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THE NATIONAL MINIMUM WAGE AND TRAINING Research report commissioned by the Low Pay Commission >>Back to main index 2. Sectoral Training Issues 2.1. Social Care In the social care sector the NMW was one of a number of statutory requirements facing residential home-owners. The perception of the Training Organisation for the Personal Social Services (TOPSS) is that the NMW wage and the exemptions from it are not the main drivers for training. Statutory requirements for induction and foundation training were introduced in April 2002 by the Care Standards Act 2000 (published in 2001). By 2005 all care workers must be registered individually and there are targets for NVQ assessment so that employers can demonstrate that they have a competent workforce. These are the principal mechanisms driving investment in training and the assessment of worker competence. In addition, the Act sets environmental standards for room sizes, bathing facilities and single rooms. Many home-owners have been struggling to meet these requirements. According to the National Care Homes Association, everything in this sector revolves around the funding of long-term care. Home owners have to meet additional costs which have been created by the introduction of the NMW, the Working Time Directive and the need to meet Care Standards requirements, but these have not been acknowledged in local authority payment rates. This has affected homes of all sizes, but larger ones have probably had greater capacity to absorb the on-costs. The lack of clarity in commissioning strategy has created considerable uncertainty and one consequence of this is that an estimated one thousand homes have been closing per annum since 1998. Other adaptions include switching from residential care to sheltered housing where the standards do not apply or providing specialist care (mental health, learning disability) which attract premium rates, although owners do not believe these meet the full costs of specialist care either. Others are reducing their takings in anticipation that the government will eventually increase the rates of payment for care in order to free up hospital beds in the NHS. A study commissioned by the Joseph Rowntree Foundation found that the average weekly cost of a running a good quality nursing home was £459 per resident whilst local authority fees were £74 less. As a consequence fees were no longer enough to provide ‘a good service and make a reasonable profit’ (The Guardian, 19-6-2002). In August 2002 Alan Millburn, the Health Secretary, announced that the new environmental standards would not apply to existing homes, but only to new ones (The Guardian, 20-8-2002). The impact of the NMW on training and development has been ambiguous. The NCHA believes that it may have created disincentives for owners to train because they do not want to pay staff increased wages above the minimum. There is also concern that owners may train their staff, who then leave for better paid jobs elsewhere. In this respect, the NMW has not contributed to staff development and training. The NCHA believes that the problem lies in the fact that although the government is prepared to put extra money into training for this sector, this is not much help if staff cannot be rewarded for achieving qualifications because the care sector as a whole is inadequately funded. The NHCA position is therefore one of 'we don't have a problem with the National Minimum Wage. We have a problem with how to fund it'. Moreover, it has not been seen as an opportunity to review training and development practices, but rather a burden on home-owners. The organisation with responsibility for education and training strategy in this sector is the Training Organisation for the Personal Social Services (TOPSS) and has separate structures in England, Wales, Scotland and Northern Ireland. It is a strategic body which works with the government and other agencies to support training, including activities at regional level through regional forums. The board is made up of representatives of employer networks, trade unions, higher education, trainer networks service users, carers and professional bodies. Small and medium-sized enterprises are represented through employment networks such as the UK Homecare Association and the National Care Homes Association. There are 20 staff working for TOPSS England, including the Chief Executive. It is in the process of becoming a Sector Skills Council. According to TOPSS the key issues in the sector are to encourage employers, especially small employers, to invest in training. Some resent the new standards and are reluctant to invest in the training of low paid staff because ‘they only leave’. TOPSS emphasises that training can contribute to retention, particularly with a workforce which is mobile between sectors (private and public, NHS and local authority, agency work). Moreover, low wages mean that employers are in competition for staff with supermarkets, where work does not involve intimate care and management is more professional. The quality of training provision is also an issue. There are two frameworks for Modern Apprenticeship in the sector (at NVQ levels 2 and 3), but their take-up by new entrants is restricted by the fact that under 18s can not perform intimate care. In Wales, the upper age limit has been increased on MAs to extend the scope for training young entrants under the scheme, although apprentices in England must complete by age 24. One of TOPSS’s objectives is to support training in the care sector through seeking resources for training from different sources. For example, there is funding available through the Department of Health to support education and training, but it is often difficult for small organisations