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Making Apprenticeships Right for SMEs

The Indian SME sector is the lynchpin of the country’s economy employing around 40% of the total workforce, next only to agriculture. With SME contribution to GDP expected to rise to 22% in 2020 from 17% in 2011, developing the skills base of SMEs has never been more important to maximise productivity and boost social mobility. To aid the generation of well-paying jobs in SMEs the government made sweeping changes in 2014 to the Apprentice Act (1961) which were reflected in the National Apprenticeship Promotion Scheme (NAPS).  Although the NAPS was targeted at SMEs, they have not been quite forthcoming despite the various business-friendly changes to the Act including monetary support. Despite four amendments to the Act in total since its stipulation, challenges remain when it comes to scaling apprenticeship to its full potential.  

Apprenticeship numbers in India are pitifully low- around 50,000 employers engage with apprenticeships as against 71 lakh enterprises, amounting to around 3 lakh apprentices. And we don’t know the SME make-up in those numbers. Given the preponderance of informality in India’s workforce (95%), it is a safe assumption that there must be large numbers of informal apprentices in SMEs that do not fall under the Act. Formal apprentices- under the Act or otherwise- are favoured by large enterprises.


Also Read: Breaking Development – SME Friendly Fresh Reforms in Apprenticeship Act to Drive Up Numbers


What is Happening?

Boosting apprenticeship take-up by SMEs requires targeted due diligence and subsequent SME-focused interventions. A one-size-fits-all approach simply does not work to address concerns of SMEs, as neither does a paper policy (however conducive and well-intended) waiting to be picked up and rolled out. What is required is hand-holding, a much more personalised approach. Let’s look at some core issues that prevent SMEs from having more skin in the game:

  • Financial and manpower resource constraints of SMEs create additional strain on their HR and administrative departments to navigate the nitty-gritty of a complex apprenticeship ecosystem
  • Understanding the system, where to start, who to approach, where to get information, finding training providers, recruiting and managing apprentices are all factors that contribute to the perception that apprenticeships are more time and resource consuming for small businesses than worth their while
  • Smaller companies without the reputation and scale of their larger counterparts struggle to attract quality applicants
  • Difficulty in budgeting for the extra staff hours needed to design training, mentor, assess and certify apprentices
  • Absence of or limited SME-specific cooperation in apprenticeship matters from local and regional government agencies, trade bodies, chambers of commerce

Intermediaries a Necessity

SMEs can benefit greatly from support by go-between organisations such as chambers of commerce, local enterprise support offices, Sector Skill Councils, regional development agencies, etc.  Industry and government representatives at such entities can take up the role of apprenticeship advisors especially for SMEs, yet such targeted interventions are extremely few and far between. International research has found that establishing intermediaries to provide communication and practical support for smaller businesses at local levels can greatly increase the confidence and likelihood of firms taking up apprenticeships.

But intermediaries first need to build their expertise to be able to support SMEs effectively. This essentially means ‘training the intermediaries’ to:

What Next?

Many international observations and studies of more mature apprenticeships systems have shown an indisputable increase in SME engagement in apprenticeships through boosting both the number of and out-reach quality of local intermediaries. Different models of local intervention have been put into action to make small business apprenticeships a reality. Find out about a few popular ones in our article Engaging Employers Locally.

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