HR · 7 March 2016

How an extra tax might be the solution to your training troubles

trained employee leaving
The risk of a trained employee leaving could be putting off owners from providing training

The UK’s productivity continues to be dwarfed by international competitors, and the government doesn’t know what to do about it. But there’s one important explanation that is missing from the debate.

Recent research revealed that the cost of management training is putting small business owners off investing in it, with 43 per cent citing this as a key challenge.

This seems surprising when underinvesting in people is so obviously a false economy. Given how important leadership skills are, training is one purchase that is almost certain to pay for itself in the long run.

But who gets to reap those benefits is another question entirely, and the answer might hold the key to the UK’s productivity puzzle.

In Sillicon Valley, the threat caused by unicorn companies has been well documented – with Uber and Airbnb poaching staff from other, less successful startups by luring them with generous compensation options and share packages.

While the numbers involved might be less dramatic in the UK micro business space, the risk of a trained employee leaving and taking their new management skills with them is still a big one, and has the potential to wreck havoc on a young, financially-fragile company.

In fact, in a report for the UK Commission for Employment and Skills (UKCES) published in 2010, Durham Business School academic Ian Stone argued that this was as an important piece of the puzzle. With larger firms often able to pay higher wages for top talent, he emphasised how the risk that micro firm workers could be whisked away by big corporates stops their employers providing transferable skills.

So what does that mean for government policy, given that stopping people changing jobs is not an option? The real answer to the problem is actually simple, though probably not very popular. The government could simply levy a tax on small firms with employees and use the proceeds to give company owners money for training those employees.

Though it sounds like taking with one hand and giving with the other, it also takes a lot of the risk out of upskilling workers. With training funded by the government, if an employee jumps ship as soon as they’ve finished a management course, the employer may still have wasted time but hasn’t thrown away money. And with training effectively free to provide, it will also be likely that the experienced applicants lining up to replace them will have those skills as well.

For more inspiration on how to increase the productivity of your micro firm, check out this piece about encouraging innovation.

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Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics – as well as running a tutoring company.

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