Industry Training Review

Proposal to improve the performance of the Government’s investment in industry training

Consultation Document

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Executive summary

This consultation document seeks views on a proposal to make changes to the policy settings for industry training following a review that commenced in 2011.

It is intended that the changes will create an environment that will better support trainee achievement and progression through vocational education and training, by ensuring that employers and trainees are well served by industry training organisations (ITOs) with appropriate incentives.

The proposal was considered within the context of the wider vocational education and training settings, and needs to be considered alongside ongoing operational policy changes.

The key proposed changes to industry training policy that the Ministry of Education are seeking feedback on are as follows:

  • ITOs will focus on two key functions – arranging training and skill setting for industry.
  • Greater simplicity, accountability and clarity of the ITOs’ functions and roles.
  • Higher expectations for qualification completions and programme completions for ITOs.
  • Industry will have responsibility for communicating skill needs directly to Government to create closer links between education, employment and industry.
  • Amalgamating all apprenticeships into the Modern Apprenticeships scheme, making the same level of support available for all apprentices, regardless of age.
  • Raising the current 10% restriction on industry training at levels 5 and 6.
  • Either the Modern Apprenticeship co-ordination fee should be incorporated into the Modern Apprenticeship training rate or kept as a separate rate.
  • Adjust to a more sustainable funding regime that increases the subsidy rate for traineeships (programmes of 40 credits or greater) and introduces a new, higher subsidy rate for apprenticeships (currently Modern Apprenticeships are 100 credits or greater). A higher rate per trainee is being considered as part of the expectations for improved performance.
  • Remove disincentives for allowing trainees to progress into employment and apprenticeships from a provider, and for transferring into a provider to complete a qualification if their employment situation changes.
  • Review quality assurance mechanisms to include management of the processes for assuring consistency of graduate outcomes as a role of the qualification developer.
  • Review quality assurance systems for unit standards, with the view that, over time, new versions will be flexible enough to be able to be delivered in a range of delivery settings.

The proposal focusses on changes to the policy for industry training. It is anticipated legislative changes to the Industry Training Act 1992 and integrating aspects of the Modern Apprenticeship Training Act 2000 will be needed to implement changes from 2014. Any operational changes will be implemented progressively over 2013 and 2014.

A working party of sector and industry representatives, as well as government officials, will work through the implementation issues once final policy decisions have been made.

Feedback can be submitted to . The deadline for providing feedback is 12 September 2012.

Introduction

Purpose of this document

This consultation document seeks views on a proposal to change New Zealand’s industry training system to improve its effectiveness for employers, trainees and the Government. The proposal aims to address the problems identified through the review of industry training while meeting the training needs of employers and employees, improving the clarity of training pathways, and delivering better value for Government’s investment.

The proposal will be refined following the consultation process. We would like to hear your views on the benefits and risks of this proposal for employers and trainees in your industry.

How to provide feedback

You can provide feedback by emailing: . The deadline for providing feedback is Wednesday, 12 September 2012.

We are happy to receive feedback in an email, or you could use the feedback form at the end of this document.

Process from here

The Minister for Tertiary Education, Skills and Employment will consider feedback on this proposal when making final decisions on changes to industry training. The Minister expects to announce final decisions in November this year with the view that the new policy settings will come into effect progressively during 2013 and 2014.

This proposal will require changes to the Industry Training Act 1992. It will also involve integrating aspects of the Modern Apprenticeship Training Act 2000 into new industry training legislation.

A working party, comprising sector and industry representatives as well as government officials, will work through the implementation issues once final policy decisions have been made.

Background to the proposal

What is industry training?

Industry training is systematic work-based training that leads to national qualifications. New Zealand’s industry training system encompasses initial vocational training (apprenticeships), foundation education, and continuing vocational education for employees.

Most industry training funding is for qualifications at levels 1 to 4 on the New Zealand Qualifications Framework (NZQF). Government funding is focussed on the lower end of the qualifications framework to incentivise employers to invest in training lower-skilled employees towards full qualifications. Lower-skilled employees generally attract less investment from employers than higher-skilled employees.

Industry training organisations (ITOs) are industry-owned bodies that support industry training in New Zealand. ITOs currently have three main roles under the Industry Training Act 1992: setting skills standards for their industries, arranging training towards those skill standards, and providing leadership within their industries on matters relating to skills and training.

The Modern Apprenticeships scheme provides additional support to young people in long industry training programmes at levels 3 and 4 of the NZQF. The additional support is provided by Modern Apprenticeships Co-ordinators (MACs), who may be an ITO, a tertiary provider, a group training scheme or an independent organisation.

There are currently 31 ITOs across a range of industries. In 2011, there were approximately 148,000 trainees enrolled.

