Training in the time of Coronavirus | Third and final part | Can you get funding for training activities?
In the first of these three articles, which was published two weeks ago, we set about demonstrating that training is an important resource for improving a company’s capacity to react, especially in challenging times like the ones we are now facing. We also said that the impact of training activities can (must) be measured in terms of the improvement of performance through agreed parameters (KPIs).
You mustn’t think that the measurement process is particularly challenging because, if you have a good LMS suite, (see the article from last week) data is collected automatically and the analysis is simplified by the reporting features in the dashboard function.
In this article we want to provide an overview of how the training your organisation requires can be funded so that you can significantly reduce your economic commitment, thereby accelerating returns on investment (or removing the principle excuse for not investing in training).
What is funded training?
There are two main funding categories for training: the first includes loans issued by inter-professional funds, while the second comprises loans provided through the European Union and the Italian government, with specific laws or provisions approved within the scope of budget laws.
“Let’s start from public funds and joint inter-professional funds for ongoing training: all these instruments have a single purpose which is that of updating and consolidating the competencies of workers and people approaching the labour market.
In accordance with the law, employer associations, trade unions and sector associations can tax themselves to create funds for investing in the qualification or requalification of specific professionals or employees, as well as in on health and safety training activities” (source: Gema).
How do they work?
“A company decides to participate in a joint fund for ongoing training within the sector in which it operates. A percentage of the gross salaries of the company’s employees will contribute to the cash balance of the fund. This allows the company and its employees to reinvest a part of the accumulated sum in interventions for ongoing training courses, that will be available free of charge.
In other cases, the fund can be public and will be assigned on the basis of tenders for financing company or individual training courses” (source: Gema).
What are inter-professional funds?
“Inter-professional funds for ongoing training were created with Italian law 388/2000. The objective is to disseminate the practice of professional development and training in Italian companies, "from the perspective of the competitiveness of companies and as a guarantee of the employability of workers" (art. 118). In the intentions of the legislator, we can therefore clearly see (even in more prosperous times) that training is the cornerstone for the growth of companies and the employability of workers.
The Funds are private sector associations set up on the basis of inter-confederal agreements involving "the main Italian trade union, employer and worker organisations" which operate with a contribution of 0.30% from participating companies.
These Funds can finance all or a part of corporate, territorial, sectoral or individual training plans agreed by the social parties, in accordance with the criteria of redistribution for resources provided by participating companies to each of these and in accordance with the principle of transparency, as well as any additional preparatory initiatives or initiatives directly connected to the plans agreed by the social parties” (Source: Fondimpresa).
The main inter-professional funds are:
Who else finances training?
“Financial resources are provided by local, national or European institutions (Law n. 236 - urgent interventions to promote employment, Regional and National FSE).
The use of these resources enables companies to reduce or even completely cover the cost for internal training” (Source: Studio Sant’Agostino).
The source of funding
“It is companies and their workers who provide money for training.
Indeed, all private companies and, since 2009, public companies and former providers of public services give 1.61% of their total wage bill as an obligatory contribution against involuntary unemployment. With law 845 of 1978, part of this contribution, i.e. 0.30%, is allocated to the training of workers.
With law 388/2000 all companies who pay 0.30% can choose whether to designate this to an inter-professional fund for ongoing training. If they do so, 0.30 is paid to Inps [the Italian national insurance entity], which then transfers it to the Fund specified by the company.
Participation is voluntary, free of charge and can be agreed and cancelled at any time.
Therefore, every year each Fund receives resources that are proportional to the number of workers employed by participating companies and will use these funds to finance training within said companies.
ESF Training Courses are available to companies in all member states of the EU and are funded by the European Social Fund which consists of EU resources for financing activities that satisfy specific objectives. The main aims of the Social Fund, the so-called four “pillars” are: employability, entrepreneurship, adaptability, equal opportunities” (source: Fondimpresa).
Tax credits for Training 4.0
The goal of this measure is to encourage companies to invest on the training of their staff within areas relating to relevant technologies for the technological and digital transformation of companies (Source: Ministry of economic development)
Which companies qualify for this?
All companies that are resident in Italy, including permanent establishments of non-resident parties, irrespectively of the legal company form, the sector in which they operate, the size, accounting system and means of calculating income for tax purposes.
It does not apply to companies in a state of voluntary liquidation, bankruptcy, receivership, agreement with creditors with the absence of a going concern, or other insolvency procedures. It also does not apply to companies who have received disqualifying penalties pursuant to article 9, paragraph 2, of legislative decree 8 June 2001, n. 231.
Use of this benefit is conditional to compliance with safety regulations in the workplace and the correct fulfilment of payment obligations of pension and national insurance contributions for workers (Source: Ministry for economic development).
What are the advantages?
