Table of Contents

1............ Introduction. 4

2............ Definitions and regulatory context 7

2.1......... Types of traineeships. 7

2.2......... Current regulatory framework. 8

3............ Consultations and stakeholders’ views about the main problems affecting traineeships. 10

4............ Problem Definition. 13

4.1......... Quality problems. 13

4.2......... How common are quality problems?. 14

4.3......... Consequences of quality problems. 15

4.4......... Problem drivers. 19

5............ Legal basis and subsidiarity. 21

6............ Policy Objectives. 23

7............ Policy coherence and contribution to Europe 2020 objectives. 23

8............ Policy options. 24

9............ Analysis of impacts. 26

9.1......... Option 0 – Baseline. 26

9.2......... Option 1 – Information website. 28

9.3......... Option 2 – Voluntary Quality Label 29

9.4......... Option 3 – ‘Council Recommendation on a Quality Framework for Traineeships. 31

9.4.1...... Option 3a – Council Recommendation on a Quality Framework for Traineeships 'basic' 31

9.4.2...... Option 3b – Council Recommendation on a Quality Framework for Traineeships with enhanced transparency. 38

9.5......... Option 4 – Directive on a Quality Framework for Traineeships. 41

9.6......... Summary and comparison of options. 43

10.......... Monitoring and evaluation. 44

11.......... References. 46

12.......... ANNEXES. 49

12.1....... Examples of Member States’ Initiatives to Enhance Trainee Protection in the Open Market 49

12.2....... Differences between Traineeships and Apprenticeships. 50

12.3....... Regulatory Framework. 51

12.4....... Main concerns identified by the Traineeship study. 52

12.5....... Quality of traineeships and labour market outcomes: an econometric analysis of the data of the Eurobarometer survey. 53

12.6....... Results of the European Youth Forum survey. 62

12.7....... SMEs Test Results. 63

12.8....... Case studies - the benefits and costs of providing quality traineeships. 71

12.9....... Motivations for supplying and applying for traineeships. 72

12.10..... Economics of traineeships. 75

12.11..... Geography of quality. 83

12.12..... A voluntary approach to Quality Labels for Traineeships. 84

12.13..... Summary tables per each option. 85

Executive Summary Sheet

Impact assessment accompanying the document Proposal for a Council Recommendation on a Quality Framework for Traineeships

A. Need for action

Why? What is the problem being addressed?

Traineeships can effectively enhance young people's employability through providing a stepping stone to the labour market. Nevertheless, despite their benefits, concerns about the effectiveness and quality of traineeships in general, and open-market traineeships in particular, have been increasingly recognized by a wide range of stakeholders including European Institutions. These concerns, and especially low learning content and substandard working conditions have been confirmed by a recent Eurobarometer survey. Low or no pay, as well as the low share of transnational traineeships are further problems indicated both by stakeholders and surveys. While these are not in the direct focus of the initiative, certain options may have an indirect impact on them.

What is this initiative expected to achieve?

The initiative aims to (1) Increase the share of quality traineeships; (2) Discourage abusive practices while keeping the compliance costs for traineeship providers limited; (3) Enhance information on and facilitate access to transnational traineeships.

What is the value added of action at the EU level?

Currently there very diverging regulatory frameworks in Member States regarding traineeships. A common understanding of what a traineeship is and what minimum standards should apply to them will help shape Member States’ policies and regulatory approaches. In this way, the EU could concretely support Member States in implementing the Europe 2020 employment guideline nr 8, in particular ‘enacting schemes to help young people and in particular those not in employment, education or training find initial employment, job experience, or further education and training opportunities, including apprenticeships, and should intervene rapidly when young people become unemployed.’ In the framework of the European Semester process, the Commission should provide guidance to Member States for efficient implementation of their commitments related to youth employment. Quick and effective implementation of CSR recommendations on youth employment requires concrete and specific guidance on quality traineeships. Furthermore, the QFT would address one key obstacle for cross border mobility, lack of information, in an area of great regulatory fragmentation. The QFT is essential for the extension of EURES to traineeships, as requested by the European Council conclusions of 28/29 June 2012. This is to prevent the risk that support through EURES is provided to substandard traineeships that will not help smooth education to work transitions. The Recommendation would also help to underpin the support provided by ERASMUS+. The Quality Framework is an important reference point for determining a good quality offer of traineeships under the Council Recommendation on Establishing a Youth Guarantee.

B. Solutions

What legislative and non-legislative policy options have been considered? Is there a preferred choice or not? Why?

There are four policy options to consider: Option 0) No new Commission initiative (baseline) Option 1) Information website about traineeship conditions and legal framework in Member States. This non-regulatory approach could increase the availability of general and specific information about traineeships in all Member States. Option 2) Quality Label. Could be based on agreed quality principles or minimum quality guidelines for traineeships (same as in option 3a). Traineeship providers could take up the label voluntarily. Option 3) Proposal for a Council Recommendation on a QFT. Two sub-options: 3a) QFT basic: traineeships should be based on a written traineeship agreement that specifies educational objectives, working conditions, rights and obligations and a reasonable duration of the traineeship. Remuneration and/or compensation and social protection would not be compulsory, but the agreement should specify whether they are provided, and if so, what can the trainee expect. 3b) QFT+Transparency: further to QFT basic traineeship providers would have to clarify remuneration and/or compensation and social protection coverage already in the vacancy notice; and in the case of unpaid traineeships they would have to disclose information at the conclusion of the traineeship agreement about the number of trainees and the share of those who were recruited by the same traineeship provider after their traineeship within the 3 previous years. Option 4) Proposal for a Directive on a QFT+Transparency: same content as option 3b. The most balanced option, in terms of proportionality and effectiveness seems to be 3b) (Council Recommendation on a QFT+Transparency).

Who supports which option?

The public consultation as well as the social partner consultations show that trade unions and youth organisations tend to support a legally binding proposal (Directive or at least a Council Recommendation). Employers, businesses and some MS prefer non-binding guidelines (label or at most Council Recommendation). Our analysis shows that the acceptance of a Council Recommendation seems to be the highest. Content wise, the elements included in the QFT are supported by most stakeholders. This was also confirmed by an SME survey conducted in 2013, which showed that the overwhelming majority of SMEs could implement the quality elements proposed by the Commission without difficulty.

C. Impacts of the preferred option

What are the benefits of the preferred option (if any, otherwise main ones)?

A Council Recommendation on a QFT+Transparency can be adopted quickly, has very low compliance costs for quality traineeships and discourages unscrupulous practices through market mechanisms. It is expected to have tangible effects and is expected to stimulate higher level of quality of traineeships through better learning content and working conditions. Acceptability for publication of remuneration conditions in the vacancy notice is high (90% of SMEs responded positively in SME test). Acceptance for the transparency requirement on hiring policies may be lower; nevertheless, its compliance costs are negligible.

What are the costs of the preferred option?

Only marginal costs mainly linked to ensuring a mentor and to the conclusion of a written traineeship agreement, the latter being a one-off cost. These costs could be reduced by elaborating and making available simple and concise model traineeship agreements,

How will businesses, SMEs and micro-enterprises be affected?

There will be only marginal compliance costs related to the working time of the mentor as well as of the HR officer responsible for the conclusion of the traineeship agreement. This is already an existing practice at the majority of traineeship providers. SMEs expressed a 90% acceptance to these measures in a recent SME test.

Will there be significant impacts on national budgets and administrations?

No budgetary impacts. National public authorities will be in charge of the implementation of the QFT.

Will there be other significant impacts?

None.

D. Follow up

When will the policy be reviewed?

A policy review could possibly take place after 2016, when a follow-up Eurobarometer and an ad-hoc module on young people within the Eurostat Labour Force Survey will provide data on implementation.

1. Introduction

Over the last two decades traineeships, also known as internships or 'stages', have become a standard feature in our labour markets and increasingly represent the main entry point into the labour market for young people[1]. There is wide consensus on the fact that a traineeship represents a useful experience, complementing traditional classroom instruction with important practical skills, and can facilitate access to employment. However, there are growing concerns that a significant share of traineeships does not provide a meaningful learning experience, takes place under substandard working conditions, and in effect does not constitute a real traineeships but simply a low-cost replacement for regular jobs.

To act upon these concerns and following calls by the European Parliament[2] and the European Council[3], the Commission last year launched consultations with the wider public and with Social Partners and announced that it would present a Quality Framework for Traineeships (QFT) by the end of 2012[4].

The Impact Assessment aims to identify and analyse which policy options can lead to a higher share of quality traineeships, notably by providing standards that can be utilised as best practice and by discouraging the offer of substandard traineeships.

This Impact Assessment builds upon the Analytical Document presented by the Commission in December 2012 in the context of a Social Partner consultation on traineeships[5]. It adds several new elements, such as previously unavailable data on the number and quality of traineeships, and presents new evidence assessing the impact of quality problems on the future employment prospects of the affected trainees. It also puts forward proposals for a Quality Framework for Traineeships that includes the elements identified as most apt to enhance trainees’ employability. Finally, the Impact Assessment includes new proposals on transparency that are meant to strengthen the possibility for young people to distinguish quality traineeships from substandard ones before they begin, helping them to make a better choice.

2. Definitions and regulatory context

2.1 Types of traineeships

Traineeships are generally understood as a limited period of work practice spent at business, public bodies or non-profit institutions either by students or by young people having recently completed their education, in order to gain practical work experience ahead of taking up regular employment[6]. They generally last a few weeks to a few months, and are usually not considered to constitute employment contracts, as their main aim is to provide a training experience, not a paid work opportunity. Traineeships must not be confused with apprenticeships, which are generally much longer, lead to formal academic qualification and are more regulated. Annex 0 gives more detail on the differences between the two.