Why does Government invest in industry training?

Government subsidises industry training to encourage employers to invest in training to up-skill employees with broad and transferable skills that result in industry-recognised qualifications. It is not intended as a straight subsidy for employers towards business-as-usual activities.

Government’s investment in industry training is substantial – the 2012/13 baseline for industry training (including Modern Apprenticeships) is $207.4 million. Industry training is co-funded with industry: Government provides approximately 70% of the cash cost of training, while employers are expected to fund 30%. This recognises that industry training benefits the employer as well as the individual and the wider economy.

Why is Government reviewing industry training?

New Zealand’s industry training system was reformed in 1991. It has been nearly 20 years since the Industry Training Act 1992 was enacted, and 10 years since it was revised and the Modern Apprenticeship Training Act 2000 enacted.

Compared to the previous apprenticeship system, the flexibility of industry training has proven successful in responding to different employer needs and engaging new industries. Structured industry training has been extended to many new industries and to individuals who have not successfully undertaken education in the past.

However, there have been concerns about the performance of industry training. Less than a third of trainees achieve a qualification five years after starting their industry training programme. Between 2000 and 2010, an average of 53% of industry trainees and 36% of modern apprentices achieved no credits even though they attracted a government subsidy. In 2009, half of the credits trainees were enrolled in were achieved.

Beginning in 2010, the Tertiary Education Commission (TEC) has undertaken a series of compliance reviews of ITOs. These reviews identified that some ITOs were claiming funding for ineligible trainees, including where there was no evidence of employment or that a valid training agreement was in place. This has resulted in the TEC recovering $4.3 million in funding from ITOs.

In response to performance issues and evidence of low-value provision, the TEC also made a number of changes to operational policy settings. These changes include only funding trainees who are appropriately progressing through their programmes and requiring evidence of credit achievement.

The recent compliance and operational policy reviews have addressed some important aspects of performance and the effective use of public funds, and performance of the ITO sector has significantly improved, as figure one below shows. In 2010, following the TEC’s operational changes, programme completions have increased to 65% and preliminary 2011 data indicates they have reached 70%.

A number of other policy changes were also agreed during 2010 to improve the link between funding and performance, and to focus funding upon training with wider economic benefits. The changes included the introduction of performance-linked funding; placing greater emphasis on the rate of industry cash contribution for the purposes of recognising organisations as ITOs; requiring literacy and numeracy as part of all level 1 and 2 training; and removing funding for training primarily designed to fulfil regulatory compliance or health and safety requirements.

In parallel with the TEC’s operational changes, the Minister asked for a wider policy review to be undertaken to ensure that the policy principles of industry training support further improvement of ITO performance, and are conducive to a better-performing vocational education and training sector generally.

Figure 1: Participation and performance of industry trainees, 2006 – 2011

* 2011 results are preliminary.

Process of the review

The Ministry of Education commenced a policy review of industry training in 2011 to assess whether the current model is still fit-for-purpose.

The Ministry looked at the history of industry training, made international comparisons, consulted on a discussion paper of industry training systems, and used interviews and surveys to gather feedback. Six papers produced during the course of the review can be found at www.minedu.govt.nz using the quicklink on the right-hand side of the homepage.

Findings of the industry training review

The key themes that emerged through the review were:

  • ITOs vary in terms of the level of service they provide to employers and trainees, their performance, and their connection with industry.
  • The industry training funding rate does not adequately support the level of theory learning required in traditional apprenticeships (qualifications of 200 credits or greater at NZQF levels 3 and 4 that provide entry into an occupation or trade).
  • Tensions between ITOs and tertiary providers have contributed to the proliferation of qualifications and hindered easy transitions between sectors for learners.
  • The Modern Apprenticeships scheme, which provides additional support to young people in specific industry training programmes, lacks accountability.
  • Transferring to a different part of the tertiary sector part-way through a qualification, for example, changing from a polytechnic programme to employment and an apprenticeship, can be difficult, and vice versa.

Proposal for consultation

While this proposal is focussed on industry training, the review has been conscious of the impacts that changes to industry training will have upon the wider vocational education and training sector.

You are welcome to provide feedback on all aspects of the proposal.

The table on page 11 provides the elements of the proposal, how it changes from the status quo, rationale for each element and feedback questions for consideration.

