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Small firms embrace affordable training alternatives to ease staff development costs

Red tape guidance overshadows other training priorities, according to new research from the Forum of Private Business

Small businesses are sourcing affordable training alternatives in order to sidestep steep staff development costs, new research from the Forum of Private Business has revealed.

According to the findings of the Forum's latest training and skills member panel survey, more than one in five firms (22%) use guides and handbooks, while other popular alternatives include supplier training (48%) public sector training provided by bodies such as colleges or local authorities (41%), services from trusted advisers such as accountants (38%), personal coaching and mentoring (34%), online training services (28%), ‘DIY' training including industry tips (24%) and analysing competitors (14%). Just 3% use self-help videos.

While 32% of panellists believe the overall training and skills environment has improved recently, compared to the 19% who think it has deteriorated, costs are seen as the biggest barrier to providing training for employees, with 61% of panellists reporting this.

In all, 40% said the availability of training is a barrier, 28% indicated quality of courses as an issue and 22% reported that time needed for training is an impediment.

"For the sake of small businesses and the economy, it is important that small businesses are able to access the right training for their staff at the right price.  Unfortunately, while there have been some improvements recently, this is often not the case at present," said the Forum's Chief Executive, Phil Orford.

"But entrepreneurs are finding ways to provide the skills training their staff need that are more affordable than traditional routes such as expensive courses. This is particularly relevant given the training and guidance required in order to negotiate the minefield of red tape, which is why small businesses value handbooks such as our employment and health and safety guides."

The Forum's research suggests time and money spent on red tape training is hindering coaching in key skills and other areas of staff development, affecting recruitment and, subsequently, economic growth.

A total of 64% of respondents include regulatory compliance as part of their training budget, compared to 45% who prioritise replacing specific skills lost when individuals leave their businesses, 44% who focus on continuing personal development and professional skills and 41% who budget for efficiency training to improve productivity.

In addition, 31% of Forum members surveyed ensure workers receive skills training focused on growing their businesses and 16% provide strategic training such as management skills. 

Just 3% use external third parties such as freelancers to source skills and deliver services previously retained in-house, including marketing and administration. Further, 11% of respondents provide no training at all.

Training focus and impact on recruitment

A total of 65% of panellists have subsequently not recruited in the past year, even though some had considered it, compared to 35% who have taken on staff.

In all, 58% believe their training focus is ‘not ideal', citing time and costs as the main reasons, compared to 40% who think it is – with improved business performance the main benefit.

Mr Orford pointed to earlier Forum research into the cost of complying with red tape, carried out in July 2011, showing that small firms are spending more time and money on complying with regulations – £16.8 billion per year to be exact – despite the Government's legislation-busting initiatives.

A total of 84% of Forum members reported an increase in time spent complying with legislation since 2009, when the not-for-profit organisation's previous ‘cost of compliance' Referendum survey took place.

Further, 67% of respondents said they were being forced to spend more money on external consultants to help them avoid legal pitfalls.

Despite tax-related regulation being deemed the most costly area of red tape, leaving smaller employers with a bill of £5.1 billion per year, employment law came second at £4.2 billion, followed by health and safety law at £3.8 billion.

Mr Orford added: "Employees are hired because their skills and experiences are essential in driving firms forward, and training is an important part of this process, but despite sourcing low-cost alternatives many business owners are being forced to spend valuable training time and money on ensuring they comply with regulations, or are simply not recruiting at all.

"We need government measures designed to free firms from unnecessary regulations to start working quickly – the situation does not appear to have improved for many small businesses and the prospects for economic growth are being threatened."

Apprenticeships and other government schemes

Responding to questions about the Government's training and skills policies, 48% of respondents welcome the present focus on apprenticeships - as opposed to higher education - but 36% feel that the level of funding is still too low.

Panel members were asked whether the burden of training individuals should fall on the employer – while 52% said ‘no' 35% replied that it should, stating that businesses often require specialist skills or expertise from owners or managers. Many said their needs are specific and that it had not been possible to provide local courses in the good times so it would be unrealistic to expect them during the current downturn.

When asked about skills funding 36% of respondents believe the balance is correct but the level of funding too low, while considerably fewer (13%) said the focus and level of skills funding is ‘about right'.

Commenting on the Government's approach to skills training, Mr Orford added: "Focusing on apprenticeships is welcome but there is still a long way to go to make the system more affordable and fit for purpose, including providing better workplace skills training in schools and colleges.

"This means fostering basic attributes such as literacy and numeracy, and a work-ready attitude, as well as the specific skills required by individual businesses."

A total of 73% of panellists assess training needs informally, 35% adopt a formal approach based on their employees' performances and 32% a formal, company-wide process, and 29% train staff when made aware of a need via their supply chain. In all, 21% adopt training when making a significant change to their businesses and 15% when made aware of a particular course from a training provider.

In terms of work-readiness, 68% foresee no problems recruiting graduates, 62% employees aged over 50, 47% apprentices, 40% young people, 33% recent entrants to the UK and 27% those unemployed for over a year.

The Forum's policy recommendations are:

  • The Government should continue to invest in apprenticeships;
  • The education system must equip school leavers with employability skills;
  • Education institutions should forge better links with small businesses in the local community;
  • Steps should be taken to reduce the cost of training for small businesses;
  • More guidance for small businesses on how to identify training needs is required;
  • There must be greater flexibility in training schemes;
  • There should be more training courses to support the long-term unemployed back into work.

The Forum's headline Get Britain Trading campaign highlights the barriers to growth created by over-regulation in the UK. In addition, The Forum helps businesses and their staff to negotiate regulations by providing an Employment Guide and Health and Safety Guide, for more information visit our membership page.  

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