One may distinguish five major – partly overlapping - types of traineeships:[7]

1. Traineeships forming an optional or compulsory part of academic and/or vocational curricula (i.e. traineeships during education);

2. Traineeships which form part of mandatory professional training (e.g. law, medicine, teaching, architecture, accounting, etc.);

3. Traineeships as part of active labour market policies;

4. Traineeships agreed between trainee and a traineeship provider (business, non-profit or government) without the involvement of a third party, generally conducted after completion of studies and/or as part of a job search, known as ‘post-studies’ or ‘open-market’ traineeships[8];

5. Transnational traineeships, which may include types 1, 2 and 4, but for the purpose of the Impact Assessment are considered as a separate group.

This impact assessment will focus on types 4 and 5. This choice is due to three considerations. Firstly, the Traineeship study has identified open market traineeships and transnational traineeships as those where the concerns over their quality are strongest. Secondly, in the case of types 1, 2 and 3, national and regional institutions are closer to the problem and are better placed to take corrective action if necessary. Finally, Type 5 traineeships are of particular relevance in the EU context owing to the policy issues raised by the differences in the regulatory framework currently existing among Member States[9].

2.2. Current regulatory framework

The regulatory framework in general and the strictness of the regulation in particular varies widely both amongst the different types of traineeships and across Member States (see Table 1). At one end, France regulates all types of traineeships by law, while in countries such as the Bulgaria or the UK there is no specific legal definition for trainees[10]. In six Member States (CY, IE, LT, LU, LV, UK), no legal definition of traineeships exists[11]. Less than half of the Member States have provisions on the duration, remuneration or social protection coverage.

Table 1 Key differences in regulatory framework

Issue || Yes || No || Legal situation uncertain

Legal definition of traineeships || AT, BE, BG, CZ, DE, DK, EE, EL, ES, FI, FR, HU, IT, MT, NL, PL, RO, SE, SI, SK || CY, IE, LT, LU, LV, UK || PT

Legal provisions on duration || BE, BG, DE, EE, EL, ES, FI, FR, HU, IT, LU, MT, PT, RO, SI, SK, UK || AT, CY, CZ, DK, LV, NL, SE || IE, LT, PL

Legal provisions on remuneration || EL, ES, FR, HU, IE, LT, MT, PT, RO, SE, SI, SK || AT, BG, CY, CZ, DK, FI, IT*, LU, LV, NL, UK || BE, DE, EE, PL

Legal provisions on social security protection || AT, BE, BG, CY, EL, FR, LT, RO, SE || CZ, DE, DK, EE, ES, IE, IT, LU, LV, MT, NL, PT || FI, HU, PL, SI, SK, UK

Absence of legal and administrative barriers for trainees from other EU MS || DK, IT, MT, SE, SI || BE, DE, EL, ES, FR, IE, LU, LV, NL, PL, RO || AT, BG, CY, CZ, EE, FI, HU, LT, PT, SK, UK

Traineeship contract offered as a common practice || AT, BE, BG, DE, DK, EE, EL, ES, FI, FR, IE, IT, LT, LV, MT, NL, PT, SI, UK || CY, LU, PL || CZ, HU, RO, SE, SK

Source: Traineeship study, European Commission (2012a) * Note: In Italy guidelines on traineeship were published after the Traineeship study was completed, that include legal provisions on remuneration. They are not included in the table.

In many countries the training objective and the fact that traineeships are not considered to constitute 'work' result in the freeing of traineeships from minimum wage requirements, sometimes with an explicit stipulation of a minimum compensation and a (usually much) lower level of protection than for regular employees.

In practice, the distinction between training activities and work can be difficult as the hands-on nature of on-the-job training makes it hard to distinguish from work itself. Given the lower cost of trainees the stricter regulatory approaches therefore typically list criteria to differentiate what trainees and regular employees can do. If a trainee then carries out tasks not meant for a traineeship, the results can be a fine, or the application of the employment status to the traineeship, with consequences such as the need to pay minimum wage.

An example of a strict regulatory approach: the US

On traineeships, the U.S. follows a much more stringent regulatory approach than most EU Member States. Unpaid traineeships are allowed only under very restrictive rules aiming at ensuring a clear distinction from regular employment and a tight link to training purposes. For example, it is required that the training is similar to that which would be given in a vocational school; that the employer derives no immediate advantage from the activities of the trainees and that on occasion the employer’s operations may actually be impeded; if these and other conditions (so-called six-point test) are not respected, the trainee is considered an employee and entitled to minimum wage (Edwards, Hertel-Fernandez, 2010). In practice, however, these guidelines are hobbled by legal and technical issues making their application far from straightforward; partly for this reason they have not been extensively enforced until recently (Curiale, 2010).

Similarities with legislation in EU Member States

In Europe, the regulatory picture is fragmented and differs between countries and types of traineeships, but the criteria to delimit admissible training activities and regular job content appear to be less elaborate and detailed, if at all present. In France legislation dictates that “traineeships cannot be concluded to replace an employee in case of absence, of suspension of his contract, or to execute a regular task corresponding to a permanent job, to address a temporary work peak in the enterprise, to fill a seasonal job[12]. Spanish legislation distinguishes between post-studies traineeships, the pràcticas no laborales, which do not have employment status, and the contrado de trabajo en pràcticas which does; in the case of the pràcticas no laborales, the regulation prevents trainees to be utilised to ‘contribute a productive value’ to the traineeship provider, which is allowed for the contrado de trabajo en pràcticas. Such distinctions has been criticised as difficult to enforce and opening the door to abuse (Todoli, 2013, p. 6-9). The delimitation issue appears to be a challenge in many jurisdictions (see for example Langille, 2012 for Canada).

3. Consultations and stakeholders’ views about the main problems affecting traineeships

Public consultation

The Commission has consulted a wide range of stakeholders about which issues require policy action and the ways in which the EU could most usefully intervene. The results of these consultations were extensively reported upon in last year’s Analytical Document[13] .

Some of the main concerns expressed in the 2012 public consultations were on the appropriateness of EU intervention in this domain and the form that the intervention should take. Trade unions, as well as NGOs, youth organisations, educational institutions and most individual respondents generally supported a Commission initiative; some of them called upon the Commission to consider issuing a legally binding framework at EU-level. Employers' organisations, chambers of commerce and industry often adopted a more sceptical stance. Employer organisations and Member States often referred to the need to keep the framework sufficiently flexible to take into account the diversity of national practices. Traineeships should not be burdened with heavy legal or administrative procedures. Calls for strengthening regulation in this area at EU level have been renewed recently, following the death of a trainee in an investment bank in London, reportedly due to excessive overtime work (Les Echos, 23 Aug. 2013).

Scope of policy action

Opinions about the scope of a possible initiative were varied. Many educational institutions preferred to keep the scope limited to traineeships that are part of study curricula/programmes; while other respondents including most employers suggested limiting the framework to 'open market' traineeships.

On the elements to be included in a QFT, most respondents agreed with the Commission's analysis and definition (traineeship contract, clear objectives and content, limited duration, adequate social security/remuneration etc.). Businesses and employers' organisations mostly argued that remuneration and social protection issues do not fall under EU competence; however, the European Roundtable of Industrialists (ERT) stated that in most cases trainees should be remunerated and highlighted the importance of the Traineeship agreement as a tool to clarify mutual obligations, including company confidentiality policies, the use of company (intellectual) property, and so on.

Consultation with Social Partners

Following the publication of the Analytical Document, EU Social Partners answered the first- and second-stage consultations confirming the positions already expressed in the public consultation. At the Social Dialogue Committee meeting of 23 October 2012 employer's organisations expressed their readiness to start discussions on traineeships as part of the EU social partner autonomous negotiations on a Framework of Action on Youth Employment. However, the European Trade Union Confederation at that stage considered that the discussions on the Framework were not the appropriate place for negotiations under Article 154 TFEU.

The 2nd stage consultation of the social partners was launched as part of the Commission's Youth Employment Package of December 2012. In their replies, EU social partners informed the Commission that they did not intend to launch negotiations on a possible agreement under Article 154 TFEU; therefore the Commission decided to go ahead with its own initiative, taking into account the views expressed in the consultation.

On 11 June 2013 ETUC, BUSINESSEUROPE, UEAPME and CEEP presented their Framework of Actions on Youth Employment (FoA), resulting from social dialogue negotiations taking note of the Commission’s intention to propose a Council Recommendation on the European Quality Framework on Traineeships. Social partners envisage taking further joint actions towards the Council and the European Parliament based on an upcoming Commission proposal for a Council Recommendation on a European QFT.

Small and medium enterprises (SMEs) – SME test

Following a consultation of SMEs through UEAPME in 2012, between March and June 2013 an SME test was conducted to inquire about the quality of traineeships provided by SMEs (from an employer perspective), as well as on the compliance costs of potential QFT measures. In total, 914 SMEs replied to the survey. The SME test showed that the majority of SMEs questioned (71.9%) saw offering traineeships as a way to select and train future employees, and as such the test highlighted the importance of traineeships to create jobs in such businesses (see Box 1 for the results).

