Thinking about apprenticeships to implement in MSME? Then consider implementing apprenticeships beyond the regular colleges and locations. Check out our blog to learn more about how apprentices can offer MSMEs cost-effective and home-grown talent.
It is an exciting time for any MSME leader to transition from startup to expansion. The MSME now has its core staff and has been through a tornado of trial and error. Even though it has been through many problems, it is now doing well and is ready to grow.
Scaling is a specific phase of an MSME's expansion. During this stage, an MSME may focus on growing its team, finding new ways to get money, getting more prominent clients, entering new markets, or doing all these things. An MSME has never had a better opportunity to incorporate apprenticeships into its employment strategy.
How Can Apprentices Provide MSMEs With Cost-Effective And Home-Grown Talent?
Apprentices can help micro, small, and medium-sized businesses build a talent pipeline for their business. Small businesses sometimes need help hiring excellent personnel because they cannot provide hefty salaries. With apprentices, companies could generate home-grown, highly affordable, custom-made, and home-grown talent. According to the report, India's micro, small, and medium enterprises (MSMEs) have the capacity to develop 2.5 million apprentices if each firm employs at least one apprentice. The Sixth Economic Census estimates roughly 26,300,000 MSMEs with five or more employees in the United States. Even though most businesses in India need to get more organized, there is a massive chance for them to hire apprentices. Today, the Apprenticeship Act only applies to companies with more than 30 employees, excluding most MSMEs.
In India, the unemployment rate rose from 2.3% in 2009 to 5.8% in 2018, and the young employment rate is 12.2%. Apprenticeships have become a new and effective way to improve India's job market. But, with only 500,000 apprentices, India has yet to realize its true potential.
How important is hiring apprentices for Micro, Small, and Medium Enterprises (MSME)?
Even though the updated Acts and Rules for Apprenticeships make it easy for a small company to hire apprentices, most MSMEs still need workers ready to work in the shop. Large companies have ways of structured training, like bringing people on board and teaching them on the job. Even if they don't use an apprenticeship model, they still have a way to train people. On the other hand, smaller companies tend to be less organized and need more tools and know-how to train people.
Companies can make more money by putting apprentices to work in the shop.
Different studies by the International Labor Organization (ILO) have shown that if apprentices get the proper skill training, they can help the organization be more productive and give the companies a good return on the money they spend on on-the-job training. A lot of changes have made apprenticeships beneficial for businesses. With the help of the National Apprenticeship Promotion Scheme (NAPS) and National Apprenticeship Training Scheme (NATS), which give financial incentives to companies that hire apprentices, the ecosystem is changing, and more companies are starting to hire apprentices. But there is still little going on in the MSMEs.
How Can We Encourage MSMEs to Hire Apprentices?
MSME businesses need people with a lot of skills. They try to meet this need in a lot of different ways. But there is still a long way to go. An MSME should need to know what is good about the program. In addition to having a high rate of return on investment, the apprenticeship program lets a company hire educated and skilled people from the ecosystem as apprentices under the Act, train them on their shop floor process, evaluate them on their strengths and weaknesses, and then hire them if they are a good fit. Small and medium-sized businesses (MSMEs) will understand the benefits of hiring apprentices if they get some counseling. MSMEs need to understand that taking on apprentices is a manageable burden. They need to use apprenticeship training instead of their traditional hiring process, in which they hire people directly without letting them work on the shop floor or get to know their strengths and weaknesses.
Often, a mismatch leads to high turnover and the need to re-hire or re-train people. Instead, they can engage apprentices based on their needs and pay them 70% of the minimum wage, as per law. Even if they have to pay them a little more in the form of a stipend than they might pay a new employee (which might be less than the minimum wage and therefore illegal), the overall rate of return on investment is better if they go the apprenticeship route. It helps them stay on the right side of the law, which is good. The EPF and ESI also don't apply to apprentices working under the Apprenticeship Act.
On top of that, they get paid back up to Rs. 1500 per Apprentice per month for the stipends they give to apprentices. Also, they hire skilled people, not people who are just learning on the job. This improves the quality of what they sell or do.
As MSME works on all the actions mentioned above to make apprenticeship a win-win situation for trainees and businesses to grow deeper roots in the Indian economy, apprenticeship must not become a source of cheap labor. All forms of job experience cannot be grouped under the term "apprenticeship." Apprenticeship is defined by a verifiable written contract between the employer and Apprentice, payment of a stipend according to norms, systematic training of the Apprentice, including training during the non-production time, light yet stringent monitoring, and its evaluation. The value proposition of apprenticeship for firms must be derived from increased production, fewer attrition rates, and lower hiring expenses. For the trainees, it is a work-based learning program with appropriate stipends and increased employment opportunities. In order to achieve long-term, sustainable growth, the benefits of apprenticeship expansion must flow to all relevant parties: the Apprentice, the institution, and the economy as a whole.
Get in touch with 2COMS to learn more about the benefits that apprentices may provide MSMEs with cost-effective and home-grown talent.