Incentives for SMEs to Invest in Skills

Workers' skills are an essential asset for firms to recover from the COVID-19 shock and succeed in the twin digital and green transitions. Small and Medium-sized Enterprises (SMEs) face special barriers to investing in human capital because of their size and more limited access to information and capital markets. This report identifies policies that are successful in promoting SMEs' investment in the skills of employees, managers or entrepreneurs. A review of cost-reducing and financial support instruments is followed by an analysis of initiatives that promote innovative HR practices, a learning culture in the firm, and better co-operation among firms and with the education sector. The report describes the design and rationale of these measures as well as their advantages and limitations. It identifies a common set of features that make skill investment policies especially suitable for SMEs.