Box 1 Quantifying the factors driving the supply of traineeships

The Commission ran a survey among European SMEs between March and June 2013. SMEs were asked about their practices offering traineeships, their motivation to do so, the quality elements they ensure to their trainees and the compliance costs of these quality elements (as well as of quality elements that a potential Quality Framework for Traineeships could contain). As for their motivation for offering traineeships, 71.9% of a total of 914 SMEs reported they wish to train potential future employees; 35.4% underlined that trainees bring new ideas to the enterprise; 31.6% mentioned that it is part of their Corporate Social ­Responsibility policy to contribute to the education of high skilled staff. 12.8% said that offering traineeships helps them to build a corporate image. As for the cost savings, 10.8% replied that trainees provide a cheap and flexible workforce for the organisation (Source: European Commission, 2013).

These results are in line with previously available evidence from the UK. In a 2011 survey of 218 top, senior and middle level managers in the UK, 52% said that the main reason for taking on interns was to identify new talent for the organisation, while 17% said it was to get work done more cheaply. A 95% share of them believed that interns were useful to the organisation

Source: Commission services, 2013

Eurobarometer survey on traineeships

In May 2013 a Eurobarometer survey was conducted in the EU27 and Croatia to quantify concerns about the quality of traineeships. This was the first-ever EU-wide representative survey on the topic. Its results are detailed in Box 2. Some of the most interesting results include confirmation of how widespread phenomenon traineeships are: 46% of the 18 – 35 year olds surveyed had completed at least one. For three traineeships one was deemed unsatisfactory, either in terms of working conditions or learning content in line with results of previous more partial surveys.

Further targeted consultations with policy experts and other stakeholders

On 5-6 June 2013 the European Commission organised the conference 'Advice on apprenticeship and traineeship schemes'. Two workshops discussed the policy challenges on traineeships and quality assurance. The outcomes provided useful input to this Impact Assessment. Furthermore, a Trainee Forum was organised in February 2013 to discuss with trainees (mainly, but not exclusively from EU Institutions) the problems related to traineeships and possible solutions.

Consultations within the European Commission

DG Employment, chef de file for this initiative, has had a long-standing regular cooperation with DG Education and Culture on traineeships. Further to the EMPL-EAC cooperation, DG EMPL set up an Impact Assessment Steering Group with the involvement of SG, SJ and DGs EAC, ECFIN, ENTR, HOME, INFSO/CNECT, MARKT and RTD. This IASG has met 5 times in the past year.

Recommendations from the Commission Impact Assessment Board (IAB)

The Impact Assessment was submitted to the IAB in September 2013. In its first opinion of 4 October the IAB requested mainly to better clarify the problem to be addressed and to better reflect the existing regulatory and voluntary initiatives.

In its second opinion of 15 November 2013 the IAB made further requests to improve the problem definition, clarify the EU need to act, better explain how the options address the problems and better substantiate the impacts. Both opinions resulted in additions and redrafting of the Impact Assessment.

4. Problem Definition

4.1. Quality problems

The public consultation as well as the Traineeship study has listed a range of problems currently affecting traineeships in the EU. Two groups of problems in particular stand out as both being of key importance: one is the insufficient learning content and the second is the unsatisfactory working conditions.

1) The learning content problem refers to complaints that instead of receiving meaningful training, trainees are just put to work being asked to do menial tasks. This runs against the purpose of traineeships which is to learn. However this is not only an ethical issue – if too many traineeships provide insignificant learning, traineeships may acquire a bad reputation, undermining their effectiveness even of quality traineeships in easing young persons’ transitions from school to employment.

2) The working conditions issue instead refers to complaints such as long working hours, lack of coverage for health and safety or occupational risks, lack of clarity on the applicable legal regimes, equal treatment, and so on. Bad working conditions undermine motivation and may create an unfair competitive advantage.

In the remainder of the analysis, we define as substandard traineeships those that are unsatisfactory with respect to either learning content or working conditions.

In addition to the previous two problems, stakeholders highlighted the issue that a large share of traineeships are unpaid or, if paid, offer a compensation that does not allow trainees to cover basic living costs. This creates an equal access problem[14]. Furthermore, the fact that more and more traineeships are unpaid could create a tendency in the labour market for employers to replace paid workers with trainees. Indeed, the UK Low Pay Commission writes in its 2013 report about "widespread non-payment of the minimum for positions that appear to be work". The issue of pay or compensation as such will not be addressed at EU level due to subsidiarity reasons. Yet, more transparency would allow more efficient functioning of the labour market.

No scarcity in domestic traineeships, but transnational traineeships are rare

While no official statistics on traineeships exist, there does not seem to be a scarcity of traineeships.. Traineeships have become very common: the Eurobarometer survey indicates that a 46% share of youths have done traineeships, almost double the share of apprenticeships or student jobs.In addition, the average number of traineeships completed was 2.5 per person, which is scarcely compatible with the idea of a traineeship shortage. In addition, while the absence of statistics makes it impossible to prove, experts concur on the existence of a worldwide trend towards more traineeships; a growth has been notably observed in France[15], Italy (for which data are available - see Figure 1) and in the US (Perlin 2011)). The reason why traineeships are spreading is likely to be linked at least partly with the fact that the majority of them are unpaid, or paid little, and thus represent a relatively affordable investment for traineeship providers even in times of crisis.

However, there is a low number of transnational traineeships. The Eurobarometer survey found that only 9% of traineeships were transnational, despite very high student mobility rates, e.g. in the Erasmus programme. This appears to be an important missed opportunity in terms of reducing youth unemployment through mobility: currently, many vacancies cannot be filled on the local job market, and transnational traineeships could be a key facilitator for taking up employment in another EU Member State.

4.2. How common are quality problems?

The next step in the analysis was to identify the scope and frequency of quality problems. This is not an easy task, given that no statistical office collects data on traineeships, and, with the exception of Italy, the available survey data are very scarce. To address this difficulty, a Eurobarometer survey was commissioned. The survey was conducted in such a way to give a representative picture of the traineeship experience in the EU in the recent years. Thirteen thousand people in all EU Member States and Croatia were asked about their traineeship experience.

Comparing the results with earlier surveys

The Eurobarometer survey, on account of its methodological solidity, its pan-European geographical coverage and its representativeness is a better basis then earlier surveys; it is also very recent (May 2013). Its results are detailed in Box 2. A comparison of the Eurobarometer results with other previous surveys however shows quite similar results; if anything the Eurobarometer gives a somewhat more positive picture, possibly due in part to answering biases (see Table 3 and Annex 12.6)[16].

The questions in the Eurobarometer survey were selected to shed light on the elements that the Traineeship study had identified as being key for the quality of the traineeship. Special care was taken to formulate the questions to make them comparable across sectors and countries and avoid very general and purely subjective answers about satisfaction with the traineeship. Rather, the survey asked specific questions about the traineeship experience, such as whether a written contract was signed, whether a mentor had been assigned to the trainee, whether the trainee learned things that were useful professionally, whether the traineeship was paid and so on. The questionnaire was designed to be comparable with earlier surveys to cross-check results.

The answers made it possible to quantify how often the key quality elements identified by the Traineeship study were present. In line with more partial surveys done earlier, it found that while the majority of traineeships is of sufficient quality, a significant minority is not. In particular, 18%[17] of traineeships were reported to have an insufficient learning content, while in one case in four the working conditions (excluding pay) were found to be not comparable to those of regular employees in terms of working hours, leave rules, etc. Overall, 30% of traineeships were found to be substandard, i.e. deficient in terms of either learning content or working conditions. Often, the traineeships were found to be deficient in both aspects[18] (see Box 1). It is also important to note that this figure covers all types of traineeships (including traineeships as part of the study) and therefore might underestimate the phenomenon.

4.3. Consequences of quality problems

The next step in the analysis was to evaluate what were the practical consequences of this lack of quality. The aim was not so much to assess the impact on the well-being or motivation of the trainee, but rather to check whether substandard traineeships led to worse employment prospects.

The econometric analysis contained in Annex 12.5 and based on the Eurobarometer results found a significant, in some cases highly significant link between the quality of the traineeships, and the employment outcome. In other words, those that had done a substandard traineeship were significantly less likely to find a job afterwards.

Conversely, quality traineeships do not only clearly translate into a higher chance of being offered a work contract by the same organisation, but are also associated with lower risks of being unemployed later.

How traineeship quality was measured

For the purposes of the econometric analysis, traineeship quality was defined as the absence or presence of the quality elements identified in the Traineeship study (e.g. written agreement, presence of a mentor, comparable working conditions, etc). This allowed testing the relevance of these quality elements in terms of the employment outcome.

The link between quality and hiring perspectives

The econometric analysis in annex 12.5 confirmed the correlation, already highlighted in last year’s Analytical Document, between quality and the intention to hire. It turns out that there is a clear link between working conditions and the probability of being offered a work contract at the end of the traineeship. Another example is that those who do not sign a traineeship agreement have only half the probability of being offered a work contract at the end of the traineeship. Several others of the quality elements identified by the traineeship study were found to correlate with the probability to find employment; this not only confirms the importance of quality in general, but also validates the relevance of the specific quality elements identified by the Traineeship study.

The best quality traineeships are typically offered by traineeship providers aiming to hire personnel. A high share of traineeship providers uses traineeships to prospect for potential employees – for example, this applies to almost three in four SMEs (71,9% according to the survey). The aim of creating a long-term working relationship with the best of their trainees explains why organisations wanting to hire put in more effort, on average, in training them properly and in providing adequate working conditions. It also explains the strong correlation between quality and compensation: the latter signals that the traineeship provider is willing to 'go the extra mile', and indeed, lack of remuneration/compensation is indeed associated with a significantly lower probability of being hired by the same organisation (see table 2). However, the Eurobarometer results also show that while paid traineeships are clearly better quality, it is not true that an unpaid traineeship need be substandard: trainees often reported their experience with an unpaid traineeship as positive and useful. For this reason, this impact assessment does not consider the compensation issue as determinant for quality, as done for example by Todini (2013).