to access this. In 2002 TOPSS England received £15 million from the DOH to support training in small organisations through its structure of regional forums and some local authorities have been instrumental in supporting this initiative. As local authorities increasingly become commissioners rather than direct providers of care services, this role in providing training support may become of increasing significance. There are therefore a range of sources of support available to home-owners: regional TOPSS officers, employer networks, colleges, local authorities, the National Care Standards Commission and training providers. TOPSS has played a role in sign-posting this information, by putting information on its webpage and publishing ‘frequently asked questions’ sheets. According to TOPSS, perceptions of the significance of the NMW has shifted over time. Initially the impact of the NMW in this sector was seen as putting pressure on wages costs, whilst payments from local authorities remained the same. However, this has now been subsumed by the issue of meeting the care standards requirements and more general issues of recruitment and retention in a period of labour shortages. As a consequence, local labour market conditions and any changes in them, can have an enormous impact on individual care homes. The view of TOPSS is that although the NMW on its own has not been a major driver in training, along with other developments in standards, it is contributing to the introduction of more effective HRM practices as owner-managers have needed to examine how they manage labour. This may encourage managers to seek external sources of funding for training to offset increased staff costs. Although this support is available, the range of initiatives and agencies – the Department of Health, Learning and Skills Councils, local government training support - means it may not be very accessible to small businesses. There are fewer pressures to review and adapt staffing practices where recruitment is not a problem. TOPSS produced a pamphlet with the Department of Trade and Industry on ‘Management Best Practice’ (Department of Trade and Industry, 1999) which encouraged small and medium companies to adapt to the NMW by improving their management practices. By and large, the exemptions for young people on training programmes have not been widely used. TOPSS England reported receiving one query about the exemptions from an employer supplying agency workers who was interested in using it and one from an employee on a Modern Apprenticeship who wanted to know if it was legal to pay below the NMW. 2.2 Hospitality Although in the hospitality sector some training is provided to meet statutory or inspection requirements, this is restricted to specific areas, such as health and safety, and food hygiene. Staff access to training is therefore more likely to be determined by the business strategy of the organisation. According to the Hospitality Training Foundation the most common training route is on-the-job training by an internal provider leading to no qualification. New full-time and part-time staff are likely to receive induction training, though this is the case for only a proportion of seasonal and casual staff (Hospitality Training Foundation, 1999:7). Post-induction training is very dependent on the size of the business: in general, small, independent family-owned businesses are significantly less likely to train employees beyond induction than those which are part of a chain (Hospitality Training Foundation, 1999:14). Large organisations with head offices are more likely to have a Human Resource infrastructure and to provide craft, management and supervisory training leading to qualifications. They are also more likely to have links with a range of organisations providing support for training and development. Research by the Hospitality Training Foundation (HTF) shows that small independent businesses are ‘still outside the training loop’ (1999:46) The Hospitality Training Foundation is responsible for the hospitality, leisure, travel and tourism sectors and was in the process of making a bid to gain Sector Skills Council status in 2002. It is responsible for developing National Occupational Standards and National Qualifications Framework, Modern Apprenticeship and other learning frameworks and promotes workforce development solutions to recruitment, retention and skills issues in the sector. It carries out labour market intelligence and skills surveys. It also has a policy function and brokers dialogue between the industry and government on skills related issues for the England, Wales, Scotland and Northern Ireland. It has a total of 15 staff. According to the HTF the key issues for the industry are recruitment, retention and skills shortages, particularly in food preparation and food service. As far as small and medium-sized firms are concerned, fitting learning in with the demands of the business is a major issue. The HTF sees its task as convincing them of the business benefits of learning in relation to staff retention, improved quality of the product and repeat business. The HTF has a board of trustees nominated from the main trade associations, the British Hospitality Association, the Restaurant Association and the British Beer and Pub Association. It also has a high level consultative body, the Strategic Hospitality Advisory Panel of Executives, on which employers of all sizes from all sub-sectors are represented which steers its work. It does not have a local or regional infrastructure, but works through partners at local level, such as the Regional Development Agencies, tourist boards and local employer groups (e.g. the Cornwall and Devon Skills Alliance for Tourism). It does not provide advice on training as such, but enquirers