REIMBURSABLE INDUSTRY CONTRIBUTION (RIC)

Skills are the software of business and the private sector is it’s hardware. The hardware is only as good as the software it uses. The private sector understands this software the best; it knows when to repair, how toupdate and what its future requirements will be. Hence, a more intensive and holistic role of the private sector is the only way to provide for on demand skills. However, this is a perennial challenge.

Given the scale of the demographic challenge like the one in India, financing from corporate social responsibility, multilateral organisations and the government will meet the financial needs for skill development is wishful thinking. One key way to mobilise adequate resources for skills training, have equipment and tools that keep pace with changing needs and to ensure that employers have skin in the game is the Reimbursable Industry contribution (RIC) — a 1-2% payroll tax that will be reimbursed when employers train using public/private infrastructure and provide labour market data. RIC, which is in some forms implemented in 62 other countries is an idea whose time has come in developing countries. It can be a way to bring all employers onto acommon platform for skill financing by addressing the moral hazard problem (“One company will not skillits workers as others will poach them, and vice versa”). Such a ‘employer-skin-in-the-game’ mechanism means that industry makes a financial contribution, which goes into an training fund, over which private sector  exercises control. RIC leads to better alignment with private sector skill needs and incentivizes industry which is reimbursed the costs for in-house or pre-employment training

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