Overall, the econometric analysis found that those who think their traineeship was helpful were only 60% as likely to be unemployed than those who disagree to such a statement. Another important result is that quality traineeships translate into a higher chance of being offered a work contract by the same organisation.

Another significant results underlining the importance of the quality elements identified by the Traineeship study is for instance that those who do not sign a traineeship agreement have only half the probability of being offered a work contract. Furthermore, lack of remuneration/compensation is associated with a significantly lower probability of being hired by the same organisation. Finally, there is a clear link between working conditions and the probability of being offered a work contract at the end of the traineeship.

.Table 2 Traineeships: compensation and quality indicators

% share of traineeships satisfying the following quality element || Paid traineeships || Unpaid traineeships

Employment offered at end of traineeship || 42 || 20

Written agreement || 77 || 52

Health / accident insurance || 76 || 64

Traineeship (partly) in other country || 13 || 8

Opportunity costs

The methodology used in the econometric analysis quantifies the employment impact but does not take into account the other opportunity costs from substandard traineeships. While trainees may ultimately be able to find a job, spending time on a substandard traineeship delays the entry into the labour market, undermines motivation, and, in the typical case of unpaid substandard traineeships, cause a running down of savings which could be used to acquire human capital. Given the Eurobarometer result showing the 36% of trainees do three or more traineeships, these costs can be significant[19].

Box 2 Main results of the Eurobarometer survey on traineeships quality

The survey on traineeships quality was conducted In May 2013 in all EU Member States and Croatia: 12921 people in the age group 18-35 were interviewed on their personal traineeship experience. The survey found that 46% of the 18-35 year old population had had at least one traineeship. Respondents had on average undergone 2.5 traineeships; of these 1.7 traineeships took place after the studies. A 24% share of respondents had their last traineeship after finishing their studies (the majority of these traineeships are open market traineeships, i.e. no other party is involved apart from the trainee and the traineeship provider). The typical traineeship lasts one to three months (this is the case for 37% of all traineeships); only 15% of traineeships lasts longer than 6 months. Those that had done more than one traineeship were asked about the last traineeship and then to a randomly chosen previous one. This was done to test the assumption that the last traineeship undertaken is usually better quality than previous ones, which was indeed fully confirmed. As a result two datasets are available; generally this Impact Assessment reports the result for the randomly chosen traineeship, felt to better represent average quality, however in some cases data are available only for the last traineeship. Data confirm the validity of the concerns about the quality of traineeships, although they also show that the majority of traineeships is either of good or acceptable quality. Quality was measured through questions on the learning content (e.g. whether the trainee gained useful experience, whether a mentor was foreseen, etc), and on working conditions. Questions on pay/social protection were also included; however it is important to note that pay is excluded from the operational definition on quality, which relates only to satisfactory learning content and working conditions. A 30% share of traineeships was found to be unsatisfactory either with regards to working conditions or learning content (improving slightly to 25% for the last traineeship). As could be expected, low quality in working conditions is positively correlated with a poor learning quality. More than one third (35%) of the trainees have not signed any traineeship contract, confirming fully the concerns about lack of awareness of working conditions. As for the learning content, 18% report not to have gained useful knowledge in professional terms. About one in ten trainees (11% for the random traineeship, 9% for the last) could not turn to a mentor for any guidance. A 23% share felt that working conditions (equipment, working hours, workload…) were inferior to those of regular employees. While three in four trainees (76% for the random traineeship) were covered by social protection, the main concern put forward was confirmed to be pay/compensation: only 32% of trainees received compensation (40% for the last traineeship) and only 41% of those that were paid were able to cover their living costs. Thus, about four in five trainees had to finance their traineeship on their own, in whole or in part. Trainees were also asked whether the traineeship vacancy notice made the level of compensation clear, with only 42% replying positively. As expected, repeated traineeships also proved to be a major issue: almost one in four trainees (23%) were offered to renew or extend the traineeship at its end. This is a particularly doubtful practice since in such cases there is a strong suspicion that these traineeships simply replace jobs. However, 27% were offered a work contract after the end of the traineeship confirming the positive role that a traineeship can play in finding a job. On the other hand, 28% found that their last traineeship did not help them to find a job. One in three trainees (34%) did not receive any certificate at the end of the traineeship. Adding up those who were offered to renew the traineeship and those who got a job, we find that half of the TPs were satisfied enough to keep the trainee. Finally, the survey confirms the low rate of transnational traineeships: only 10% of the traineeships took place abroad. Among those who have not had the opportunity to go on a traineeship abroad but would have liked to, 38% indicated that lack of information was the main problem; while 48% referred to lack of resources. Based on survey results, the low rate of transnational traineeships has a direct impact on mobility: amongst those who have had a traineeship abroad, their language knowledge was improved in a very large proportion (79%) and in a large majority the traineeship made them consider working abroad (69%). Source: Eurobarometer, European Commission, 2013

Table 3 Overview of quality indicators for traineeships from different sources

Indicator || Value || Source(s) || Year || County

Learning content

Mentor' s performance: good or excellent || 88% || Eurobarometer || 2013 || EU-wide

Mentor' s performance: less than satisfactory or not satisfactory || 11% || Eurobarometer || 2013 || EU-wide

Traineeship useful professionally || 71% || Eurobarometer || 2013 || EU-wide

Traineeship not useful professionally || 18% || Eurobarometer || 2013 || EU-wide

Mentor' s performance: good or excellent || 55% || EYF Survey, p.19 || 2011 || EU-wide

Mentor' s performance: less than satisfactory or not satisfactory || 18% || EYF Survey, p.19 || 2011 || EU-wide

Relevance to respondents' field of study: good or excellent || 55% || EYF Survey, p.19 || 2011 || EU-wide

Relevance to respondents' field of study: not satisfactory || 6% || EYF Survey, p.19 || 2011 || EU-wide

Beneficial in terms of extending experience and practical knowledge || 83% || Fuchs / Ebert || 2008 || DE

Good mentoring || 81% || Fuchs / Ebert || 2008 || DE

Useful in terms of learning outcomes || 70% || Briedis / Minks || 2005 || DE

Duties/tasks at a good level || 67% || Briedis / Minks || 2005 || DE

The traineeship content was good || 64% || Kravietz || 2006 || DE

Usefulness for professional development || 57% || Kravietz || 2006 || DE

Usefulness for professional orientation || 66% || Kravietz || 2006 || DE

Good mentoring || 61% || Kravietz || 2006 || DE

The tasks contributed to learning || 88% || OPALA survey || 2010 || FI

Counselling / support during the traineeship was sufficient || 81% || OPALA survey || 2010 || FI

Compensation

Traineeship was paid || 40% || Eurobarometer || 2013 || EU-wide

Compensation covered living expenses || 18% || Eurobarometer || 2013 || EU-wide

Traineeship was paid || 51% || EYF Survey, p. 15 || 2011 || EU-wide

Compensation covered living expenses || 25% || EYF Survey, p. 15 || 2011 || EU-wide

Working conditions

Working conditions worse than that of employees' (except for pay) || 23% || Eurobarometer || 2013 || EU-wide

Feeling of being exploited || 61% || Fuchs / Ebert || 2008 || DE

Traineeship plans lacking / not followed / not useful || 62% || Briedis / Minks || 2005 || DE

General level of satisfaction || || || ||

Trainees completely satisfied with their internship || 25% || Internocracy || 2010 || UK

Traineeships felt to be poor quality || 30-40% || Traineeship study, p.831 || 2012 || UK

Comparison mandatory vs. open-market traineeships

VET students satisfied/very satisfied || 88% || Traineeship study, p.151 || 2012 || AT

University applied sciences graduates "at least satisfied" || 80% || Traineeship study, p.151 || 2012 || AT

General University graduates "at least satisfied" || 70% || Traineeship study, p.151 || 2012 || AT

Young graduates "at least satisfied" || 52% || Traineeship study, p.151 || 2012 || AT

Source: compiled by Commission services; see References section for details.

4.4. Problem drivers

There are several causes for the existence of the ascertained high share of substandard traineeships. These relate both to the supply side and to the demand side. We examine them in turn. Finally, we discuss why the market fails to address the problem.

Problem drivers acting on the supply side

On the supply side, two different situations may arise: the traineeship provider may offer substandard traineeships because it does not know how to ensure quality (unintentional low quality) or, alternatively, the supply of substandard traineeships may be intentional and due to a conscious profit maximization strategy. The problem drivers differ depending on the case.

Causes of unintentional provision of substandard traineeships

It is important to note that, apart from a certain share of highly regulated traineeships, there are currently no quality standards or guidelines in general or common use and traineeship providers are typically not required to follow or implement any.

Some organisations may be well intentioned to offer a quality traineeship but simply be unaware of the requirements for a traineeship to be a successful learning experience. The Traineeship study has underlined that successful traineeships are usually characterised by a definition of learning objectives, a clear plan of how to attain them, and the availability of good mentoring.

A share of traineeship providers is likely to be unaware of these needs. The SME test results show consistently that many SMEs do not include the quality elements identified by the Traineeship study, yet a strong majority of them declare that they would not find it problematic to implement them. This refers for instance to elements such as signing a written traineeship agreement (71.8% ensure while 95% have nothing against) or to provide mentoring (60.7% against 93%) or a letter of reference (50% against 95.2%).

