House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Skills and Training, the Hon Brendan O'Connor MP)

Chapter Six: Consultation

6.1 Australian apprenticeships incentives reform consultation

As described in Chapter One, prior to the COVID-19 pandemic, reforms sought to identify opportunities to reduce the complexity in the incentives system and address the decline in commencements and completions. This reform drew heavily on the Joyce Review (discussed below).

This led to the inception of the Incentives for Australian Apprenticeships (IAA) program which proposes modest changes to the current program that would achieve a simplified payment structure and reduce system complexity. However, the COVID-19 pandemic has created a different economic landscape and presented many opportunities to learn from, including market responsiveness to incentives such as the Boosting Apprenticeship Commencements (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies. The Productivity Commission's review of the National Agreement for Skills and Workforce Development (NASWD) has also exposed some of the current system's shortcomings.

The Government undertook several stakeholder engagement activities and research projects to assess if the IAA was still fit-for-purpose and to inform further reform. Feedback on challenges with current incentives and possible options for an improved system were sought from stakeholders, including employers, apprentices, peak bodies, training organisations and state and territory representatives.

Consultation determined the IAA is not equipped to operate in the current and emerging environment, without compromising commencements and completions. Instead, reforms should prioritise:

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Sustaining commencements, above pre-BAC levels;

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Targeting skill shortages to secure the future of the Australia's pipeline of skilled workers; and

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Providing more support to the apprentice, to improve completions.

Table 8: Key views from the sector summary

Primary research

National Centre for Vocational Education research

National Centre for Vocational Education Research (NCVER) is the national professional body responsible for collecting, managing, analysing and communicating research and statistics on the Australian VET sector, including apprenticeships.

NCVER publishes a number of research findings on VET and apprenticeships, including a quarterly data infographic and research into specific apprenticeship issues aimed at helping inform policy. The direction and priorities for NCVER research is determined primarily through the Skills Senior Officials Network (SSON).

Some recent examples of their research include:

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Issues in apprenticeships and traineeships - a research synthesis (2021)

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Incentives play an important role in encouraging and supporting apprenticeships and traineeships but need to be carefully calibrated.

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The relevance of the historical apprenticeship model to changing industry, economic and social conditions has been challenged and there is support for alternative models of delivery.

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Apprentices and trainees 2020: impact of COVID-19 on training activity (2020)

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Compared with the same period in 2019, the number of contract commencements showed marked declines in April and May 2020.

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Impacts to commencements and suspensions were more pronounced for females than for males; and for contracts in non-trade rather than trade.

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Traditional trade apprenticeships: learnings from the field (2020)

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There was strong support among the sector, including employers and apprentices, for maintaining the current element of apprenticeship training, such as on and off the job training.

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Apprentices could feel challenged by the expectations of the workplace, understanding components of their courses and sustaining inter-personal interactions with their colleagues.

Strengthening Skills: Expert Review of Australia's Vocational Education and Training System: Joyce Review

On 28 November 2018, the Honourable Steven Joyce, former New Zealand Minster for Tertiary Education, Skills and Employment led an independent review of Australia's VET sector on behalf of the Australian Government.

The primary recommendation for the Australian Apprenticeship incentives system was that the Australian Government revamp and simplify its apprenticeships incentives program to make it more attractive to and more easily understood by apprentices and trainees and their employers.

Productivity Commission - National Agreement for Skills and Workforce Development Review

In the foreword of the review, the objective of NASWD is stated as:

The NASWD's objectives are to ensure the VET system delivers a productive and highly skilled workforce; enables all working age Australians to develop the skills and qualifications needed to participate effectively in the labour market and contribute to Australia's economic future; and supports increased rates of workforce participation.

This review included reviewing current funding arrangements for the VET sector, including the Australian Apprenticeship Incentives Program (AAIP). The review found overall the three biggest priorities for the Australian Apprenticeships was to:

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Prepare and support apprentices;

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Reduce barriers to apprenticeship and non-apprenticeship pathways; and

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Reorient employer incentives - Employer incentives are more effective when they are front loaded.

