The Green Paper proposed that employer contributions be made through a one to one and a half percent of payroll levy, collected nationally and disbursed through sectoral and national channels. The levy has several benefits over other revenue collecting instruments . Most notably, it spreads the cost of training across all firms. Firms which do not train contribute to the costs of training carried out by others. And this is as it should be because these firms benefit indirectly when they recruit skilled labour from the labour market.
Firms tend to train in the priority areas in order to reclaim some of their levy contributions.
This levers higher levels of training and promotes strategic training which brings higher returns. The decline of the apprenticeship system and the relative weakness of training systems in the current environment persuaded us that the voluntary collection of levies, as is now in operation, is inadequate for the challenges which our country faces regarding skills development. But the case for a private sector levy contribution does not preclude the need for Government to also contribute to revenue for grant payments. Government understands that for the levy grant system to be successfully implemented it will be necessary for it to make a fiscal contribution, Government also understands that the introduction of a national levy will have to be phased in, and that it will have to be designed in a way which is ultimately consistent with the reform of the overall tax system, currently under review by the Katz Commission. Shared contributions to the revenue needed to finance the grant mechanism will require some shared control over the disbursement of the funds.