It is impossible to measure exactly the share of unintentional substandard traineeships, but on the basis of the SME test results, we might quantify it tentatively at between 20% and 35% of those traineeships that are insufficient in learning content[20] [21].

Causes of intentional provision of substandard traineeships

As underlined by Todini (2013), Langille (2012) and many others, traineeship providers often have a financial incentive to utilise traineeships improperly to carry out at a lower cost tasks that should be executed by regular paid employees. This incentive appears particularly strong considering the high share of trainees that do not receive any compensation at all; the high availability of trainees allows certain tasks to be carried out at almost no cost on a permanent basis.

Not surprisingly, to prevent this misuse of traineeship and the attendant distortions, many countries have legislation prohibiting the use of trainees to replace permanent employees. As mentioned in section 2.2, however, this prohibition is however very difficult to enforce owing to the difficulty of testing it, the scarce resources of labour inspection offices, and the lack of incentives both for trainees to put forward complaints and for labour inspection to enforce aggressively (see, amongst others Todoli (2013) for a documentation of several cases in which trainees were used to replace employees).

Problem drivers acting on the demand side

Given the limited interest in entering a substandard traineeship, and the fact that they are typically unpaid, the main reason that candidates apply for them is lack of transparency (information asymmetry). It seems safe to assume that trainees would normally avoid substandard traineeships in favour of good quality ones, which offer a much better payoff in terms of chances for employment.

However, the quality of the traineeship is difficult to assess before it starts, and when the traineeship is started, the trainee has neither the possibility nor the incentive to complain. If trainees hope to be hired later or fear blacklisting, they will be very reluctant to lodge complaints or litigate. Even in the USA, where the institution of ‘punitive damages’ and the right to minimum wages can constitute powerful incentives to legal action, litigation is very rare and until now has not proven a deterrent for abuse (see Curiale 2010).

As a result, it is easy for a traineeship provider to under deliver on the quality of the traineeship, i.e. on the learning content or on the general conditions of work or on both, creating a market failure.

Asymmetric information and lack of incentives for complaints create room for market failure

It is the combined effect of asymmetric information and the lack of incentives for trainees to put forward complaints[22] that prevent the market from pricing and discouraging substandard traineeships. For reasons explained in detail in annex 0, asymmetric information is a much bigger problem in traineeships than in regular employment contracts. Thus, the traineeships market is characterised by a long-term equilibrium in which a majority of quality providers of traineeships coexist with a 20% -25% share of substandard traineeships providers.

One may consider the question whether young people would apply for a substandard traineeship if they knew about it before starting. This appears unlikely given the modest payoff from a substandard traineeship and the fact that the majority of traineeships are good quality – meaning that finding a good traineeship is not an impossible task. The main reason therefore appears to be quite simply lack of information on their trainee's part on what they can concretely expect from that traineeship (see Box 3).

Finally, one should mention that the current deep recession aggravates the above problems leading to a further decline in traineeship quality. The impact of the labour market situation on the traineeship market is outlined in Section 9.1.

Box 3 A low learning content traineeship

A traineeship experience abroad is important, but in my case it’s been a wasted opportunity” says G.C., who did a traineeship as a fourth year law student. “I applied for a five-month traineeship organised by my university at a law firm in London, in the department for international property purchases. There were almost exclusively lawyers from my country there. My role was essentially making photocopies. My working time was the same as for the colleagues, I tried to be proactive but de facto I just did secretarial work like handling email and archiving documents. I was not the only one in that situation; in the firm there were other two boys whose judgement was equally negative. My impression was that they were just looking for people to put to work for free; they were continuously looking for trainees, certainly not with training purposes. Source: abridged from Repubblica degli Stagisti, E. Della Ratta, 8 March 2010

5. Legal basis and subsidiarity

Legal basis

Currently there is no European legislation specifically directed at traineeships. The legal bases for this initiative are Articles 153, 166 and 292 TFEU. According to Article 292 TFEU, the Council can adopt recommendations on the basis of a Commission proposal in the areas of EU competence.

According to Article 153 TFEU, the Union shall support and complement Member States' activities in the field of, inter alia, working conditions, social security and social protection of workers, and also the integration of persons excluded from the labour market and the combating of social exclusion.

In this respect it should be noted that the definition of workers is wider than that of employees and is usually interpreted extensively. Furthermore, under current conditions a large proportion of trainees may be considered to be at risk of exclusion from the labour market. This article therefore applies to traineeships. This is corroborated by the circumstance that Occupational Safety and Health legislation considers trainees and apprentices as covered by the scope of the Directives based on the framework Directive of 1989[23], whose basis is Art 153 TFEU.

Since Article 153 TFEU applies only to workers and, therefore, only to traineeships which are remunerated, Article 166 TFEU is added as additional legal basis. According to Article 166 TFEU, the Union shall implement a vocational training policy which shall support and supplement the action of the Member States, while fully respecting the responsibility of the Member States for the content and organisation of vocational training. Depending on whether the traineeship is remunerated or not, Article 153 or 166 TFEU apply respectively to ensure equal treatment.

The provisions of Article 153 TFEU do not apply to pay, by virtue of Article 153 para. 5 TFEU. However, the latter provision does not stand in the way of addressing problems regarding transparency of pay, by recommending that the written traineeship agreement clarifies whether or not remuneration would be applicable.

Subsidiarity

In the case of traineeships, the differences between national labour market institutions do not seem to play a major role, as the nature of the complaints and concerns is very similar everywhere, and quality problems in traineeships are frequent even in the Member States with a more favourable labour market situation. The Traineeship study found that only in five Member States was there no presence of questionable practices (see Annex 12.1 and the Traineeship study, p. 94).

An EU-wide solution presents several advantages:

1) The quality guidelines adopted or proposed by different bodies in different countries look quite similar. Differences reflect mainly remuneration and the presence of certain compulsory or binding elements, such as limitations of successive traineeships, which are usually absent from voluntary charters (see Table 5). This suggests that there is no great need for adaptation of quality standards to local conditions.

2) Secondly, an EU wide-solution would have benefits in terms of trainees’ mobility. Young people would find it easier to accept a traineeship in another country if the existence of standard practices or rules gave them a clear understanding of what they can expect.

3) Thirdly, experience shows that, owing to coordination problems, the definition of internationally accepted quality standards can be faster if supranational institutions adopt a coordinating and supporting role.

Member States could independently adopt measures to improve the quality of traineeships, in practice, however, they have repeatedly called upon the Commission to adopt a QFT (see among others the Conclusions of three recent European Councils: December 2012, February 2013 and June 2013).

The reason why the European Council has repeatedly asked for the Commission to put forward a proposal for the QFT seems likely to be linked to the current fragmentation of regulation and the absence of quality criteria in general use, which can be taken ‘off the shelf’. Given the situation of diverging regulatory frameworks, it helps to have a common understanding of what a traineeship is and of its minimum standards. In addition, several Member States do not have a long experience in regulating traineeships: as demonstrated by the Traineeship study, in many cases they are still largely unregulated. Therefore, a QFT can help shape Member States’ policies and regulatory approaches. In this way, the EU could concretely support Member States in implementing the Europe 2020 employment guideline nr 8, in particular ‘enacting schemes to young people and in particular those not in employment, education or training find initial employment, job experience or further education and training opportunities, including apprenticeships, and should intervene rapidly when young people become unemployed.’.

A Europe-wide QFT would also help address the low number of transnational traineeships. It would help address one key obstacle for cross border mobility, lack of information, in an area of great regulatory fragmentation, and the Recommendation would help to underpin the support provided by ERASMUS+.

Finally, the QFT is essential for the extension of EURES to traineeships, as requested by the European Council conclusions of 28/29 June 2012[24]. EURES should support trainee mobility through quality traineeships. Substandard traineeships will not help smooth education to work transitions.

Similarly, quality requirements for traineeships are needed to ensure the effectiveness of traineeships offered in the context of the Youth Guarantee (see Council Recommendation of 22 April 2013). The Council Recommendation refers to a 'good quality' offer of traineeships – therefore a QFT can be an important reference point for ensuring this.

6. Policy Objectives

The general objectives of an initiative in this domain are the following:

(1) Improve the quality of traineeships, in order to increase the contribution of traineeships to successful education-to-work transitions

(2) Reduce mismatches in the European labour market by promoting the development of transnational traineeships

In order to meet these general objectives, the following specific objectives have been chosen:

(1) Increase the share of quality traineeships;

(2) Discourage abusive practices while keeping the compliance costs for traineeship providers (TPs) limited;

(3) Enhance information on and facilitate access to transnational traineeships.

The operational objectives are:

(1) Provide a framework / standards / guidelines that Member States, Social Partners, TPs or other entities can use as a reference for actions to foster the development of quality traineeships and facilitate trans-national traineeships;

(2) Ensure the effective take-up of this framework / these standards or guidelines in EU policy instruments, the European Semester process, the Youth Employment Initiative (YEI), and other EU financial programmes.

7. Policy coherence and contribution to Europe 2020 objectives

In 2010 the Europe 2020 flagship initiative 'Youth on the Move' announced that the Commission would propose a quality framework for traineeships including the transnational dimension, the role of the social partners and corporate social responsibility aspects.

