Training Incentives for Malaysian SMEs: An Impact Evaluation Corporate Strategy and Insights Department, Pembangunan Sumber Manusia Berhad

Apr 27, 2018

International Journal of HRD Practice, Policy and Research 2018, Vol 3 No 1: 73-88 doi: 10.22324/ijhrdppr.3.103

Training Incentives for Malaysian SMEs:
an Impact Evaluation

Corporate Strategy and Insights Department,Pembangunan Sumber Manusia Berhad1, Malaysia

Abstract

The article reports on the effectiveness of a Malaysian Government initiative to enhance training within the country’s Small and Medium Enterprises (SMEs). The Training Incentives for SMEs Scheme was designed to improve the level of productivity among SMEs by upgrading the skills and capabilities of the existing SME workforce. The Scheme has benefited a total of 16,248 employees from 5,502 employers and they were trained by 276 training providers. The article reports on a study to assess the outcome of the Scheme by measuring the effectiveness based on the perspective of trainees, employers and training providers. In conclusion, the Scheme was effective. Strategic recommendations are developed to improve future schemes by targeting types and content of training programmes, delivery of training programmes and execution of future training programmes and incentive schemes mechanism.

Key Words: training, training incentives, SMEs, impact, Malaysia

1. Introduction

Small and Medium Enterprises (SMEs) form the backbone of Malaysia’s economy and are key to driving the momentum of the nation’s growth. Over the last decade, SMEs’ Gross Domestic Product (GDP) growth has continuously outpaced Malaysia’s overall economic growth. However, SMEs’ growth is constantly being constrained by lack of skilled labour resulting in lower productivity rates when compared to larger firms. The Training Incentive for SMEs Scheme was introduced by the Pembangunan Sumber Manusia Berhad (PSMB) (better known as Human Resources Development Fund, HRDF) to support the aspirations of SMEs in developing and improving the level of productivity by upgrading the skills and capabilities of the existing SME workforce.

This article reports on the study undertaken to assess whether the training programmes attended by trainees under the Scheme was effective in improving the trainees’ job performance. The study’s three main objectives were to:

  • Assess the outcome of the Training Incentive against its objectives by measuring the effectiveness of it from the perspective of the trainees, employers, and training providers.
  • Identify the problems and challenges associated with the Training Incentive and obtain feedback on areas of improvement from the three target groups (i.e. trainees, employers, and training providers).
  • Provide recommendations and develop short and long-term action plans to improve the training programmes offered under such Incentive schemes.

This paper starts by providing a brief contextual profile regarding training within SMEs in Malaysia. It then outlines the methodology associated with this study before reporting on findings.

A concluding section provides a discussion of the issues associated with the implementation of this scheme and a consideration of the implications for future government backed programmes in order to enhance the training effectiveness within SMEs.

Training and Malaysian SMEs
The Malaysian Government has long been concerned with the development of SMEs in Malaysia and various strategic plans and initiatives have been formulated to assist SMEs in facing new challenges faced by the changing business environment. This is because SMEs are recognized as a growth driver and an accelerator of economic expansion in Malaysia (Hashim, 2012). Hashim (2012) also argues that apart from their significant share of business establishment (more than 90% of business establishments in Malaysia are SMEs) and their contribution to the country’s income generation (approximately 37% of Malaysia’s GDP), SMEs are also known to provide new job opportunities, introduce innovations, stimulate competition, and form an important link in the supply chain to large multinational companies.

Efficient SMEs have a more educated workforce and are more likely to provide formal structured training to their workers (Batra & Tan, 2003). However, there are five key challenges faced by SMEs: (1) lack of access to finance, (2) human resource constraints, (3) limited or inability to adopt technology, (4) lack of information on potential markets and customers, and (5) global competition. More importantly, there is a high risk that SMEs will be wiped out if they do not improve their competitiveness in a globalized market that changes at a rapid pace (Ting, 2004). Although there are various factors that are hindering SMEs’ competitiveness, the lack of human capital is the most significant challenge for Malaysian SMEs. It is often too expensive for SMEs in Malaysia to employ professional and competent employees (Saleh and Ndubisi, 2006).

The Incentive Scheme
Realizing the importance of SMEs to the nation, there is acknowledgement from the Government to support the human capital development of SMEs in Malaysia, especially in skills-upgrading for their employees. As such, the agenda of Developing and Retaining a First Class World Talent Base is included as one of the priorities under the Tenth Malaysia Plan (10th MP, Chapter 5). PSMB was given the mandate to upgrade the skills and capabilities of the existing workforce and was entrusted with an allocation of RM47.5 million (for the period 2011 to 2015) to provide training and skills-upgrading to employees of SMEs across Malaysia. This marked the beginning of the SME Training Incentive Scheme.

Specifically the Training Incentive Scheme is to assist SME employers that are registered with PSMB and who pay the levy2, but who have insufficient levy balance, to engage some of their employees in training. Training must be in an area of direct benefit to the business operation. Any eligible employer is able to nominate up to three employees to attend a programme run by an external training provider and from a list of approved programmes. In implementing the SME Training Incentive Scheme, PSMB has adopted the latest definition of SME as determined by the SME Corporation Malaysia (SME Corp). The definition is in line with an economic development of the country taking into consideration of price inflation, change in business trends and structural changes.

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