Approaching its 15th anniversary, ‘one-per-cent training law’ seen as one more tax on small employers
There has been plenty of discussion over the years about the true importance of workplace training. When done well, the benefits of continually training employees are seen in market or product leadership, increased sales or profitability, lasting customer relationships and numerous operational efficiencies.
For the economy and society as a whole, the benefits are equally significant. Changing economies in Canada, the United States and Europe require individuals to continually develop their knowledge and improve their skills to remain employable and for economies to remain competitive.
Many jurisdictions are experimenting and seeking ways to ensure the economies remain competitive through various forms of training incentives. One of the more interesting efforts is in Quebec.
In 1994, the Quebec government passed legislation mandating organizations with offices in the province to provide annual employee training. Loosely based on France’s training legislation, which has been in place since the 1970s, it is commonly referred to by employers as the “one-per-cent training law.”
Essentially law 90 (Loi favorisant le développement et la reconnaissance des compétences de la main-d’œuvre or the competency law) requires all organizations with payrolls of more than $1 million to invest a minimum of one per cent of payroll into some form of employee training.
According to the Quebec government employment service, Emploi-Québec, the objective of the law is to ensure an organization’s training investment develops the competencies and skills of employees, resulting in improved organizational productivity and performance.
To assist employers in sourcing and selecting qualified trainers, and to ensure expenditure qualifies as part of the one-per-cent contribution, the government requires every training professional (both internal and external) to be certified by Emploi-Québec.
The law was meant to improve workforce productivity. Until this point, the Quebec workforce was often ranked as one of the least productive in the country. The law was also instituted to appease union groups. Major unions pressured the government to provide employees with the improved skills and abilities they needed to be competitive.
True impact uncertain
In principle, this legislation is meant to drive organizations to continually improve performance and build a stronger workforce who can effectively compete with any other information- or industrial-based economy.
In theory, this could result in a more innovative and productive economy. In practice, however, it is uncertain what kind of effect this type of training legislation has had on the workforce. Results in other countries, such as Australia and several European countries, are mixed and often anecdotal.
Quebec is the only jurisdiction with this type of law in North America. Naturally, the government continually states the law’s impact has largely been positive. This is supported by the growth of Quebec’s knowledge-driven sectors in aerospace and aviation, pharmaceuticals and biosciences and specific high technology areas such as digital innovations and gaming.
The impact on employers has also been questioned. Under the law’s guidelines, larger companies already meet or exceed the one-per-cent payroll requirement. So there is little incentive for larger organizations to increase training investment. Some Quebec-based multinationals spend as much as eight per cent to 10 per cent of payroll on training. With the law allowing these companies to carry forward the excess training expense to subsequent years, there is little or no effect on many major organizations.
Smaller companies, usually with fewer than 50 employees, are the ones most affected by the law. These companies are frequently start-ups, service-driven or small manufacturing organizations. As beneficial as training can be for employees, it is not usually a priority for smaller companies. This is because either they are not knowledge-intensive, resulting in lower training requirements, or they utilize limited funds to establish market presence and profitability for growth.
Management at small companies are often annoyed with the law because if they don’t spend one per cent of payroll on staff, then it must be paid to the government at the end of the calendar year. (The money goes into a government fund specifically for training initiatives.)
For example, a payroll of $1 million requires a company to spend a minimum of $10,000 in employee training. Whatever is not spent is paid to the government taxation department within 60 days of the end of the calendar year and any excess is carried forward to the next year.
To avoid the recordkeeping and reporting requirements, many simply pay the total amount to the government and consider the law another form of taxation.
Some claim the legislation is needed to maintain the competitiveness of employees given current market conditions. Others argue market conditions will automatically dictate the need for employee training within organizations, to effectively compete in the marketplace.
The Quebec workplace competency development legislation is pioneering and, in principle, well founded. The results of the implementation, however, have yet to be determined objectively.
