Unit cost calculation methodology and implementation

Training and retraining programmes for the unemployed can be an effective way of reducing unemployment, especially when there is a gap between the skills of the labour force and the needs of employers.

There are several factors that determine the efficiency of publicly funded training programmes. One of these is that the Public Employment Service can ensure that training opportunities are offered to those who need them most, rather than those who will be able to get a job without any training. Another, perhaps even more important factor is that the training must be good quality, i.e. it must improve the skills of the participants.

A simple and powerful tool to improve the quality of training programmes is to create a transparent monitoring system that informs jobseekers of the average reemployment rate of the participants of each completed training course.

Once transparent monitoring is established, further incentives for training providers can be introduced via a unit cost system. In such a system, training providers receive a lump sum compensation for each ‘unit’ they supply, and are not asked to keep a record of their expenses. The ‘unit’ can for example be a participant passing the exam, or reemployed after the course. Such a system reduces the complexity of the funding process, reduces the administrative burden, and can also be used to strengthen incentives for improving quality.

In this project, the Budapest Institute developed a methodology for the application of a simplified cost option (unit cost) for EU-funded labour market training for jobseekers. The project was commissioned by the Prime Minister’s Office – Secretary Office for Monitoring and Evaluation.