Govt aid for staff training growing in importance

Summary:Governments' role increasingly include stepping in to guide industry growth and equipping workers but companies need to avoid being over-reliant and align aid with long-term goals, insiders say.

The responsibility of staff training should be shared by organizations and the government, with the latter stepping in only to provide direction in areas where more skilled workers are needed. Companies, though, need to be mindful of being over-reliant on government aid and align assistance with their long-term strategies, industry players said.

Andrew Milroy, vice president of Asia-Pacific ICT research at Frost & Sullivan, said that the government's role was traditionally to ensure its citizens have a good education, while companies make sure their employees are adequately trained to perform their stated duties.

However, the government has seen its role extended to "stepping in and giving directions" to nurture the talent pool to ensure industries' needs are being met through the provision of training or tax incentives, he pointed out.

Tan Bin Eng, director of business incentive advisory at Ernst & Young, agreed with Milroy, pointing to Singapore's Productivity and Innovation Credit (PIC) scheme as an example. She noted that the program is meant to support the country's aim of boosting productivity, specifically funding and catalyzing activities in training and automation within the local economy.

Such initiatives from the government to defray costs of staff training in tandem with companies are "great", noted Hitachi Data Systems. Joe Ong, the company's Singapore managing director, said by doing so, there will be returns on productivity, efficiency and acquisition of new skills and this, in turn, helps create a stronger local workforce that can provide higher value services.

"These benefit not just the individual and the organization but the economic well-being of the country," he said.

Logistics company YCH, too, lauded the government's role in providing the necessary resources that can help organizations create the right environment to stimulate learning and continued education. Executive Director Margaret Toh believes these incentives would enable the company to innovate and shift industry paradigms while allowing them to customize training programs to various employees to ensure relevance and value.

That said, Ong warned companies using such government funds to be wary about over-reliance. These financial aids may prove counter-productive to its original intent of improving productivity should companies reduce their own staff training budgets, he explained.

Firms unaware of PIC benefits
Governments will also need to ensure that their financial aid schemes are well created and communicated to the business community.

Chiu Wu Hong, tax partner at KPMG Singapore, noted that utilization of Singapore's PIC scheme, which was first introduced in 2010, remains relatively low. According to a Ministry of Finance survey, 44 percent of respondents indicated that they were put off by the scheme's restrictive conditions, while 19 percent felt it was targeted at small and midsize businesses (SMBs) and less so at enterprises. Another 19 percent said they did not participate because of PIC's limited scope.

Companies may also be deterred by the complex administrative procedures to be completed in order to enjoy the benefits, he added.

For instance, to enjoy the benefits on acquiring automation equipment, companies will have to own the equipment for a year. Should they decide to dispose of the equipment before the stipulated year, organizations must notify the Inland Revenue Authority of Singapore (IRAS) within 30 days of the planned date of disposal and repay the cash incentives they had received, explained Chiu.

Despite the potential hurdles, companies should still try to leverage PIC as the scheme covers a broad host of measures that can spur businesses to increase productivity, he qualified.

Know the scheme better
The industry players went on to highlight some aspects of the PIC scheme that organizations can consider to maximize the financial incentive:

  • Use tax deductions for training activities
    Under the PIC scheme, companies can enjoy 400 percent tax deduction for the first S$400,000 (US$312,964) of training expenditure incurred on all external courses and in-house training modules approved by the Workforce Development Agency (WDA) and the Institute of Technical Education (ITE) each year, Chiu noted.

    Since claims for internal training costs of up to S$10,000 (US$7,824) do not require the approval of the WDA and ITE, companies opting for cash in lieu of tax deductions can look forward to faster payouts on a quarterly, rather than yearly, basis from July 2012 onward, he pointed out.
  • Larger investment capacity
    The combined capacity of qualifying expenditure per activity of S$800,000 (US$625,928) for the year of assessment (YA) 2011 and 2012 and S$1.2 million (US$938,893) for 2013 to 2015 will allow companies to undertake larger investments in productivity and innovation, Chiu said.

    SMBs, in particular, can opt for quarterly payouts under the cash conversion options, Ernst & Young's Tan pointed out, advising that this can be done any time after the end of each financial quarter, but no later than the filing due date of the income tax return for each year.
  • Identify R&D for tax breaks
    Companies should identify research and development (R&D) for more tax benefits. This is because qualifying costs incurred for such projects conducted in Singapore will be eligible for 150 percent deduction with no limit on expenditure cap, Chiu said.

    "The R&D category is not limited to activities performed by scientists in laboratory coats, but extends to companies developing new or improved products or processes which involve novelty or technical risk," Tan added.

Topics: IT Employment

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Elly grew up on the adrenaline of crime fiction and it spurred her interest in cybercrime, privacy and the terror on the dark side of IT. At ZDNet Asia, she has made it her mission to warn readers of upcoming security threats, while also covering other tech issues.

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