Workshops with key stakeholders

The Department consulted with stakeholders on strengths and weaknesses of the existing Australian Apprenticeship System and design principles for future reform. Stakeholders were also asked to consider and identify practical implementation issues and possible solutions.

This involved:

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A workshop with state and territory officials to contribute ideas and practical solutions to inform an effective reformed incentives framework;

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Discussions with individual states and territories to further explore issues and possible solutions at the state level; and

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Workshops with the Skills Expert Panel and the VET Stakeholder Committee.

Wallis - Apprentice and Employer Surveys

The Department commissioned Wallis in late 2021 to explore what supports apprentices and employers needed to help them succeed in the Australian Apprenticeship ecosystem.

The surveys primarily focussed on the non-financial support currently available and sought input on the type of support needed to improve apprenticeship commencements and completion rates. Focus groups with a very limited number of apprentices and employers, identified the following topics for exploration:

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Perceptions of the employing process and becoming an apprentice/trainee;

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Support of apprentices/trainees (early on and current);

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Support for managing apprentices/trainees;

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AASN providers;

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Attrition/termination; and

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Overall views and perceptions of apprenticeships/traineeships.

Wallis received completed surveys from 500 current apprentices as well as 500 employers of apprentices. Key smaller populations such as Indigenous Australian Apprentices were over-sampled to ensure responses from these populations were obtained. The key findings are below:

Challenges of hiring and sign-up

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Both employers (28 per cent) and apprentices (17 per cent) consider fitting in with workplace and low wages are key challenges when starting apprenticeships; and

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However, 37 per cent of employers believe the apprentice work ethic or job readiness is more challenging.

Support for employers and apprentices

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The main sources of support differ between apprentices and their employers:

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More than half employers reported getting support from AASNs and training providers.

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Whereas apprentices are predominantly getting support from their families and their employers.

Apprentice

Apprentices identified the need for more support to help navigate workplace relations.

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Apprentices identified they need extra help to help them understand their rights and obligations. Apprentices reported issues such as signing up with blank contracts, being underpaid and working on site on the days they are supposed to be at training;

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Over a fifth of apprentices identified better training/support from training providers as being critical non-financial support;

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Nearly half (46 per cent) of apprentices consider AASN providers fully or mostly meet their expectations; and

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Qualitative research suggests that where apprentices have had a limited interaction with the AASN their understanding of the role/support they could get from their AASN providers can be unclear and is also limited. AASN providers have not been reachable at times when the apprentice needs help.

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Apprentices indicate the lack of consistent name or brand of AASN could be contributing to the confusion about what AASNs can do and what apprentices can expect from them.

Employer

Employers note they need support with improved training/trainers, and financial support.

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Qualitative data found some employers and individuals expressed frustration at the perceived quality of some Registered Training Organisations (RTOs) and the need to change RTOs if the RTO failed to retain their accreditation;

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In addition to training quality issues, they noted that RTOs are perceived as generally not flexible enough for apprentices; and

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The majority of employers (60 per cent) believe the support they received from AASN providers fully or mostly meet their expectations.

Deloitte

The Department of Education, Employment and Workplace Relations commissioned Deloitte Access Economics to conduct an econometric analysis of the AAIP, which was completed on 5 March 2012.

Their analysis drew two high level conclusions:

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Financial incentives have a positive effect on commencements, with payments made of over $1,000 having a significantly positive effect; and

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The timing of when incentives are paid is very important.

Importantly, their analysis found that incentivising individual apprentices to improve completions is more effective than incentivising employers. ^[61]

How did we incorporate feedback into policy? What other consultation will occur?

What is the feedback telling us?

Overall, feedback across the sector has been fairly consistent, from Australian Government and State Government, employers, apprentices, AASNs and research, and includes:

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Apprentices need more support, both financially and non-financially;

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There are barriers to sign-up;

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Apprenticeships can play a key role in targeting priority skills;

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Policy needs to target apprenticeships to build on the gains from the BAC and continue to encourage increased commencements; and

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Completions are an important part of the equation.

These views and concerns have been used to shape Option 2 and Option 3. In particular, Option 3 enables a higher level of investment in the apprenticeship incentives system during the economic recovery, before reducing to pre-COVID-19 investment once post-pandemic economic conditions stabilise.