The issue: Enterprises should envision the benefits of offering quality apprenticeship training and demonstrate their capacity to deliver it

The participation of enterprises in the implementation of quality apprenticeships depends primarily on two main factors: first, whether they are willing to offer apprenticeships;² second, whether they have the capacity to offer good quality training and comply with the standards for training and working conditions specified by their applicable national laws and regulations.

For employers to appreciate the value of participating, the perceived financial and non-financial benefits of offering apprenticeships must outweigh the costs. The cost and benefit aspects play a decisive role here, as discussed in Toolkit 1 (see section 8.2.1). Figure 4.1 illustrates the economic principle. In the early stages of an apprenticeship there is a net cost to enterprises (shown as A in figure 4.1), because the initial costs (such as wages, social security contributions, time commitment of in-company trainers (in-CTs) and training materials) outweigh the initial contribution that apprentices make to the production of goods and services. As apprentices acquire skills and become more productive, the costs and benefits start to even out and enterprises recover their initial investment, as can be seen from the stylized cost–benefit analysis relating to the period of the apprenticeship programme (B). In the post-apprenticeship period, when the apprentice has become an experienced worker, there is a clear benefit for the enterprise, even if wage costs are higher (C). The marginal productivity (MP) of a person recruited into an apprenticeship is represented by the curve MP–MP. The figure simply illustrates the principle; the reality will look different in each individual case.

Figure 4.1 A stylized model of the costs and benefits of apprenticeships for enterprises

Source: Gambin, Hasluck and Hogarth, 2010.

Employers incur the costs of training apprentices in the expectation that those apprentices, once partly trained, will contribute to productive output and, once fully trained, may become valued skilled workers. Smaller employers, in particular, may find it difficult to retain qualified apprentices, so need to realize a positive return on their investment by the end of the training period. In some cases, employers, particularly larger employers that may reasonably expect to retain qualified apprentices, may also be prepared to bear a net cost during the apprenticeship period in order to benefit from their skills following completion of the apprenticeship. Employers benefit from apprenticeship in a number ways:

• gaining highly competent employees who meet the specific needs of the employer (rather than having to resort to external recruitment)
• improving productivity, as well as the quality of services and products
• saving on recruitment and retraining costs
• realizing a high return on investment in the long run
• participating in defining specific employer-based training content and development of standards
• supporting corporate social responsibility.³

Which arguments carry most weight with employers depends on the socio-cultural and economic context of the respective country. Table 4.1 summarizes the costs and benefits of providing apprenticeships for enterprises.

Table 4.1 Summary of the costs and benefits of quality apprenticeships for enterprises

		Costs	Benefits
Enterprises	During the apprenticeship	Wage/stipend Social security contributions Time of in-CTs Costs of training materials, space, equipment Recruitment and administration costs	Apprentices’ contributions to the production of goods and services Government incentives Payments from training funds Improvement in reputation
	After the apprenticeship		Savings in recruitment and initial training costs by hiring graduating apprentices Highly competent employees who meet the specific skills needs of the enterprise (versus hiring externally) Higher productivity and quality More loyal workforce Savings from reduced employee turnover Innovation Wage stability High return on investment in the long run

Source: ILO Toolkit 1.

Toolkit 1 concludes that “there is some evidence that, all in all, the benefits of funding apprenticeship systems outweigh the costs, both for enterprises and for governments. Indeed, these costs are investments for future social and economic development – and in some countries, governments do provide incentives,⁴ in many different forms, so as to encourage employers and apprentices to participate in apprenticeship systems. … If all the actors see the long-term benefits, perhaps at some point no incentives will be needed to promote apprenticeships” (ILO, 2017, p. 76) (see box 4.1).

At their 2016 meeting in Beijing, the G20 Labour and Employment Ministers agreed to increase the number, quality and diversity of apprenticeships (G20, 2016) by, inter alia, making apprenticeship more attractive to enterprises, in particular SMEs, addressing legal and regulatory disincentives and promoting an adequate/appropriate sharing of costs among enterprises, providers and public authorities.

---

1 Source: www.admin.ch/gov/it/start/documentazione/discorsi/discorsi-dei-consiglieri-federali.msg-id-62302.html.

2 Employers’ knowledge of the costs and benefits of apprenticeships plays an important role in the willingness of enterprises to offer apprenticeships. In addition, in several countries, it is mandatory for enterprises (with a certain minimum number of employees) to offer apprenticeships. However, in spite of this requirement, not all enterprises implement apprenticeships.

3 GOVET, Dual Vocational Education and Training in Germany, https://www.bibb.de/govet/en/71186.php. A more comprehensive list can be found in a publication of DC dVET, https://www.dcdualvet.org/wp-content/uploads/DC-dVET_Engaging-the-Business-Sector-in-VET_Study_ENGL_FINAL.pdf, p. 33.

4 For further details, refer to section 8.3 of Toolkit 1 as well as the DC dVET discussion paper Companies engaging in Dual VET: Do financial incentives matter?.