would be referred to their website or sign-posted to other sources of advice, such as Business Link. The HTF does not have data on the impact of the NMW, nor on its impact on the development of training strategies in companies in the sector. HTF staff have no evidence of a causal link between the NMW and requests for information about training and the Development Rate. However, this could be a presentational problem because most businesses would want to put a positive spin on their training strategies rather than to admit that they pay their staff low wages. The HTF reports that here is some evidence that very small businesses are having problems with the Working Time Directive as well as the NMW, particularly where the owners see themselves as making a living rather than running a business. Since the standards for employing adults on the Development Rate are linked to the attainment of training to NVQ standards, it is likely that only the larger companies in the sector have the capacity to meet the criteria for exemption. For post-induction training leading to qualifications such as City and Guilds, BTEC, GNVQs and full-time NVQs, employers tend to rely on local colleges. This is also the most likely source of advice, if training is part of the company’s culture. Whilst NVQs are used extensively in larger establishments, there is some evidence of a shift to recruiting staff with NVQ qualifications rather than to fund them to study for it (Hospitality Training Foundation, 1999:21). The funding mechanism for further education is reducing local colleges’ provision of hospitality training which is relatively expensive compared to class-room based courses. This is occurring alongside a shift to support for national centres of vocational excellence in hospitality (Birmingham College of Food) and catering (Lancaster and Morecambe Further Education College). According to the British Hospitality Association at sectoral level the picture is that the NMW and the Development Rate have not been significant drivers for small firms to develop a more proactive approach to the management of labour. Staff turnover is endemic and the British Hospitality Association has developed a best practice scheme to encourage good employment practices with an emphasis on training through the Investors in People award. They have also put work into promoting careers in hospitality and tourism through the ‘Springboard’ scheme. The problem is that many small businesses see staff as a ‘throughput resource’ and hospitality is often not a first choice career. So long as this prevails, recruitment and training are seen as a cost rather than an investment contributing to business performance. 2.3 Retail According to Skillsmart, the Sector Skills Council for retail labour turnover in this sector is very high and it also has a large part-time workforce. Even large businesses with a professional management function are not immune to this. Workers are often transient, moving between retail employers in the same locality. The size structure of companies has a significant impact on market strategy, staffing and training policies. Many large retailers have a presence throughout the country, whilst small independent companies will have only a local base. Therefore the trading conditions which affect major retailers such as Marks and Spencer's, or BHS, may be very different to those affecting the retail sector as a whole, or individual retailers within a locality. Business performance is highly dependent on consumer confidence. Because retail businesses work on low margins, they are dependent on high levels of turnover. In London and the South-East there is also a tight labour market, which makes staff recruitment difficult. One consequence is that some retailers have been working with Job Centre Plus and the New Deal to provide basic skills training for staff they might not have recruited under other circumstances, before providing sales training. Skillsmart reports that the majority of training is a mixture of on- and off-the-job training, though the latter is usually away from the job rather than located in a college. The format alters according to the size of the store and the sophistication of its HR structures. For example a large company might have its own workbooks or ICT delivery in stores whereas micro-enterprises might be dependent on learning on-the-job. Although Modern Apprenticeship and National Traineeships have been developed throughout the UK, they are not used to any great extent by employers. Large employers, in particular, are disaffected by government training schemes which are run mainly through private training companies. A fundamental problem for large companies in this sector is that external market conditions and products are similar to those of their competitors. The level of customer service is significant in differentiating their product, so the idea that ‘your people are your brand’ is prevalent, and this is why they invest in training. They are interested in training which helps develop their in-house teams. Employers maintain that national qualifications, which stress the achievement of a common standard, are not the best mechanism for doing this. Given high levels of staff turnover even in national retail chains, the costs of training also tend to be kept to the minimum. The main skill requirements in this sector are customer service skills, communication, IT and management skills (Harris and Church, 2002). At the time the research was conducted, in the summer of 2002, responsibility for industry training in the sector was in the process of shifting from the Distributive National Training Organisation to Skillsmart, the Sector Skills Council, which received a two year licence from the government in April 2002. This was one of the