Industry Engagement Reforms

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What is Industry Engagement in the VET system?

Industry, including employers, peak bodies and unions, interacts with the Vocational Education and Training (VET) system in diverse and complex ways. These include:

  • hiring VET graduates
  • engaging and supporting structured training for apprentices and trainees
  • training their own employees
  • in some cases, working with Registered Training Organisations (RTOs) to develop organisation-specific training, including tailored training to meet workforce development needs.

Industry also provides input to the development of qualifications through the following channels:

  • The Australian Industry and Skills Committee (AISC) was established by Skills Ministers in May 2015 to give industry a formal role in commissioning training package development work and approving training packages for implementation.
  • Industry Reference Committees (IRCs) were established to advise the AISC about the skills needs of their industry sector, including what national training products are required to support these skills needs.

Why is Industry Engagement in the VET system important?

Australia's VET sector has long been internationally recognised for its industry leadership, quality, and capacity to deliver qualifications aligned to jobs.

Industry plays a critical role in identifying the skills needed today and into the future.

Why is reform needed?

The impacts of COVID-19 and a rapidly changing economy are affecting the way we work. While the strength of Australia’s VET system is internationally recognised, we need to ensure it continues to respond to the needs of employers, now and into the future.

However, employers have indicated that the VET system is not currently working for them, with National Centre for Vocational Education Research data showing:

  • employer satisfaction with VET has fallen from 86.3 per cent in 2009 to 78.8 per cent in 2019
  • 42 per cent of employers report recruitment difficulty, primarily because of applicants’ lack of skills, qualifications or experience
  • only 41 per cent of employers said that the VET system is currently meeting the needs of their business.

What is being done?

As set out in the Heads of Agreement for Skills Reform, the Australian, state and territory governments have agreed to reform the way industry engages with the VET system to ensure it is delivering for both learners and employers.

This will equip Australians with the skills they need to upskill in current roles or apply to new and emerging jobs, and be part of the responsive and resilient workforce that delivers for businesses and employers.

Skills Ministers have listened to feedback from the sector received through comprehensive consultations and have now agreed to the arrangements to implement industry engagement reforms. Industry Clusters will be established to provide industry with a stronger, more strategic voice and a broader role in ensuring Australia’s VET system can respond rapidly to changes in Australia’s economy and build a resilient workforce that delivers on industry’s needs.

Establishing the Industry Clusters

From 2022–23 financial year, there is $402 million over the forward estimates to support industry engagement in VET, to enhance the role of industry in the VET system and embed improved governance. To achieve this, Industry Clusters will be established and supported to:

  • Identify, forecast and respond to the current and emerging skills needs and workforce challenges of their industries.
  • Develop training products that improve the quality, speed to market and responsiveness of training products, including piloting emerging products and testing new approaches to meet industry needs.
  • Work with training providers to ensure training delivery meets employer needs, career pathways are mapped and promoted and the impact of delivery is monitored.
  • Provide strategic advice on skills and workforce needs and the effectiveness of VET system policies and standards.

The new Industry Clusters will replace the current industry engagement arrangements which includes 67 IRCs and six Skills Service Organisations (SSOs) and are expected to be operational from 1 January 2023. IRCs and SSOs will retain responsibility for training packages and training product development until the end of 2022. The AISC will continue to review proposed changes to national training products until the end of 2022.

More information on the industry engagement arrangements is available on the Skills Reform website.

Stage One of the Industry Clusters Grant Opportunity has now closed.

Industry Cluster Grant Opportunity

A detailed evaluation of applications submitted under Stage One of the Industry Clusters Grant Opportunity has now been finalised by the Department of Employment and Workplace Relations (DEWR). A high level of interest was received from industry leaders to establish and operate Industry Clusters.

A clarification and negotiation phase with shortlisted applicants commenced in August 2022.

The Australian Government has committed to establishing Industry Clusters and strengthening tripartite leadership in the VET system, bringing all parties to the table to find solutions to skills and workforce challenges.

In line with this commitment, the department has set out a clear expectation that Industry Clusters will be tripartite. This will be demonstrated by employer organisations and unions aligning on Industry Cluster governance (board composition, membership structures), and operational arrangements (strategic taskforces and technical sub-committees). Participation by employer organisations and Unions is intended to be fair and equitable.

A clarification has been provided to all shortlisted applicants that sets out expectations and provides guidance for the Industry Cluster governance arrangements at the board, membership and subcommittee levels.

Further questions on this clarification can be directed to

Stage Two of the process is expected to open from September 2022. Stage Two will invite newly established Industry Clusters to provide an operational and delivery strategy detailing how they will carry out the full range of Cluster functions.

Successful Stage Two applicants will then be invited to negotiate a second grant agreement that provides operational and activity funding. This is expected to be complete by late 2022.

Setting clear expectations for system performance

Australian Commonwealth, state and territory governments have also agreed to new system performance arrangements, with skills and training ministers setting standards and frameworks to drive quality outcomes. New mechanisms will be established, including through an annual health check, to evaluate impact and drive continuous improvement to ensure the system is responding to the needs of industry.

Quality assurance for training products that meet employer and learner needs

The Australian Government has decided (in consultation with states and territories) to consider alternate arrangements for the Training Package Assurance function which means it will not be transitioning to ASQA as planned. Instead, the Department of Employment and Workplace Relations will establish the independent Training Package Assurance function for a limited time, to ensure training products meet national standards. The arrangements will commence on 1 January 2023 allowing time for Industry Clusters and Jobs and Skills Australia to become established before a decision is made on where to house the function long-term.

The Department of Employment and Workplace Relations is well placed to undertake the Training Package Assurance function due to the collaboration to date with ASQA to establish this function.

The Training Package Assurance function will deliver increased transparency, accountability, and confidence in training products for employers, learners and training providers. It ensures high quality compliance assessments of training packages against the standards set by Skills Ministers.

ASQA will continue its role providing best practice regulation to ensure quality so that students, employers, governments and the community have confidence in the integrity of national qualifications issued by training providers.

Ensuring the new industry engagement arrangements deliver for employers and learners

Skills Ministers have agreed to undertake a review of the new industry engagement arrangements after commencement to assess whether the system is working as intended, and to make improvements where needed.

Submissions - Skills Reform: Improving industry engagement and reforming qualifications in Vocational Education and Training discussion paper

As part of public consultations on industry engagement reforms, VET stakeholders were invited via the Skills Reform website to provide submissions in response to the Improving industry engagement and reforming qualifications in Vocational Education and Training discussion paper. The submissions are now available to be viewed.