Subsidy Control
SC10320 – Skills Development Scotland support for training, the employment of disadvantaged/disabled workers and consultancy 2014-22
1. Background
SDS registered a subsidy scheme with the Scottish Government Subsidy Control Unit referred to as the Skills Development Scotland support for training, the employment of disadvantaged/disabled workers and consultancy 2014-2020 Scheme (“Scheme”). The Scheme is in respect of subsidy for:-
Training and the recruitment and employment of disadvantaged/disabled workers.
Until 31 December 2020, it also included consultancy. Details of this Scheme are set out in this document. SDS has extended this Scheme. New legislation and ongoing guidance is anticipated in relation to the new subsidy control regime operating in the UK. As such, this document (and as applicable, arrangements for the Scheme) shall require to be amended to reflect any new legislation and guidance, from time to time.
2. The legal basis for the Scheme
2.1 Following the expiry of the Brexit transition period on 31 December 2020, the UK is no longer subject to the EU state aid rules. For the purposes of this Scheme, until such time as the UK adopts a domestic subsidy control regime, SDS is required to comply with the provisions on subsidy control provided in Chapter 3 of Title XI of the UK-EU Trade and Cooperation Agreement signed on 30 December 2020 (as implemented by section 29 of the European Union (Future Relationship) Act 2020 (“TCA”). From 1 January 2021, the Scheme has operated under and satisfied, and shall continue to operate under and satisfy, as relevant and/or necessary, those requirements.
2.2 Until 31 December 2020, the Scheme operated under Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the common market in application of Articles 107 and 108 of the Treaty as published in the Journal of the European Union on 26 June 2014 (“GBER”). During that time, the scheme reference number was SA.39104 and the legal basis for the Scheme was:-
2.2.1 the European Communities Act 1972,
2.2.2 the exercise of powers by the Scottish Ministers pursuant to the Employment and Training Act 1973 under which the Scottish Ministers instructed SDS to distribute aid of the nature described in the Scheme;
2.2.3 SDS’s powers and duties referred to in its Articles of Association, and
2.2.4 SDS’s stated policy objectives within its relevant Corporate Plans.
The Scheme included aid for consultancy, which element of the Scheme shall not continue from 1 January 2021.All references in this document to the Scheme shall therefore exclude any reference to aid for consultancy.
2.3 Although the Scheme no longer legally operates under GBER, GBER remains relevant to interpretation of the Scheme and terms from GBER are referred to throughout.
2.4 The training subsidy and incentives to recruit disadvantaged or disabled workers are considered compatible with the subsidy control provisions contained in the TCA, and as a benchmark, would be fully in accordance with Articles 31-35 of GBER, were GBER applicable in the UK.
3. Objective
3.1 This Scheme covers discretionary funding awarded to enterprises to assist them with activities in the areas outlined below. The principal objectives of the Scheme are to encourage investment in training by companies in Scotland and promote the recruitment and employment of disadvantaged workers and workers with disabilities.
4. General Provisions
4.1 There is no automatic entitlement to support from SDS. Assistance is offered through a range of products and services delivered by SDS based on the merits of the proposed project and an assessment of need for assistance subject to rigorous due diligence appraisal. SDS shall post details of SDS contacts for the Scheme on the SDS web pages as and when funding is being made available under relevant projects.
4.2 Subsidy will not be given to applicants that are deemed to be ‘undertakings in difficulty’ as further described below.
4.3 Applicants must submit an application for assistance to SDS before work on the project or activity has started, and the application must be approved in writing before work can commence on the project or activity.
4.4 The information set out in this document is intended to be a helpful summary of the types of subsidy which may be granted under the Scheme. Any award will however be subject to assessment against the detailed conditions of GBER. It should be noted that the aid amounts set out below reflect the maximum levels of support permitted under GBER and SDS may set lower intensities for specific products or programmes created under the Scheme, taking into account the strategic rationale and market failure being addressed through the subsidy.
4.5 SDS is required to provide annual returns to the Scottish and UK Governments detailing subsidy provided under this scheme, and to maintain detailed records regarding individual subsidy provided under the scheme. Such records must contain all information necessary to establish that the conditions laid down in the scheme are fulfilled, including but not limited to information on the status of any undertaking whose entitlement to subsidy depends on its financial status and its status as an SME, information on the incentive effect of the subsidy, and information making it possible to establish the precise amount of eligible costs for the purpose of ensuring compatibility with GBER. Unless otherwise provided by legislation or guidance from the UK Government or Scottish Government subsidy control unit, records must be maintained for 10 years from the date on which the last subsidy was granted under the scheme. The information which must be provided to SDS / retained by the subsidy recipient will be set out in the Offer of Grant.
5. Transparency of Aid
5.1 Only aid for which it is possible to calculate the precise amount of the aid at the point at which it is awarded will be provided under the Scheme. Subject to the detailed provisions of GBER, such aid shall be provided in the form of grants.