Summary of proposal

ITO functions and role

  1. The first key focus for ITOs is to provide excellent support and service to employers and trainees, resulting in the successful achievement of qualifications.
  1. The second key focus for ITOs is to undertake the standard-setting function for their respective industries.
  2. The Government would have higher expectations of qualification and programme completions for ITOs.
  1. Industry will have responsibility for communicating skill needs directly to Government, with support by the Ministry of Business, Innovation and Employment (MBIE) and the TEC, to create closer links to education, employment and industry.
  1. A more sustainable funding regime would be put in place that increases the subsidy rate for traineeships and introduces a new, higher subsidy rate for apprenticeships. A higher rate per trainee is being considered as part of the expectations for improved performance.
  2. All apprenticeships will be amalgamated into the Modern Apprenticeships scheme, making the same level of support available to all apprentices regardless of age. The definition of an apprenticeship will be clarified.
  1. Feedback is sought on whether the Modern Apprenticeships coordination fee should be incorporated into the training rate for apprentices, or whether it should be kept as a separate fee.
  1. The current 10% restriction on training at levels 5 and 6 will be raised.

Transferability across tertiary sectors

  1. To encourage greater transferability of learning between ITOs and providers, the TEC will remove disincentives from transferring between industry training and provider courses by recognising continuation of a qualification across sub-sectors as a positive outcome.

Quality assurance

  1. Feedback is sought on how moderation and consistency of graduate outcomes should be managed and funded in future. Possible options are:
  • for external moderation, only applying to standards relating to skills critical to an occupation as identified by industry
  • removing the credit rebate for external moderation and funding the qualification developer to manage consistency of graduate outcomes using this funding
  • introducing a small levy to enable the qualification developer to manage consistency of graduate outcomes.
  1. The NZQA intends to review its rules and guidelines for setting unit standards. Over-time, as unit standards are redeveloped, new versions will be flexible enough to be contextualised to a range of settings rather than developing new standards for each setting. NZQA will be consulting later in the year on rules for recognition of prior learning.

What will the proposal mean for employers, trainees and industry?

Employers

Employers should see a more consistent level of service and support from ITOs. Employers should expect a greater degree of mentoring to assist in training employees, more support for trainees and apprentices to keep them on track, and a greater level of assessment services being provided by ITOs or organisations contracted by ITOs.

ITOs will be expected to communicate with employers more clearly and in a timely manner about progress of trainees and apprentices towards qualifications.

The consolidation of the ITO sector should reduce the compliance costs for employers currently dealing with multiple ITOs and reduce duplication of effort.

Employers will be expected to support trainees and apprentices towards completion of qualifications.

Trainees and apprentices

Trainees and apprentices should see a higher level of support for their learning from ITOs or organisations contracted by ITOs. Trainees and apprentices who need a higher level of assistance should see a higher level of contact and pastoral care.

A higher subsidy for apprenticeships is anticipated to result in higher quality theory and off-job learning for apprentices.

Students should see better pathways to transfer between ITOs and tertiary providers, and vice versa.

Industry

Industry groups will have a clearer and more direct way to communicate their skill needs to Government and to influence government funding of tertiary education.

Industry should see a greater return on its investment in industry training, as a greater proportion of trainees will be upgrading their skills. The proposal is likely to result in fewer enrolled trainees than would have been the case under the old settings, but many more of these trainees will be earning credits and completing qualifications.

It is anticipated that there will be a greater proportion of younger trainees overall in industry training, because young people are more likely to complete full qualifications.

Industry should see larger and more competent ITOs developing fit-for-purpose standards and qualifications.

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Outline of the proposal

Proposal / Status quo / Detail on the proposal / Rationale for proposal
1. ITOs focus on providing excellent service and support to employers and trainees. / ITOs arrange training and are prohibited from delivering training. The boundary between arranging and delivery is blurred.
ITOs vary in the type and level of support they provide to employers and trainees. / ITOs will continue to support training in the workplace through:
  • developing learning materials
  • training and mentoring workplace trainers
  • supporting the learning of trainees
  • providing assessment services
  • contracting tertiary providers to deliver the theory, or off-job, learning.
Through the investment plan guidance, government will set clear expectations around the support employers and trainees should expect from ITOs.
ITOs will be expected to assist in planning how a qualification can be achieved within a company to assess learner needs to ensure they are enrolled in an appropriate programme with the right kind of support, and to provide timely and regular feedback to employers and trainees on their progress through programmes. / ITOs will be able to undertake the activities employers most value – providing support for on-job training.
Clarifying expectations about the level of support provides transparency for employers and addresses variability in ITO support for training.
ITOs will be able to focus on support for on-job training and explore innovative ways of meeting industry demand for training.
Clearly articulating what constitutes arranging training removes uncertainty about the boundary between arranging and delivery of training.
Feedback question: In your view, what are the benefits and risks for employers and trainees in your industry of retaining the arranging training role of ITOs and clarifying expectations of service to employers and trainees?
2. ITOs focus on the standard-setting function for their respective industries. / ITOs collaborate with industry on the development of skill standards.
Many standards are very small and relate to discrete tasks rather than skills.