In light of the further deterioration of youth access to the labour market, the Commission launched the ’Youth Opportunities Initiative’ in December 2011. The Youth Opportunities Initiative also confirmed earlier commitments to present a quality framework for traineeships in 2012. Traineeships were included in the 2012 Employment Package; quality traineeships are also an integral part of the Youth Guarantee concept and therefore their development is a prominent objective of the 2013 Youth Employment Initiative.

Within the 2013 European Semester, 16 Member States were addressed a Country Specific Recommendation (CSR) on "enhancing access to lifelong learning, upgrading the skills and competences of the workforce and increasing the labour market relevance of education and training systems, VET". Typically, the CSR recommend increasing the availability of work-based learning, whether apprenticeships or work placements in companies. Guidelines on traineeships appear particularly useful for countries with little experience or tradition of working in partnership with business. A QFT would help the Commission to monitor progress on the above recommendations and suggest further action to MS where needed.

Actions to improve traineeship quality also relate to the recognition of qualifications, and in particular cross-border ones. This is of particular importance for the regulated professions but might concern other professions as well[25].

Developing a QFT also contributes to the Commission's endeavour to lift obstacles to the full enjoyment by citizens of their EU rights, and notably their right to free movement.

Finally, a QFT can allow the Commission to work together with the Member States towards the inclusion of traineeships in EURES, as requested by the European Council conclusions of 28/29 June 2012[26].

8. Policy options

The peculiar challenge in regulating traineeships is the difficulty of enforcing legislation, as highlighted most clearly by the examples of the United States, where, despite the existence of restrictive rules, internships often suffer from abuse (see section 0). In the EU, literature puts forward a similar experience in Spain (see Todoli, 2013).The existence of abuse in an environment with generally effective institutions and law enforcement depends on the general unwillingness by interns to launch complaints against employers. Hence, strategies based mainly on repression do not appear effective in this context. Therefore, the policy approach followed here is not to attempt stimulating ex-post complaints by dissatisfied trainees; rather, the objective is to increase the transparency of the traineeship market ex ante, so as to address the key problem drivers, i.e. lack of information and/or asymmetric information. This will make it easier for traineeship candidates to screen the offered quality before they make a commitment with a traineeship provider.

Four options that are in line with this approach have been identified and are listed in Table 4 alongside the ‘no change’ or ‘baseline’ option 0. Their expected impacts and the possibility and usefulness of combining them will be assessed in Section 9. Given lack of data, the analysis of impacts is largely qualitative.

Table 4 Overview of Options

Option number || Name || Type || Short description

0 || Baseline || - || No policy change

1 || Information Website || Information || Creation of an information website for trainees with all regulations and types of traineeships per MS

2 || Voluntary Quality Label || Information || Quality label for traineeships on a completely voluntary basis

3a || Council Recommendation on a Quality Framework for Traineeships ‘basic’ (QFT 'basic') || Guideline || A Traineeship Agreement would have to be signed between the trainee and the TP. The agreement would have to include information on objectives, learning content and monitoring, duration, remuneration or cost compensation, and social security coverage.

3b || Council Recommendation on a QFT with enhanced transparency (QFT + Transparency) || Guideline || The same as 3a + Information on pay/ compensation in vacancy notice + transparency requirements on hiring policy for unpaid traineeships

4 || Directive on a QFT + enhanced transparency || Regulation || The same as 3b but in the form of a Directive

Option 1: information website

Option 1 consists of the creation of an information website containing complete, detailed and regularly updated information on the rules and regulations applicable to all types of traineeships, in each Member State. The website, which could possibly set up within the EURES portal, would include links to the relevant authorities in Member States.

Rationale

This option mainly addresses one problem on the supply side, that is to say unintentional provision of substandard traineeships. It also addresses one factor facilitating abuse, i.e. lack of information on the part of trainees of about their rights, and could also help organisations unsure about the rules applicable onto traineeships, particularly if they have never offered a traineeship position.

In addition, this option could facilitate demand for transnational traineeship positions. A properly designed, user-friendly website would allow easier access to general information on national legislation of for traineeships. This should have a positive effect on increasing the availability of candidates for transnational traineeships. Over time, greater availability of candidates could stimulate also an increase in interest by TPs particularly those facing, for whatever reason, difficulty in attracting domestic applicants for certain vacancies, and therefore have a moderate positive impact on supply.

Option 2: voluntary quality label

Option 2 consists of setting up at EU level a Quality Label to certify adherence to certain quality standards on the part of TP that voluntarily apply for it. This option could be implemented in various ways, either in a fully decentralised manner (by country or even by sector) as has happened in the relatively few existing examples (eg in the UK Code of Best Practices or in Italy’s OK stage by Repubblica degli Stagisti).

The criteria for the award of the quality label could vary quite substantially by country or sector; alternatively, one may seek to define similar or even identical criteria for the entire EU. Defining common – or very similar – criteria would be better for fostering transnational traineeships; on the other hand, allowing criteria to differ significantly between countries or sectors would allow adapting the standards to local conditions.

The quality principles could be elaborated by relevant national authorities in cooperation with social partners, specifying minimum standards for the format, learning content, and working conditions of the traineeship, taking as a starting point the recommendations of the Traineeship Study (see Box 4). The quality label could also include commitments on remuneration and social security coverage. By voluntarily committing to respect the principles, TPs could publicise themselves as ‘fair to trainees’ or similar. To strengthen the reputational benefit for TPs, the label should be advertised and managed by a body or stakeholder entity guaranteeing impartiality. This option would mainly address the problem of unintentional supply of substandard traineeships.

Option 3: Council Recommendation on a Quality Framework for Traineeships

This measure would consist in a Commission proposal for a Council Recommendation on a Quality Framework for Traineeships (QFT) to be transposed by Member States in national practice and/or the national legal system. The Recommendation would ask Member States to ensure that a written and signed Traineeship Agreement is made compulsory, which is currently not the case in many Member States. The Agreement should include a series of elements that have been shown to increase the quality of the traineeship experience.

Two sub-options are proposed: in option 3a, the Council Recommendation would only consist of quality guidelines to be included in the Traineeship Agreement (listed in Box 4). In option 3b, the content of the QFT is strengthened by including additional transparency requirements that allow young people applying for traineeships to make a more informed choice.

Option 4: Directive on a Quality Framework for Traineeships

Content-wise, this option would be the same as Option 3b, i.e. presentation by the Commission of a proposal for a Quality Framework for Traineeships with transparency requirements, but in contrast to option 3b, the proposal of the Commission would take the form of a Directive based on Article 153 2(b) TFEU. So the only difference between Option 3b and 4 is the choice of the instrument.

The choice of a Directive as a legal instrument implies that Member States, once it is approved and enters into force, must transpose it into their legal system because it is, unlike a Recommendation, a binding instrument. This has important implications in terms of proportionality and the subsidiarity issue.

9. Analysis of impacts

We assess the options on the basis of whether they can create disincentives to targeting intentional substandard providers, while not creating any obstacles to quality providers. This can be done by addressing the different motives of quality and substandard traineeships providers. The analysis is mostly qualitative due to the limited availability of data and the lack of models allowing this type of simulation.

The text on each policy option as well as the overview tables in the annex explain in details the expected impact on supply and demand for both quality and substandard traineeships and concludes on the effectiveness of each option.

9.1. Option 0 – Baseline

Foreseeable business cycle impact on traineeships

The supply of traineeship positions depends on broadly similar factors as vacancies for regular jobs. If firms anticipate greater demands for their production in the coming quarters, they may start considering the needs to hire new personnel, and this will stimulate the offer of those traineeship positions that are preliminary lead to a hiring. Thus it is likely that the share of quality traineeships (as these are typically linked to hiring) increases in an upturn and decreases in a downturn. Given the typical labour market lags and the worsened employment outlook, the share of quality traineeships is likely to decline in the coming quarters.

TPs also offer traineeship positions due to the replacement motive. Given their lower cost, if they face a pressure to cut costs, enterprises may attempt to replace regular workers with trainees. This factor too seems likely to intensify in the coming quarters. Moreover, other workers and trade unions may be more willing to tolerate this behaviour by TPs/ businesses if the survival of the firm is at stake.

The issue can be framed in economic terms by discussing whether trainees are, on average, complements of or substitutes for of regular workers. If they are substitutes, a higher number of trainees will be associated with a lower number of regular workers. If they are complements, a higher number of trainees will instead be associated with a higher number of regular workers. As the number of regular workers is driven down by the crisis, in the substitution case the number of traineeship positions would tend to increase with the crisis, while in the second case their number would fall as the labour market situation worsens.

In the absence of econometric studies that measure the degree of substitutability of trainees with regular workers it seems reasonable to assume that substitutability of senior, highly experienced personnel dealing with technically complex issues with trainees is limited. Conversely, trainees may more easily be substitutes for simpler or routine tasks. Overall it seems likely that the sharpening of the crisis leads to greater substitution effects; this should boost the number of traineeships in the short run.

Overall, there is no reason to believe that the quality problems discussed above would become less frequent in the future as a result of developments in the economy. As mentioned in Annex 12.6, economic incentives are such that the current equilibrium with a high share of substandard traineeships is likely to be sustained in the absence of policy action, with the crisis likely to increase the share of substandard traineeships.

Foreseeable impact of institutional developments on traineeships

Other sections of the Impact Assessment have illustrated recent institutional developments. Although concerns about abuse of open-market traineeships are widespread, this has prompted policy action only in a limited number Member States (France, Italy and Spain represents the main examples). In general, the modifications put forward or envisaged by these countries go in the direction of increasing protection of trainees, e.g. by mandating payment (traineeship guidelines approved by Italy) or by restricting the ability of traineeship provider to offer traineeships on the open market (France). However, the content of these policy actions does not take into account the international dimension of traineeships[27].