Ajay Pangarkar and Teresa Kirkwood are partners at Central Knowledge, a Montreal-based training company, and co-authors of The Trainer’s Portable Mentor and Building Business Acumen for Trainers. They can be reached at (866) 489-7378 or [email protected].
For the economy and society as a whole, the benefits are equally significant. Changing economies in Canada, the United States and Europe require individuals to continually develop their knowledge and improve their skills to remain employable and for economies to remain competitive.
Many jurisdictions are experimenting and seeking ways to ensure the economies remain competitive through various forms of training incentives. One of the more interesting efforts is in Quebec.
In 1994, the Quebec government passed legislation mandating organizations with offices in the province to provide annual employee training. Loosely based on France’s training legislation, which has been in place since the 1970s, it is commonly referred to by employers as the “one-per-cent training law.”
Essentially law 90 (Loi favorisant le développement et la reconnaissance des compétences de la main-d’œuvre or the competency law) requires all organizations with payrolls of more than $1 million to invest a minimum of one per cent of payroll into some form of employee training.
According to the Quebec government employment service, Emploi-Québec, the objective of the law is to ensure an organization’s training investment develops the competencies and skills of employees, resulting in improved organizational productivity and performance.
To assist employers in sourcing and selecting qualified trainers, and to ensure expenditure qualifies as part of the one-per-cent contribution, the government requires every training professional (both internal and external) to be certified by Emploi-Québec.
The law was meant to improve workforce productivity. Until this point, the Quebec workforce was often ranked as one of the least productive in the country. The law was also instituted to appease union groups. Major unions pressured the government to provide employees with the improved skills and abilities they needed to be competitive.
True impact uncertain
In principle, this legislation is meant to drive organizations to continually improve performance and build a stronger workforce who can effectively compete with any other information- or industrial-based economy.
In theory, this could result in a more innovative and productive economy. In practice, however, it is uncertain what kind of effect this type of training legislation has had on the workforce. Results in other countries, such as Australia and several European countries, are mixed and often anecdotal.
Quebec is the only jurisdiction with this type of law in North America. Naturally, the government continually states the law’s impact has largely been positive. This is supported by the growth of Quebec’s knowledge-driven sectors in aerospace and aviation, pharmaceuticals and biosciences and specific high technology areas such as digital innovations and gaming.
The impact on employers has also been questioned. Under the law’s guidelines, larger companies already meet or exceed the one-per-cent payroll requirement. So there is little incentive for larger organizations to increase training investment. Some Quebec-based multinationals spend as much as eight per cent to 10 per cent of payroll on training. With the law allowing these companies to carry forward the excess training expense to subsequent years, there is little or no effect on many major organizations.
Smaller companies, usually with fewer than 50 employees, are the ones most affected by the law. These companies are frequently start-ups, service-driven or small manufacturing organizations. As beneficial as training can be for employees, it is not usually a priority for smaller companies. This is because either they are not knowledge-intensive, resulting in lower training requirements, or they utilize limited funds to establish market presence and profitability for growth.
Management at small companies are often annoyed with the law because if they don’t spend one per cent of payroll on staff, then it must be paid to the government at the end of the calendar year. (The money goes into a government fund specifically for training initiatives.)
For example, a payroll of $1 million requires a company to spend a minimum of $10,000 in employee training. Whatever is not spent is paid to the government taxation department within 60 days of the end of the calendar year and any excess is carried forward to the next year.
To avoid the recordkeeping and reporting requirements, many simply pay the total amount to the government and consider the law another form of taxation.
Some claim the legislation is needed to maintain the competitiveness of employees given current market conditions. Others argue market conditions will automatically dictate the need for employee training within organizations, to effectively compete in the marketplace.
The Quebec workplace competency development legislation is pioneering and, in principle, well founded. The results of the implementation, however, have yet to be determined objectively.
Ajay Pangarkar and Teresa Kirkwood are partners at Central Knowledge, a Montreal-based training company, and co-authors of The Trainer’s Portable Mentor and Building Business Acumen for Trainers. They can be reached at (866) 489-7378 or [email protected].