6. Types of Subsidy and Maximum Intensity
6.1 The following terms used in this document, have the following meanings:-
Disabled worker means any person who:
(a) is recognised as worker with disabilities under national law; or
(b) has long-term physical, mental, intellectual or sensory impairment(s) which, in interaction with various barriers, may hinder their full and effective participation in a work environment on an equal basis with other workers;
'Disadvantaged worker' means any person who:
(a) has not been in regular paid employment for the previous 6 months; or
(b) is between 15 and 24 years of age; or
(c) has not attained an upper secondary educational or vocational qualification (International Standard Classification of Education 3) or is within two years after completing full-time education and who has not previously obtained their first regular paid employment; or
(d) is over the age of 50 years; or
(e) lives as a single adult with one or more dependents; or
(f) works in a sector or profession in a Member State where the gender imbalance is at least 25% higher than the average gender imbalance across all economic sectors in that Member State, and belongs to that underrepresented gender group; or
(g) is a member of an ethnic minority within a Member State and who requires development of his or her linguistic, vocational training or work experience profile to enhance prospects of gaining access to stable employment;
'Severely Disadvantaged Worker' means any person who:
(a) has not been in regular paid employment for at least 24 months; or
(b) has not been in regular paid employment for at least 12 months and belongs to one of the categories (b) to (g) mentioned under the definition of 'Disadvantaged Worker'.
‘Sheltered Employment’ means employment in an undertaking where at least 30% of workers are workers with disabilities.
6.2 Subsidy for training shall be distributed in accordance with Article 31 of GBER:-
6.2.1 Aid shall not be granted for training which undertakings carry out to comply with national mandatory standards on training.
6.2.2 The eligible costs shall be the following:
6.2.2.1 trainers' personnel costs, for the hours during which the trainers participate in the training;
6.2.2.2 trainers' and trainees' operating costs directly relating to the training project such as travel expenses, accommodation costs, materials and supplies directly related to the project, depreciation of tools and equipment, to the extent that they are used exclusively for the training project;
6.2.2.3 costs of advisory services linked to the training project;
6.2.2.4 trainees' personnel costs and general indirect costs (administrative costs, rent, overheads) for the hours during which the trainees participate in the training.
6.2.3 The aid intensity shall not exceed 50% of the eligible costs. It may be increased, up to a maximum aid intensity of 70% of the eligible costs, as follows:
6.2.3.1. by 10 percentage points if the training is given to workers with disabilities or disadvantaged workers;
6.2.3.2. by 10 percentage points if the aid is granted to medium-sized enterprises and by 20 percentage points if the aid is granted to small enterprises.
6.2.4. Where the aid is granted in the maritime transport sector, the aid intensity may be increased to 100 % of the eligible costs provided that the following conditions are met:
6.2.4.1. the trainees are not active members of the crew but are supernumerary on board; and
6.2.4.2. the training is carried out on board of ships entered in Union registers
6.2.5. The maximum amount of aid that can be granted under this provision is EUR 2 million per training project.
6.3. Subsidy for the recruitment of disadvantaged workers in the form of wage subsidies shall be distributed in accordance with Article 32 of GBER:-
6.3.1. Eligible costs shall be the wage costs over a maximum period of 12 months following recruitment of a disadvantaged worker. Where the worker concerned is a severely disadvantaged worker, eligible costs shall be the wage costs over a maximum period of 24 months following recruitment.
6.3.2. Where the recruitment does not represent a net increase, compared with the average over the previous 12 months, in the number of employees in the undertaking concerned, the post or posts shall have fallen vacant following voluntary departure, disability, retirement on grounds of age, voluntary reduction of working time or lawful dismissal for misconduct and not as a result of redundancy.
6.3.3. Except in the case of lawful dismissal for misconduct, the disadvantaged workers shall be entitled to continuous employment for a minimum period consistent with the national legislation concerned or any collective agreements governing employment contracts.
6.3.4. If the period of employment is shorter than 12 months, or 24 months in the case of severely disadvantaged workers, the aid shall be reduced pro rata accordingly.
6.3.5. The aid intensity shall not exceed 50 % of the eligible costs.
6.3.6. The maximum amount of aid that can be granted under this provision is EUR 5 million per undertaking per year.
6.4. Subsidy for the employment of workers with disabilities in the form of wage subsidies shall be distributed in accordance with Article 33 of GBER, as follows:-
6.4.1. Eligible costs shall be the wage costs over any given period during which the worker with disabilities is employed.
6.4.2. Where the recruitment does not represent a net increase, compared with the average over the previous 12 months, in the number of employees in the undertaking concerned, the post or posts shall have fallen vacant following voluntary departure, disabilities, retirement on grounds of age, voluntary reduction of working time or lawful dismissal for misconduct and not as a result of redundancy.
6.4.3. Except in the case of lawful dismissal for misconduct, the workers with disabilities shall be entitled to continuous employment for a minimum period consistent with the national legislation concerned or any collective agreements which are legally binding for the undertaking and governing employment contracts.