One can speculate that owing to increasing demands by public opinion, certain Member States might introduce regulation, and social partners might adopt quality charters at national or sectorial level; these however would not be coordinated, reflecting also the lack of universally accepted quality standards, and therefore would retain the fragmented nature of the current landscape, with its negative effects on trainee mobility.

Another possibility is that given increasing public concern about trainee exploitation, there might be a greater trend towards adoption of voluntary quality charters by TPs. This is however unlikely to change the situation perceptibly, mainly due to the fact that mostly those TPs will adapt to such voluntary charters that offer quality traineeships anyway (see section 0 for an analysis).

Overall, looking at developments on the ground, there seems to be limited movement towards spontaneous development of global or EU-wide quality standards. While it is possible that there are further national or international initiatives, experience shows that these are scarce and – especially voluntary ones – ineffective (see the low take-up rate of the Italian OK stage label: an order of magnitude of about1 to 10 000). While the European Quality Charter on Internships and Apprenticeships could be considered as a relevant international initiative, as an NGO initiative and with only limited support from employers, it is currently applied by few businesses only on a completely voluntary basis. Furthermore, the Charter itself in its Preamble urges EU institutions to ’commit to establish legal quality frameworks for internships and apprenticeships’.

In addition, the repeated calls by the European Council for action at EU level have created the expectation of a forthcoming EU initiative, making it even more unlikely that Member States or lower government levels, spontaneously develop or launch new initiatives. As for social partner action, the decision not to negotiate an autonomous agreement at EU level also indicates a low likelihood of spontaneous action.

Therefore we can assume that in the lack of a widely accepted European initiative the overall share of substandard traineeships will further increase owing to the effects of the crisis or at best stay constant. Furthermore, one of the key outcomes of the stakeholder consultations was the wide support towards a QFT – even business organisations acknowledged the need for action in this field.

Overall we may conclude that in the absence of policy action labour market developments would likely lead to a worsening of the situation for trainees and that institutional development at MS level, given the track record so far, are unlikely to result in the problems of traineeships being addressed soon.

9.2. Option 1 – Information website

Impact on supply of traineeship positions

As already described in the previous section, option 1 consists of the creation of an information website containing complete, detailed and regularly updated information on the rules and regulations applicable to all types of traineeships, in each Member State. This option would not increase costs for TPs – it might even reduce them marginally to the extent that they, too could more easily access information about this topic. However, organisations that intentionally offer substandard traineeships to profit from cheap labour are likely to continue to follow their strategy so long as they find willing candidates: the experience of countries with rigid traineeship regulations suggests that greater rights awareness is not going to stimulate complaints by trainees. As for quality traineeships, there is no reason to expect any impact on their supply.

Impact on demand for traineeship positions

Similar considerations lead to suggest that the effect on demand for traineeship positions by young people would be negligible, at least in a domestic context. In the majority of cases young people will already have access to domestic information resources to clarify the applicable rules. The complexity of the rules applying to traineeships may mean that in some cases a new, well-designed information resource fills a gap, but this is unlikely to play a major role, except for transnational traineeships, where the role of informal networks is smaller and there may be linguistic or other barriers.

Costs

The website could be set up by and run centrally for the entire EU by the European Commission or another organisation, to ensure a similar content and layout for each MS, or could be managed by a network. While there is no compliance cost for Member States or TPs, there would be some budgetary implications for the organisation running the website (possibly the European Commission). However, an information website could be implemented at a cost presumably below € 1 million per year.

Overall assessment of effectiveness

This tool partly addresses the quality problems through providing better information, i.e. the lack of general information on standards, but does not provide any information on the quality of specific traineeship positions on offer. Hence, the impact of this option on traineeship quality is positive but modest, as greater awareness of rights has been proven to be of limited effectiveness on domestic traineeships. As regards specifically the problem of insufficient learning content, no real effect or perhaps a slight positive effect is to be expected. Similarly, a slightly positive impact on bad working conditions might be achieved. It might have a stronger impact on stimulating transnational traineeships, owing to the greater difficulty of finding information for foreign countries. Overall, this seems to be a measure that can usefully complement other solutions, given also its low cost; but is not effective enough as a stand-alone option.

This option thus represents no real effectiveness for domestic traineeships but a likely positive effect on transnational traineeships. It should help the development of transnational traineeships but is unlikely to change the balance between substandard and quality traineeships. In terms of efficiency, this can only be seen as a partial solution, but given its low cost, it could be a useful complement to other options. It is a fully coherent option.

Further details are provided in table 9 in Annex 12.13.

9.3. Option 2 – Voluntary Quality Label

Impact on supply of substandard and quality traineeship positions

The weak point of this option is that by definition it has no impact on the supply of intentional substandard traineeships as TPs/businesses offering them will obviously not apply for the label. Only if the label – as part of a certification process - eventually becomes a prerequisite for public financial support to traineeship programmes, such as the ESF, may it serve as an incentive to upgrade substandard traineeships, thus increasing the supply of quality traineeships.

TPs offering quality traineeships should not suffer any meaningful compliance costs as they will already be applying the principles of the Quality Charter. On the contrary, the Quality label provides a reputational advantage. For this reason, this option is likely to have, if anything, a positive impact on the supply of quality traineeships. The significance of this however depends crucially on the conditions of the labour market, as the payoff to participating companies is significant mainly when it is not so easy to attract candidates for traineeships, which is far from the current situation.

The size of the impact will obviously crucially depend on the take-up rate by TPs.

Impact on demand for traineeship positions

Introducing a quality label where it does not exist is equivalent to segmenting the market. Market segmentation generally increases overall demand (and would obviously decrease demand for substandard traineeships). However, for this to happen, segmentation must be effective, i.e., there should be a reasonable availability of traineeship positions with the label. It is doubtful that this would be the case (see overall assessment of effectiveness below). The measure therefore would increase the availability of candidates for those companies offering a voluntary quality label but not overall given the expected limited take-up rate.

Costs

To minimise costs, compliance by the TPs to the principles of the Charter would not be monitored systematically, but ways would need to be found, either at EU or at individual Member State level, to handle complaints by trainees about companies not following the code/guidelines. Under this approach, the quality label could be attributed to all organisations that would commit to it without advance inspection or screening. A certain number of duly justified complaints could lead to the withdrawal of the label. Such a light organisation would allow the label to be managed by the companies concerned, or by a small external office.

Overall assessment of effectiveness

Overall, this non-regulatory approach has the merit of encouraging and guiding TPs by providing a reference for quality standards while its voluntary nature ensures that it is bearable for TPs. The strength of this option lies in the advantages of a voluntary/soft-law solution, i.e. flexibility and lighter-touch regulation, which minimizes the risk of imposing undue compliance costs to TPs. It goes some way into providing a positive incentive for adoption, given that one of the motives for organisations to offer traineeships is improving their reputation, which could be enhanced by a quality label. The voluntary nature of the commitment ensures that the compliance burden for TPs would remain acceptable[28]. This option might also stimulate cross-border traineeships.

However, a soft-law solution is typically well suited to cases in which the market is receptive to the need for regulation, or there are advantages to all participants from standard-setting, but the setting of standards itself is either highly technical, or needs to evolve rapidly or needs to be extensively tailored. None of this seems to apply to traineeships. Furthermore, the option suffers from a fundamental weakness, its limited or nil disincentive effect for substandard traineeships. In terms of the problems of insufficient learning content, only a slight positive impact can be expected. The bad working conditions to be found in intentional substandard traineeships are not expected to be affected.

Overall, the main disadvantage of this option is the risk that few organisations bother to apply for the label. The take-up rate for existing examples of quality labels is currently extremely low: in Italy, a few dozen companies have applied for the OK stage label, a take-up rate in the order of magnitude of 1 in 10.000. The situation does not seem to differ elsewhere. Hence this option appears ineffective.

It could be argued that this option would be effective to some extent in fostering the development of transnational traineeships but it is unlikely to change the balance between substandard and quality traineeships. In terms of efficiency this is only a partial solution as the impact is so dependent on the take-up rate, and very little impact is expected on intentional substandard TPs/businesses. The coherence of the option is potentially endangered by the potential for differences amongst labels which could create inconsistency and obstacles to mobility.

Further details are provided in table 10 in Annex 12.13.

9.4. Option 3 – ‘Council Recommendation on a Quality Framework for Traineeships

Implementation

The Council Recommendation could be adopted on the basis of Articles 153 and 166 TFEU in conjunction with Article 292 TFEU. The Council recommendation would invite all Member States to introduce the policy option chosen in their legislation within a certain deadline; the usual employment policy coordination mechanisms and structures would then monitor implementation and compliance. Given the fact that several Member States have received Country-Specific Recommendations (CSRs) on youth employment issues, the European Semester coordination mechanisms could also be utilised in this context to monitor progress. Furthermore, the implementation and monitoring of Youth Guarantee schemes also provide a natural opportunity for the implementation of a recommendation on a QFT; in the medium term, one objective could also be to link public funding of traineeships to those that satisfy the requirements of the QFT.

The description of the content, rationale, impact and overall assessment is given separately in the following for each of the two sub-options 3a and 3b. The advantage of implementation through a Council Recommendation is that it offers the prospect of a faster adoption. However, by its nature implementation of the Recommendation by Member States may be different and could be delayed considerably in certain Member States; depending on the rate of adoption, this could undermine considerably the achievement of the objective of providing a common framework for the EU, which is in turn essential to address low international mobility of trainees.