first tranche of SSCs to be approved and their role is significantly different from the NTOs which preceded them. The mission statement of Skillsmart states that its objective is ‘to make a real difference to building a more productive retail sector through the continuous development of those that work in retail, and the promotion of employment and career opportunities’. Its remit includes workers in the 14-65 age bracket. Rather than focussing on the initial training of young people its role is seen as upskilling and professionalising all those who are in work and to contribute to the idea of there being a career structure in retail. Skillsmart does not have a membership structure, but is a wholly owned subsidiary of the British Retail Consortium, the trade association which claims to cover 90 per cent of retailers (1). However, there are non-BRC representatives on the board, including the Swedish retailer, IKEA, and the shop workers’ trade union, USDAW. It is a strategic body, so its role is in lobbying to ensure that appropriate programmes are developed rather than rather than as a provider. In the summer of 2002 there were five staff in post, including the Chief Executive, though it was anticipated that additional staff would be recruited. According to Skillsmart in this sector there was some concern that the NMW might result in redundancies although the level at which the rate was set meant that the impact was less than trade associations like the BRC had anticipated. Its impact has varied according to the size of the company and its market. The BRC believes that the NMW along with other costs and regulatory pressures has put pressure on small retailers, in particular, who may not have the management resources internally to deal with them. Whilst the state of the local labour market may make little difference to the large national retailers (though it may affect location decisions) since their HR and training policy decisions are made at head office. In contrast, small independent retailers are more directly affected by the state of the local labour market conditions. Although it is not possible to verify whether it is being paid in practice in micro enterprises, industry bodies believe that most companies are paying it. Moreover, larger retailers such as Sainsburys and the Post Office do not want to be perceived as offering the minimum, and pay above the NMW to establish a differential. One of the implications of companies’ interest in maintaining wage differentials has been that Skillsmart will be setting up a Human Resource benchmarking service, providing labour market information for employers so that they can compare themselves to others in the region or locality. Skillsmart is not aware of any evidence suggesting that the NMW has prompted employers to take a more proactive approach towards training. This is also the view of the BRC, although they believe some companies now see staff training and development as contributing to staff retention. There is no evidence of it leading to reductions in training either, though the training of some categories of staff, such as part-timers, staff with zero hours or annualised contracts has always been a problem. There has been some evidence of a swing back to full-time working, though this may be related more to longer opening hours and employers’ desire for flexible working rather than the effect of the NMW. Rather than the Youth Development Rate, Skillsmart anticipated the right of 16 and 17 year olds for time off for study as posing a potential problem for retailers. The Distributive NTO organised a seminar to assess the potential exposure of the sector to the issue. Although they were prepared for enquiries, they only received a few because no young people asked for it. The Youth and Adult Development Rates have not had a huge impact because employers must pay the market rate if they are to recruit. According to the BRC the Adult Development Rate is not widely used because of the need to prove that the training requirements have been met. The Youth Development Rate is used especially in music stores and clothes stores which recruit young people because of their branding. There has always been a basic wage rate for adult employees and a lower rate for 16 and 17 year olds, though there has been some erosion of the latter recently. When the NMW was introduced, the BRC produced an advice note for members which was based on DTI materials and this signposted readers to the DTI website. They have also communicated with members about the need for record keeping but do not provide bespoke advice. No specific materials on the NMW were prepared by the NTO since this was not seen as part of its remit. Briefing notes were produced for their two employer forums (one for large and one for small and medium-sized enterprises) on time off for study. In this sector there are few statutory requirements driving training, except in relation to the Approved Code of Practice for forklift truck driving and food hygiene in sectors which involve food handling, distribution and storage. The DNTO conducted research on legislation in the sector affecting training and, outside the areas already mentioned, it is mainly linked to consumer rights and lotteries. According to Skillsmart, the main driver for training in this sector is its relationship to business success and it is the first thing to be cut when firms go into survival mode. Footnote The British Retail Consortium is made up of 130 corporate members which are multiple retailers and department stores, 20 trade association members and 80 associate members which are non-retail companies with interests in the retail sector such as accountancy firms, consultants and security advisors. | |
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