Employers to get say on courses in exchange for rise in payroll levy

Rise in payroll levy expected in this week’s budget to help fund colleges

Employers’ groups such as Ibec  say any  rises in the training fund levy amount to an “employment tax”.  Photograph: Getty Images

Employers’ groups such as Ibec say any rises in the training fund levy amount to an “employment tax”. Photograph: Getty Images

 

Businesses are set to be given a greater say in shaping the type of higher education and training courses to be delivered over the coming years in exchange for increases to a payroll levy likely to be announced in this week’s budget.

The Government has been examining a proposal to raise up to €200 million through increases to a national training fund levy. This follows an acknowledgement by Ministers that there is a funding “crisis” facing higher education following almost a decade of cuts and rising student numbers.

A sharp increase in student enrolment over the coming decade is set to put the sector under even greater pressure.

Employers expect the Government will announce an incremental annual rise in the training fund levy over the next three years in the budget, increasing it from 0.7 per cent to 1 per cent by 2020.

However, employers’ groups such as Ibec are not happy with the proposals, which they say amount to an “employment tax”.

There is also frustration that hundreds of millions of euro in the fund have been accumulating over recent years, with some accusing the Government of using it to prop up the State’s balance sheet.

Tony Donohoe, Ibec’s head of education and social policy, said employers were promised an independent review of the training fund and annual data on the breakdown of expenditure that has not yet materialised.

Upskilling

“We are asking the Government not to take any further action until the review is complete and receipts from the levy are ring-fenced to address upskilling in the workplace.”

Mr Donohoe said a credible and more sustainable response would involve increased exchequer funding, an effective student contribution supported by income contingent loans and employer-supported upskilling programmes. “We could also ring-fence a portion of corporate tax receipts for investment in higher education.”

The Irish Small and Medium Enterprises Association (Isme) said the proposal would end up hitting small businesses disproportionately, and wants a sliding scale based on the size of businesses.

“Many smaller businesses are operating on very small margins of 2 or 3 per cent. They are also more reliant on manpower. Up to 86 per cent of the cost of sales can involve manpower. So this will hit us harder,” said Isme’s chief executive Neil McDonnell.

The Government does not comment on budget proposals. However, Minister for Education Richard Bruton and Minister for Finance Paschal Donohoe are strong supporter of asking employers to pay more.

Reasonable

Mr Bruton has said it was “reasonable” to ask employers to contribute more as their future success depended heavily on the capacity of the education sector to respond to their needs.

This input is expected through routes such as the National Skills Council, a new Government advisory body chaired by Mr Bruton.

Separate to the levy, there is likely to be funding announced in the budget to hire hundreds of teachers to keep pace with our growing child population, along with additional investment of up to €120 million for the higher education and training sector over the next two years .

Last year Mr Bruton announced an extra €36.5 million for the sector, the first increase in nine years. Critics pointed out, however, that due to rising demographics this did not amount to an increase in funding per individual student.