For discussion FCR(96-97)7
on 10 May 1996


New Capital Account Subhead “Grant to Employees Retraining Board”

Members are invited to approve a commitment of $300 million for a grant to the Employees Retraining Board to enable it to continue and expand its retraining programmes.


The Employees Retraining Board (ERB) has inadequate financial resources to continue and expand its retraining programmes.


2. The Secretary for Education and Manpower (SEM) proposes to make a capital grant of $300 million to the ERB to enable it to continue its retraining programmes to help workers to rejoin the labour market.


3. We have expanded the scope of the Employees Retraining Scheme (ERS) significantly since 1992. As at 31 March 1994, only 86 types of retraining courses had been organised. The number rose to 191 by the end of March 1996. Also, the number of enrolled retrainees grew seven-fold from 14 364 to 100 557 during the same period. As the Board organises more courses, retraining expenses increase significantly. In 1993-94, retraining expenses amounted to $106.3 million and were adequately met by the levy income of $130.5 million. However, in 1994-95, the levy income dropped to $97.6 million while the retraining expenses went up to $245.8 million. To meet the shortfall, the ERB had to draw down its reserve in the Employees Retraining Fund (the Fund) which was largely made up of the $300 million grant provided by Government in 1992. As a result, the balance of the Fund dropped from $437.1 million in April 1994 to $310.6 million by end March 1995.

4. With the rise in unemployment rate in 1995, equipping our workers with new or enhanced vocational skills through retraining has become more important than ever. The co-existence of a considerable number of vacancies along with a large number of unemployed workers reflects a degree of on-going mismatch in our labour market. Our major challenge is thus matching skills with jobs.

5. The primary source of income of the Board is the levy imposed on employers of imported workers admitted under the various importation of labour schemes. The freeze since April 1995 on the allocation of quotas under the General Importation of Labour Scheme and its subsequent termination in October 1995 have reduced drastically the income of the Board. For 1995-96, the levy income was only $67 million whereas the retraining expenditure was $210 million. Consequently, the balance of the Fund now stands at $140 million. We have replaced the General Importation of Labour Scheme by the Supplementary Labour Scheme (SLS) since February 1996. However, given its smaller scale, the SLS will not be able to provide an adequate levy income for the ERB to continue its existing level of activities, let alone to expand these retraining programmes to meet the requirements of the labour market in a rapidly changing economy.

6. The ERB anticipates an expenditure of $337 million in 1996-97 to provide retraining for 80 000 workers. The expected income from the levy and the balance of the Fund will not be sufficient to meet this requirement in full. Therefore, SEM proposes to inject additional funds into the ERB now so that it can be assured of the financial resources needed to carry out the present programmes. In parallel, the Government is conducting a comprehensive review of the ERS which will be completed this summer. Depending on the outcome of the review, we shall consider the scope and longer term funding of the ERB.


7. If Members approve the proposal, we shall offset the supplementary provision required by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 789 Additional commitments in the 1996-97 Estimates.


8. The ERB was established in late 1992. It provides retraining to local workers aged 30 or above to assist them in taking on new or enhanced skills so that they can adjust to changes in the economic environment. The retraining programmes organised by the ERB are also made available to people with disability and victims of industrial accidents. On 6 November 1992, Members approved a grant of $300 million to the Board as Government’s contribution to employees retraining.

9. The ERB administers retraining programmes through a network of training bodies. At present, there are 54 training bodies with 128 training centres. Once approved by its Course Development Committee, the ERB will sponsor the retraining courses provided by these training bodies and provide a retraining allowance of $4,000 per month to full-time retrainees. Besides classroom courses, the ERB also administers an On-the-job Training Scheme. Employers participating in this scheme may be reimbursed up to half of the wages incurred during the first three to six months of employing the retrainees.

Education and Manpower Branch
April 1996

Last Updated on 2 December 1998