Apprenticeships in the MSME sector: A Skill Talk

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With the recent amendments in the Apprenticeship Act, MSMEs have great scope in attracting and retaining talent by engaging them as apprentices. As per the All-India Census statistics, there are 13 million MSMEs in the country and the total employment in this sector is 41.0 million. Going by these numbers, even if each enterprise employs at least one apprentice, total number of apprentices will increase tremendously . Mr. Surajit Roy, Senior Head, Apprenticeships, National Skill Development Corporation (NSDC) shares his views on engaging apprentices in MSME sector through various strategies. Let’s read on to learn more…

Tell us about the importance of engaging apprentices in Micro, Small and Medium Enterprise (MSME) sector?

Today, most MSMEs don’t have shop floor-ready workforce, even though the amended Acts and Rules for apprenticeships make it relatively easy for a small company to engage apprentices. Large companies have in-house ways of training people, by onboarding them and giving them on-the-job training. Even if it is not through a systematic apprenticeship model, they still have a training system in place. However, smaller companies are relatively less organized and also lack infrastructure and expertise to train people.

Engaging apprentices on the shop floor can boost the productivity of the companies.Empirical evidence of various studies conducted by ILO has shown that, with the right kind of skill training, apprentices would be able to contribute to the productivity of the organization with a high rate of return on investment made by the companies on such trainings. We have seen that, comprehensive amendments have made apprenticeships, extremely industry friendly. With the financial incentives under the National Apprenticeship Promotion Scheme (NAPS), there is a perceptible change in the eco system with many companies starting to engage apprentices. But the traction in small scale industry is still low.Apprenticeships in the MSME sector

How do we sensitize MSMEs towards engaging apprentices?

Small scale industry is highly in need of skilled people.There are various ways in which we try to fulfill this need. However, there is a long way to go.We need to make the small scale industry understand the value proposition of the program. Apart from having a high rate of return on investment, the apprenticeship program allows a company to get educated and skilled people from the eco system, whom they can engage as apprentices under the Act, train them on their own shop floor processes, assess them on their relative strengths and weaknesses and then employ them, if found suitable.

Counseling of MSMEs will help them understand the benefits of engaging apprentices. MSMEs need to understand that, engaging apprentices is not an additional burden on them. They need to use the apprenticeship window in-lieu of regular recruitments they conduct, where they employ people directly without having the critical shop floor exposure or fully knowing the strengths and weaknesses of new employees.

Often, there is mismatch leading to high attrition and need of re-recruitment or re-training. There is a cost to this too. Instead, they can train apprentices, as per their requirements and pay 70% of minimum wages as per law. Even if it means paying them a little more, by way of stipend compared to the wages they may be paying to a fresher employee (which could be below the minimum wage and hence unlawful), in the overall perspective there is net healthier rate of return on investment in opting for the apprenticeship route. It helps them to be on the right side of law which has its own advantages. Further the EPF and ESI is not applicable to apprentices engaged under the Apprenticeship Act. On top of it, they get financial reimbursement of stipend they pay to apprentices, up to Rs.1500 per apprentice per month. Also, they get skilled people and not shop floor trainees or raw people.This enhances the quality of their products or service.

Surajit-Roy-NSDC

Mr Surajit Roy

Beyond just work and return on investment, there is a social responsibility angle to this. There is a deeper connect, a company develops through an Apprenticeship program with the apprentice. The apprenticeship path actually allows a company to positively impact a person’s life because on the side of the youth too the program is a win-win. He learns on the shop floor while he earns from the company. And, since it is almost always that this is his/her first earning and exposure to work like life, ILO studies have revealed that an apprentice invariably develops an emotional chord with the company and tends to stay with the company and serve it for a long period of time .

They get to understand the culture of the company, the job, the team members etc and learn the group dynamics of how to work with people. It also gives an apprentice, an opportunity to understand his/her weaknesses and strengths in a work environment and focus on what he is good at or what interests him/her. Hence an apprentice’s career selection is based on a sound grounded footing which ensures, he is good at what he is doing. As a result his/her career growth will be faster than those who are directly employed without going through shop floor exposure. Also, his productivity will be higher. And the small scale sector needs to be sensitized to all of these aspects about apprenticeship.

Hence, there is a need for counseling. Counseling of MSMEs should be done in clusters through their associations. Also, there is a need of regular interactions and dialogue between the MSDE, MSME ministries and the state/district administration.

How can the large companies influence MSMEs for adopting in apprenticeships?

As we know, the growth of MSME sector has been outlined in the Ministry of MSME’s annual report 2017-18.The sector contributes to Rs.3.6 crore jobs (Rs.70%) in the manufacturing sector. However, there are many ups and downs in the development of MSME sector. A major problem related to the development of MSMEs is the lack of proper mentoring and guidance.

Small industries are hesitant to initiate change due to varied reasons. Lack of expertise and awareness compels them to be in the stagnant stage for long time. But, a scheme like NAPS is effective in creating a change. What big companies can do is to guide them properly in implementing such schemes. We can take as an example, the case of Tata Nagar or Bhilai where the entire economy revolves around the Tata or Bhilai steel plant. The organization should ensure that the MSMEs who are connected with them are engaging apprentices and giving shop floor exposure to them in a manner which suits the larger companies.

The amended law actually allows the steel plants to provide shop floor training for the MSME apprentices in their plant. Once this is done, there is bound to be improvement in the quality of work, as the apprentice would have understood firsthand, the precise requirement of the larger company. This suits all three, the larger company, the MSME making products for this company and the apprentice who gets to learn work under the umbrella of a large reputed company. This model can be very effective to convince and enable MSMEs to engage apprentices in large numbers.

How are you strategizing the cluster-based approach to MSME apprenticeships?

Cluster-based approach allows companies to provide Basic Training and Classroom training. They can have a common Basic Training Partner and common classroom where they can share the costs and purchase tools and equipment. Government will also share the cost of training. They must become the production house of human resources for that particular cluster. This is how it must be organized with a bottom up approach.

Reaching out to small scale industries cluster has to be strategized well, as they are highly disorganized. It can’t be done through an industry federation. We need to talk to the industries directly. A good way to do this is to work towards being an industry champion after 6 months. For example, companies like Dr Reddy’s Labs, Maruti, companies in Retail sector etc have been championing apprenticeships for long.

Also, we need a well thought-out communication strategy, for direct and indirect advocacy. But definitely, we are working on a model to execute it, in the best possible way. Every initiative has to be pooled into one canvas.

What are the challenges in promoting MSME apprenticeships? 

The Indian MSME sector is a huge untapped market for apprenticeships. The trend is positive and apprenticeships are picking up. Apprenticeship is accepted as a very critical part of pre-employment training and skilling in the developed countries, but its value proposition is yet to be understood by the Indian companies. The other challenge is to reach out to the states.The states are not yet sensitized to the amended laws in full and how it will help both the economy and the unemployed youth. There is also a need to make all stakeholders aware about the seamless operations possible to run apprentice program through features developed in the apprenticeship portal (https://apprenticeshipindia.org/) and its benefits.

We need to work a lot on this. The action has to be on the ground, completely practical, with all the nuts and bolts tied up. Only then will we succeed.

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