, there has been discretionary, statutory, and federal funding for training incentives, typically in the form of training grants. Training grants generally provide cash reimbursement to help cover the cost of external and internal training expenses. Some states are experimenting with new ways to finance training assistance through payroll levies and tax credits. A payroll-based levy allows companies to choose to either spend a specific percentage of their payroll on training or contribute that percentage to a state-initiated training fund. A training tax credit typically equals a percentage of an employer’s approved training cost and can be used to offset the taxpayer’s income tax liability. Programs are becoming more flexible and effective in mitigating the costs of training employees.
While it is good news that high skills/wage job classifications are getting training dollars from states, it is great news that progressive states are exploring ways to train low skills/ wage employees. It is well known that a high school diploma does not necessarily guarantee a high level of practical literacy. Non-native speakers of English may also require more training of a basic nature. States are better-positioned to offer direct training services with fewer requirements than the federal government. States can create work force development programs and provide companies with technology and training assistance through partnerships with community colleges and tech schools. These training providers can concentrate on specific industries, help companies develop job ladders, and support the training requirements of particular vocations. This also adds to the base of building a firm foundation of intellectual capital within the state.
The Bad
Many states have overly complicated applications and processes and tracking requirements for incentives that keep companies from gaining reimbursement for their training efforts. Company letters and calls to government officials and project managers have, for the most part, gone unheeded. The message is clear: the training programs and associated processes are too complicated to be cost-effective.
Regrettably, when the time comes to claim the incentives that were negotiated, companies often find the process more difficult than they had anticipated. A state may have three or more different training programs through unrelated governmental agencies, each requiring a different application. Applications are redundant, confusing, and request information not relevant to the project. Many applications are not available online or electronically — or if they are available, they are not formatted properly. Applications are often arranged for the benefit of the project managers and may use jargon that the company does not understand. To further complicate the issue, some states change applications often enough that project managers may have different versions of the same document.
The unfortunate truth is that state project managers are not going to complete applications or write training budgets for companies. They are busy people with many projects. However, this also means that state project managers have never had to complete an application for the very programs that they are “selling” to potential “clients,” creating a serious disconnect. It takes a lot of time to complete one application, not to mention three or more. In addition, the programs themselves cover different training and have different requirements. Staff turnover and inconsistent policies aggravate the situation. Poor communication and slow approval processes drive many companies to simply give up.
The Ugly
Companies that are “promised” incentives and aren’t able to use them because of “failure to meet or comply” with program requirements feel misled.
Training incentives can be counterproductive when companies think they are going to receive training money, plan their training budget, spend the money, and then realize that they are not going to be reimbursed because of a failure to comply with program requirements.
In Summary
There must be a positive link between training and profitability. Training incentives are an opportunity for the state and company to partner for mutually shared benefits. It is the company’s responsibility to commit to realistic growth and wage numbers and reach those goals within a specifically stated amount of time. It is the state’s responsibility to create well-designed programs with straightforward and flexible processes. Training money that is set aside by state authorities, but is not used by companies does nothing to develop a state’s intellectual capital. Companies are the best judges of the training required to make their businesses competitive; therefore, state training programs should be flexible enough to allow for changes in technology and types of training. Finally, companies should be aware of the extensive application and compliance paperwork associated with most training programs. To take full advantage of allocated training funds, companies must be prepared to dedicate appropriate staff and resources to administer the programs or hire experienced consultants to manage the process.
by Jenny Massey
Senior Project Manager, Bingham Economic Development
at 11:10 AM Link to this Article 0 Comments
Comments:
Investment in economic development has become increasingly more strategic as many states attempt to attract specific industries such as life sciences, advanced manufacturing, and information technology that create high-skill jobs commanding high wages. Talent is the key issue in attracting these types of jobs, making training incentives a requirement for states to stay competitive. States financially support the training of highly skilled employees in hopes that they will stay and make the state a better place in which to live, thereby also attracting other companies. For companies, training assistance mitigates some of the risk of work force turnover before recovering the training investment.