Given the choice of a Council recommendation, practical implementation and enforcement of both options would be up to the Member States. Nevertheless, the following sections contain some comments on the implementation challenges most likely to be met, on the basis of international experience.

9.4.1. Option 3a – Council Recommendation on a Quality Framework for Traineeships 'basic'

Description

This sub-option would require signature by both parties of a written Traineeship Agreements. The quality elements to be included in it would be those identified by the Traineeship Study (p 127 section 9.4), listed in Box 4. They comprise straightforward requirements such as explicit identification of a mentor, of the main learning objectives, and basic elements of the working conditions such as duration, the indication of what compensation, if any, is granted, etc.

These requirements are based on the analysis of the Traineeship study, which found that adoption of a small number of key elements resulted in better quality traineeships. The Traineeship study further found that these elements were spontaneously adopted by the best traineeship providers. However a series of factors, including the availability of candidates for traineeships, but also lack of guidance to help traineeship providers to spontaneously develop and adopt better approaches to traineeships in a situation where few guidelines exist, was slowing the spread of good practices.

The elements chosen represent a middle-of-the ground approach compared to those that have been put forward in a series of recent initiatives (see Table 5) by different types of bodies. Several of the elements contained in the Commission proposal for a QFT were tested in the econometric analysis in annex 0 and found to have a significant positive link with employment outcomes.

The QFT put forward in this proposal includes a limit on the duration of the traineeship. This is meant to limit distortions to the labour market, particularly in terms of the risk of substituting regular jobs with traineeships. As shown in Table 5, this clause is present in almost all examples of quality frameworks and is typically an element in legislation on traineeships. This is in line with the Eurobarometer result that 85% of traineeships last less than 6 month.

Table 5 Comparison between the quality elements under QFT option 3a and a number of recent initiatives

GUIDELINE NAME Issuing Organisation CRITERIA || Loi Cherpion (FR) Government || European Youth Forum Charter (EU) Youth Organisation || Carta dei diritti dello stagista(OK Stage) (IT) Trainee Organisation || EU QFT Project (EU) EU || Common best practice code for -quality traineeships internships (UK) 60 Professional bodies || Charte des stages de l'enseignement supérieur (FR) National Employer's Organisation (MEDEF)

No open-market traineeships || X || || || || || X

Mandatory written agreement || X || X || || X || X || X

Learning quality content || || X || X || X || X || X

Personal mentor || || X || X || X || X || X

Proper material and space for working || || || X || || ||

Limitation of the duration || X || X[29] || X || X || X ||

Limitation of successive traineeships || X || X[30] || X || || ||

Limitation of the number of trainees per entity || || X || X || || ||

Information about the remuneration/compensation || X || X || X || X || X || X

Minimum remuneration/compensation || X || X || X || || ||

Information about social insurance || || X || || X || ||

Same rights as employees regarding social and cultural activities || X || || || || ||

Possible variations

A possible variation of this option could be constituted by nominating an ombudsman at national or European level. The ombudsman would intervene on complaints filed against TPs that do not comply with the QFT. This might increase pressure on low-quality traineeships. The impact is difficult to assess, as it would depend on the stringency of the national legal framework, on the effectiveness and costs of the legal system, on the share of non-intentional substandard suppliers and probably also on administrative and corporate culture.

Rationale

The Traineeship Study has found that the fact of having to fill a written Traineeship Agreement stimulated the adoption of best practices by focussing attention on them. The introduction of a written traineeship agreement which lists the key quality elements is especially helpful in the case of the unintentional providers of substandard traineeships.

The strength of this approach is that the choice of the Council Recommendation instrument allows strict respect of the proportionality principle: Member States that have already introduced in their legislation a sufficient number of safeguards and quality elements will not need to act. For example, the regulation of traineeships in France or Italy currently goes beyond the quality elements identified in the Commission study. Member States shall also be free to assess whether it is opportune to go beyond the QFT proposed here to encompass also the issue of minimum remuneration, which the QFT does not touch (largely because of lack of EU legal competence in the area). The proposal for a Council Recommendation will detail in the appropriate legal form the quality elements listed in Box 4.

The use of the Council Recommendation with its inherent greater flexibility should not detract from the need for several Member States to take urgent action. As highlighted in Section 0, the current regulatory framework is patchy and fragmented, and in many Member States there is even no need for a signed traineeship agreement. Furthermore, Eurobarometer data show that substandard traineeships are common in a large number of Member States.

Data also show that particular problematic aspects tend to be endemic in specific countries, which also renders the use of a Council Recommendation more tailored. For example, a basic requirement for a quality traineeship is the possibility to turn to a mentor for assistance and help on how to do the job; but while data show that this was almost never a problem in Lithuania, a very large share of trainees in Spain (more than one in five) reported that they could not. Table 8 in Annex 12.11 indeed confirms that low quality, while common even in countries with generally good training systems and low youth unemployment, varies quite substantially in extent and in the nature of the deficiencies reported.

A Council Recommendation approach is also well suited to monitoring and following up progress on traineeship quality in the European Semester. It is worth to recalling here that a large number of countries were addressed Country Specific Recommendations on youth issues; adopting the QFT guidelines on traineeships would be a way of making progress on one aspect of the problems.

Box 4 Key quality elements identified in the Traineeships Study

The Traineeship studied surveyed the situation in all EU27 Member States and for all types of traineeships with the aim of pinpointing best practices, starting from the principle that a good quality traineeship should enable the trainee to acquire practical skills geared to the labour market needs and complementary to the trainee’s theoretical studies in order to enhance the trainee's employability. A number of principles can be identified that characterise a good quality traineeship. A fundamental point is the presence of a mandatory traineeship agreement. A good quality traineeship should be based on an agreement between the trainee and the traineeship provider (i.e. company, public agency etc.). In this respect it is worth noting that the Eurobarometer survey on traineeships of 2013 reports that only 62% of trainees have signed a written agreement[31]. The traineeship agreement should cover the following elements, identified by the study as the most important: • Objectives, content and monitoring: Traineeships should enable the trainee to acquire practical skills complementary to his or her theoretical studies. The guidelines of the study require that the validity of the educational content is ensured by a personal supervisor or mentor assigned to each trainee by the traineeship provider. The supervisor has to guide the trainee through the assigned tasks, monitor progress, and explain general work processes and techniques. The guidelines also require that the supervisor provides an evaluation of the trainee’s performance in the form of a short final evaluation (of 1 to 2 pages), which may take the form of a letter of reference. • Duration: Open-market traineeships should generally not last longer than 6 months (this duration, besides being recommended by the traineeship study, is also commonly taken up by Member States in their legislation, such as the most recent initiative on traineeships by the UK,). This recommendation however is not applicable to the mandatory post-graduation professional training of doctors, lawyers, teachers and the like, which exist in most Member States and tend to be both longer and highly regulated[32]. • Working conditions: the agreements should specify working hours and rights to holidays as well as rules on sick leave; • Remuneration/cost compensation: If there is a mutual benefit for both the traineeship provider and the trainee in terms of knowledge transfer and learning, unpaid traineeships may be appropriate. Hence, the quality guideline only stipulates that the written stage agreement specifies clearly what, if any, compensation or remuneration is offered. • Social security provisions: Social insurance provisions applying to the trainee must be clear to all parties involved, in particular as concerns coverage from health insurance and from the insurance against workplace accidents. In most Member States, students are provided with social insurance by the state or their educational institution and are therefore insured against health risks and accidents during their traineeships. However, if the trainee is no longer a student the situation may not be so clear. If the traineeship is covered by an employment contract, employer and employee need to fulfill insurance obligations as stipulated by labour law in the respective country. If this is not the case, the contractual arrangement should foresee insurance schemes to be paid by the traineeship provider or the trainee. Source: Traineeship study, p127

The impact of a Council Recommendation option will depend on the number of Member States translating it into their national legislation[33]. Nevertheless, the adoption of a Council recommendation may have a small effect even in non-adopting countries; there are at present no generally accepted guidelines on traineeships, so the existence of an EU quality framework might stimulate independent and voluntary adoption by TPs, social partners, public authorities, NGOs.

Impact on supply of traineeship positions

There are good grounds for believing that the introduction of a QFT in the format envisaged would not impact negatively on the supply of quality traineeships. While the existence of a written contract has obvious benefits for both parties in terms of clarifying duties and responsibilities on both sides, especially in the case of disputes, the overall compliance costs of concluding a Traineeship Agreement are very limited. Setting up the agreement should not require more than a few hours and the work done could largely be recycled for future trainees. Furthermore, the adoption of a QFT would result in the preparation and diffusion of standard Traineeship Agreements which traineeship providers could adopt off-the-shelf.

In addition, in France, the introduction of a mandatory written agreement in 2006 has not had any negative impact on the number of traineeships, which increased from 600,000 to 1.6 million in 2012.Finally, the SME survey run by the European Commission in March-June 2013 shows that out of 914 SMEs EU-wide only 5% would consider it difficult to provide a written traineeship agreement – in spite of the fact that currently only 72% of the SMEs do this as a usual practice[34].

As for the content of the Agreement, in the same SME survey only 7% responded that ensuring mentoring and evaluation would cause them difficulty (while 61% already now provide a mentor). Only 10.7% indicate that it would be difficult for them to clearly define learning objectives.

Assuming that larger TPs have even less difficulties, we conclude that the impact on costs for quality traineeship is negligible and th