A tax credit as a percentage of the expenses relating to employees involved in the permitted training activities, exclusively for company costs for hours or days of training. In particular, these are granted as follows:
- 50% of the permitted expenses up to a maximum annual limit of €. 300,000 for small companies
- 40% of the permitted expenses up to a maximum annual limit of €. 250,000 for medium-sized companies
- 30% of the permitted expenses up to a maximum annual limit of €. 250,000 for large companies.
The tax credit for all companies is increased - without prejudice to maximum annual limits - to 60% where all recipients of the permitted training fall within the category of disadvantaged or very disadvantaged employees, as defined by the decree of the Ministry of employment and social policies of 17 October 2017.
Tax credits also cover any expenses relating to employees normally employed in one of the company areas identified in annex A of law n. 205 del 2017 and who participate as lecturers or tutors to the permitted training activities, up to a limit of 30% of the overall annual remuneration payable to the employee.
A tax credit can be used starting from the subsequent tax year to the one in which the permitted expenses were sustained, exclusively as a compensatory allowance, pursuant to article 17 of legislative decree 9 July 1997, n. 241.
To enable the Ministry of economic development to acquire the necessary information for assessing the performance, take-up and effectiveness of the measure, including on the basis of the pursuit of the general objectives specified in paragraph 184, companies using the tax credit are required to make a notification to the Ministry of economic development. The training activities no longer need to be expressly governed through company or local collective agreements.
A specific decree from the Ministry of economic development establishes the model, content, procedures and deadlines for sending this notification. The tax credit cannot be assigned or transferred, including within a consolidation perimeter. (Sources: Ministry of economic development – CRS Laghi)
Only training activities carried out to acquire or consolidate knowledge of the technologies set forth in the national plan for industry 4.0 are permitted, such as big data and analysis of data, cloud and fog computing, cyber security, cyber-physical systems, rapid prototyping, visualisation and augmented reality systems, advanced and collaborative robotics, human machine interface, additive manufacturing, internet of things and machines and digital integration of company processes, applied in the areas in annex 1 of the budget law for 2018 (Source: CRS Laghi)
Conditions for admissibility
Where training activities are provided by parties that are external to the company, these activities may only be commissioned to parties accredited for carrying out funded training activities in the region or autonomous province where the company has its registered offices or operational headquarters, public of private universities or bodies connected to the latter, parties accredited with inter-professional funds and parties with quality certifications based on regulation Uni En ISO 9001:2000 sector EA 37 and higher technical colleges.
Training costs must be certified by an external auditor or by a professional registered in the register of external auditors, in compliance with principles of independence. Companies not requiring external audits or which do not have a board of statutory auditors have the right to also include - up to a maximum limit of 5,000 euro - the expenses they sustain and document for this accounting certification activity.
Companies with audited financial statements are exempt from this obligation: however, for the purposes of subsequent controls, these companies must prepare the necessary accounting documentation for demonstrating their entitlement to the tax credit. In this case, any expenses sustained for auditing of their accounts, shall not be included in the calculation of the tax credit. (Source: CRS Laghi)
The company areas that can use the tax credit are:
• sales and marketing
• production techniques and technologies
Deadlines and requests procedures for the Credit
The Credit must be detailed in the tax return for the tax year in which the expenses are sustained and in all subsequent tax years in which the credit is used.
The credit be used to determine the tax base for IRES and IRAP purposes and can only be used in a compensatory basis in the F24 form starting from the tax year after that on which the expenses were sustained. For use of the tax credit on a compensatory basis the limit of euro 250.000,00 per annum as per law n. 244/2007 and the general limit of euro 700.00 shall not apply.
To sum up …
There are different types of funding that have different origins (inter-professional funds, EU funds, etc.), generic or more specific purposes (like training 4.0, which focuses on digital transformation within the plan for industry 4.0), which operates using different procedures (from a significant reduction of costs through to the complete covering of costs or a tax credit of 30 to 50% of the expenses sustained subject to a ceiling).
Management training initiatives (including soft skills) can be managed through inter-professional funds, while tax credits are linked to knowledge of digital instruments (logical and physical) within the scope of Digital Transformation.
These funds are only available with a series of conditions, such as by participating in a sectoral fund or through more or less complex processes, and are subject to a prior verification (of the programme and its compliance with the respective rules), execution (training register) and final constraints (final report, audited report).
Although there are a few obstacles to overcome, there is no doubt that there are many opportunities for companies who use these funding instruments. However, given the complexity of the subject matter, it is essential to seek the support of one of the many companies (that often have conflicts of interest, because they aim to provide training) that can provide specialist advice and assistance to their clients, and who will retain a part of the funding that is secured or charge a fee for their work.
GoodGoing! is not one of these companies but, if you turn to us for an assessment of your organisation’s training requirements, we can help you select the right partner based on your needs and we’ll be at your side in all phases for obtaining the precious loan. You can contact us using the following address email@example.com.