Since training increases the competitiveness of a work force, why does it seem that companies are becoming less inclined to train employees and more inclined to hire an already trained work force? One answer is that companies seem to be more focused on project incentives that impact the direct cost of the company’s proposed project, like property tax abatement, infrastructure assistance, or corporate income tax credits. Also, some companies may have had an unpleasant introduction to working with state authorities and/or difficulties with government training or incentive programs.
The Good
Many states are beginning to recognize that training programs must address the needs of the employer as well as employees.
States use various ways to encourage training. Traditionally, there has been discretionary, statutory, and federal funding for training incentives, typically in the form of training grants. Training grants generally provide cash reimbursement to help cover the cost of external and internal training expenses. Some states are experimenting with new ways to finance training assistance through payroll levies and tax credits. A payroll-based levy allows companies to choose to either spend a specific percentage of their payroll on training or contribute that percentage to a state-initiated training fund. A training tax credit typically equals a percentage of an employer’s approved training cost and can be used to offset the taxpayer’s income tax liability. Programs are becoming more flexible and effective in mitigating the costs of training employees.
While it is good news that high skills/wage job classifications are getting training dollars from states, it is great news that progressive states are exploring ways to train low skills/ wage employees. It is well known that a high school diploma does not necessarily guarantee a high level of practical literacy. Non-native speakers of English may also require more training of a basic nature. States are better-positioned to offer direct training services with fewer requirements than the federal government. States can create work force development programs and provide companies with technology and training assistance through partnerships with community colleges and tech schools. These training providers can concentrate on specific industries, help companies develop job ladders, and support the training requirements of particular vocations. This also adds to the base of building a firm foundation of intellectual capital within the state.
The Bad
Many states have overly complicated applications and processes and tracking requirements for incentives that keep companies from gaining reimbursement for their training efforts. Company letters and calls to government officials and project managers have, for the most part, gone unheeded. The message is clear: the training programs and associated processes are too complicated to be cost-effective.
Regrettably, when the time comes to claim the incentives that were negotiated, companies often find the process more difficult than they had anticipated. A state may have three or more different training programs through unrelated governmental agencies, each requiring a different application. Applications are redundant, confusing, and request information not relevant to the project. Many applications are not available online or electronically — or if they are available, they are not formatted properly. Applications are often arranged for the benefit of the project managers and may use jargon that the company does not understand. To further complicate the issue, some states change applications often enough that project managers may have different versions of the same document.
The unfortunate truth is that state project managers are not going to complete applications or write training budgets for companies. They are busy people with many projects. However, this also means that state project managers have never had to complete an application for the very programs that they are “selling” to potential “clients,” creating a serious disconnect. It takes a lot of time to complete one application, not to mention three or more. In addition, the programs themselves cover different training and have different requirements. Staff turnover and inconsistent policies aggravate the situation. Poor communication and slow approval processes drive many companies to simply give up.
The Ugly
Companies that are “promised” incentives and aren’t able to use them because of “failure to meet or comply” with program requirements feel misled.
Training incentives can be counterproductive when companies think they are going to receive training money, plan their training budget, spend the money, and then realize that they are not going to be reimbursed because of a failure to comply with program requirements.
In Summary
There must be a positive link between training and profitability. Training incentives are an opportunity for the state and company to partner for mutually shared benefits. It is the company’s responsibility to commit to realistic growth and wage numbers and reach those goals within a specifically stated amount of time. It is the state’s responsibility to create well-designed programs with straightforward and flexible processes. Training money that is set aside by state authorities, but is not used by companies does nothing to develop a state’s intellectual capital. Companies are the best judges of the training required to make their businesses competitive; therefore, state training programs should be flexible enough to allow for changes in technology and types of training. Finally, companies should be aware of the extensive application and compliance paperwork associated with most training programs. To take full advantage of allocated training funds, companies must be prepared to dedicate appropriate staff and resources to administer the programs or hire experienced consultants to manage the process.
by Jenny Massey
Senior Project Manager, Bingham Economic Development
at 11:10 AM Link to this Article
Comments:
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