6.4.4. The aid intensity shall not exceed 75 % of the eligible costs.
6.4.5. The maximum amount of aid that can be granted under this provision is EUR 10 million per undertaking per year.
6.5. Subsidy for compensating the additional costs of employing workers with disabilities shall be distributed in accordance with Article 34 of GBER, as follows:-
6.5.1. The eligible costs shall be the following:
6.5.1.1. costs of adapting the premises;
6.5.1.2. costs of employing staff solely for time spent on the assistance of the workers with disabilities and of training such staff to assist workers with disabilities;
6.5.1.3. costs of adapting or acquiring equipment, or acquiring and validating software for use by workers with disabilities, including adapted or assistive technology facilities, which are additional to those which the beneficiary would have incurred had it employed workers who are not workers with disabilities;
6.5.1.4. costs directly linked to transport of workers with disabilities to the working place and for work related activities;
6.5.1.5. wage costs for the hours spent by a worker with disabilities on rehabilitation;
6.5.1.6. where the beneficiary provides sheltered employment, the costs of constructing, installing or modernising the production units of the undertaking concerned, and any costs of administration and transport, provided that such costs result directly from the employment of workers with disabilities.
6.5.2. The aid intensity shall not exceed 100 % of the eligible costs.
6.5.3. The maximum amount of aid that can be granted under this provision is EUR 10 million per undertaking per year.
6.6. Subsidy for compensating the costs of assistance provided to disadvantaged workers shall be distributed in accordance with Article 35 of GBER, as follows:-
6.6.1. The eligible costs shall be the costs of:
6.6.1.1. employing staff solely for time spent on the assistance of the disadvantaged workers over a maximum period of 12 months following recruitment of a disadvantaged worker or over a maximum period of 24 months following recruitment of a severely disadvantaged worker;
6.6.1.2. training such staff to assist disadvantaged workers
6.6.2. The assistance provided shall consist of measures to support the disadvantaged worker's autonomy and adaptation to the work environment, in accompanying the worker in social and administrative procedures, facilitation of communication with the entrepreneur and managing conflicts.
6.6.3. The aid intensity shall not exceed 50 % of the eligible costs.
6.6.4. The maximum amount of aid that can be granted under this provision is EUR 5 million per undertaking per year.
7. Exclusions
7.1. Export Subsidy
7.1.1. GBER and accordingly the Scheme does not apply to the following:-
7.1.1.1. Subsidy to export-related activities, namely subsidy directly linked to the quantities exported, to the establishment and operation of a distribution network or to other current costs linked to export activity;
7.1.1.2. Subsidy contingent upon the use of domestic over imported goods.
7.2. Sectoral
7.2.1. This Scheme applies to all sectors of the economy, with the exception of:-
7.2.1.1. activities in the processing and marketing of agricultural products where aid is aimed at directly influencing the price or quantity of primary production (i.e. where the amount of the aid is fixed on the basis of the price or quantity of such products purchased from primary producers or put on the market by the undertakings 8 concerned or the aid is conditional on being partly or entirely passed on to primary producers)
7.2.1.2. aid to facilitate the closure of uncompetitive coal mines.
8. Recovery of Illegal Subsidy / Undertakings in Difficulty
8.1. The following are explicitly excluded from this Scheme:
8.1.1. Payment of subsidy in favour of an undertaking which is subject to an outstanding recovery order following a previous European Commission decision (or decision of similar effect in the UK following the UK’s withdrawal from the European Union) declaring an subsidy illegal and incompatible with the common market/TCA; and
8.1.2. Payment of subsidy to an undertaking in difficulty which for the purposes of this Scheme‘” is defined as meaning an undertaking in respect of which at least one of the following circumstances occurs:-
(a) In the case of a limited liability company (other than an SME that has been in existence for less than three years), where more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital. For the purposes of this provision, ‘limited liability company’ refers in particular to the types of company mentioned in Annex I of Directive 2013/34/EU ( 4 ) and ‘share capital’ includes, where relevant, any share premium.
(b) In the case of a company where at least some members have unlimited liability for the debt of the company (other than an SME that has been in existence for less than three years), where more than half of its capital as shown in the company accounts has disappeared as a result of accumulated losses. For the purposes of this provision, ‘a company where at least some members have unlimited liability for the debt of the company’ refers in particular to the types of company mentioned in Annex II of Directive 2013/34/EU.
(c) Where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors.
(d) Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan.
(e) In the case of an undertaking that is not an SME, where, for the past two years:
(1) the undertaking's book debt to equity ratio has been greater than 7.5 and
(2) the undertaking's EBITDA interest coverage ratio has been below 1.0.
9. Cumulation of Subsidy
9.1 Subsidy provided under the Scheme may be cumulated with other forms of subsidy exempted under GBER or any new legislative provision that may be introduced in the UK, and provided through this or another SDS scheme as long as those subsidy measures concern different identifiable eligible costs. Therefore, if the maximum subsidy intensity is determined to be 60%, then the total of SDS and other public funding made available to the project or activity cannot exceed this level. ‘Special Drawing Rights’ subsidy under the TCA (set out in paragraph 4 of Article 3.2 of Chapter 3 of the TCA) (which has replaced ‘de minimis’ aid) cannot be used to "top up" the subsidy awarded under this or any other scheme, in respect of the same eligible costs.
9.2 All sources of public funding shall be taken into account when considering cumulation and in determining that the relevant aid intensity or aid amount is not exceeded.