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86th Session
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Report IV (2B)
General conditions to
stimulate job creation
in small and medium-sized
enterprises
Fourth item on the agenda
International Labour Office Geneva
ISBN 92-2-010656-6
ISSN 0074-6681/0251-3218
CONTENTS
A first discussion of the question concerning general conditions to stimulate job creation in small and medium-sized enterprises took place at the 85th Session (1997) of the International Labour Conference. On the basis of that discussion, and in accordance with article 39 of the Standing Orders of the Conference, the International Labour Office prepared and communicated to the governments of member States the text of a proposed Recommendation concerning general conditions to stimulate job creation in small and medium-sized enterprises. This text was incorporated in Report IV (1).
Governments were invited to send, after consulting the most representative organizations of employers and workers, any amendments or comments they might wish to make, so as to reach the Office by 30 November 1997 at the latest, or to inform it, by the same date, whether they considered that the proposed text constituted a satisfactory basis for discussion by the Conference at its 86th Session (1998).
At the time this report was prepared, the Office had received replies from the following 37 member States: Argentina, Austria, Belgium, Brazil, Cambodia, Canada, Chad, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, Germany, Greece, Italy, Japan, Jordan, Lebanon, Myanmar, Netherlands, New Zealand, Norway, Panama, Poland, Portugal, Romania, Slovakia, Spain, Suriname, Switzerland, Tunisia, Turkey, United Arab Emirates, and the United States.
In the case of 18 countries (Austria, Belgium, Brazil, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Japan, Jordan, New Zealand, Norway, Portugal, Rwanda, South Africa and Switzerland), the replies of employers' and/or workers' organizations were incorporated into those of the government, appended to the government's replies, or communicated directly to the Office.
In order to ensure that the English and French texts of the proposed Recommendation are in the hands of the governments within the time-limit laid down in article 39, paragraph 7, of the Standing Orders of the Conference, Report IV (2) is published in two volumes.1 The present bilingual volume, Report IV (2B), contains the English and French versions of the proposed text as amended in the light of the observations made by governments and by employers' and workers' organizations and for the reasons set out in the Office commentaries. If the Conference so decides, this text will serve as a basis for the second discussion, at the 86th Session of the Conference (1998), of the question concerning general conditions to stimulate job creation in small and medium-sized enterprises.
The following is the English version of the proposed Recommendation concerning general conditions to stimulate job creation in small and medium-sized enterprises, which is submitted as a basis for discussion of the fourth item on the agenda of the 86th Session of the Conference.
The General Conference of the International Labour Organization,
Having been convened at Geneva by the Governing Body of the International Labour Office, and having met in its Eighty-sixth Session on June 1998, and
Aware of the importance of job creation in small and medium-sized enterprises,
Recalling the resolution concerning the promotion of small and medium-sized enterprises adopted by the International Labour Conference at its 72nd Session, l986, as well as the Conclusions set out in the resolution concerning employment policies in a global context, adopted by the Conference at its 83rd Session, 1996,
Noting that small and medium-sized enterprises, as a critical factor in economic growth and development, are responsible for the creation of the majority of jobs throughout the world,
Recognizing that small and medium-sized enterprises provide the potential for women and other traditionally disadvantaged groups to gain access under better conditions to productive, sustainable and quality employment opportunities,
Convinced that promoting respect for the Forced Labour Convention, 1930, the Freedom of Association and Protection of the Right to Organize Convention, 1948, the Right to Organize and Collective Bargaining Convention, 1949, the Abolition of Forced Labour Convention, 1957, and the Discrimination (Employment and Occupation) Convention, 1958, will enhance the creation of quality employment in small and medium-sized enterprises and in particular that promoting respect for the Minimum Age Convention and Recommendation, 1973, will help Members in their efforts to eliminate child labour,
Also convinced that the adoption of new provisions on job creation in small and medium-sized enterprises, to be taken into account together with:
(a) the relevant provisions of other international labour Conventions and Recommendations as appropriate, such as the Employment Policy Convention and Recommendation, 1964, and the Employment Policy (Supplementary Provisions) Recommendation, 1984, the Co-operatives (Developing Countries) Recommendation, 1966, the Human Resources Development Convention and Recommendation, 1975, and the Occupational Safety and Health Convention and Recommendation, 1981; and
(b) other proven ILO initiatives promoting the role of small and medium-sized enterprises in sustainable job creation and encouraging adequate and common application of social protection, including Start and Improve Your Business or other programmes as well as the work of the International Training Centre of the ILO in training and skills enhancement,
will provide valuable guidance for Members in the design and implementation of policies on job creation in small and medium-sized enterprises,
Having decided upon the adoption of certain proposals with regard to general conditions to stimulate job creation in small and medium-sized enterprises, which is the fourth item on the agenda of the session, and
Having determined that these proposals shall take the form of a Recommendation;
adopts this day of June of the year one thousand nine hundred and ninety-eight the following Recommendation which may be cited as the Job Creation in Small and Medium-Sized Enterprises Recommendation, 1998:
I. Definition, purpose and scope
1. Members should define small and medium-sized enterprises by reference to such criteria as may be considered appropriate in accordance with national social and economic conditions, it being understood that this flexibility should not preclude Members from arriving at commonly agreed definitions for data collection and analysis purposes.
2. Members should adopt measures which are appropriate to national conditions and consistent with national practice in order to recognize and to promote the fundamental role that small and medium-sized enterprises can play as regards:
(a) the promotion of full, productive and freely chosen employment;
(b) greater access to income-earning opportunities and wealth creation leading to productive and sustainable employment;
(c) sustainable economic growth and the ability to react flexibly to changes;
(d) increased economic participation of disadvantaged and marginalized groups in society;
(e) increased domestic savings and investment;
(f) training and development of human resources;
(g) balanced regional and local development;
(h) provision of goods and services which are better adapted to local market needs;
(i) access to improved quality of work and working conditions which may contribute to a better quality of life, as well as allow large numbers of people to have access to social protection;
(j) stimulating innovation, entrepreneurship, technology development and research;
(k) access to domestic and international markets; and
(l) the promotion of good relations between employers and workers.
3. In order to promote the fundamental role of small and medium-sized enterprises referred to in paragraph 2, Members should adopt, where appropriate, measures and enforcement mechanisms to safeguard the interests of workers in such enterprises by providing them with the basic protection available under other relevant instruments.
4. The provisions of this Recommendation apply to all branches of economic activity and all types of enterprise, irrespective of the form of ownership (i.e. private and public companies, cooperatives, partnerships, family enterprises, sole proprietorships and others).
II. Policy and legal framework
5. In order to create a business environment conducive to the growth and development of small and medium-sized enterprises, Members should:
(a) adopt and pursue appropriate fiscal, monetary and employment policies to promote a stable economic environment (as regards, in particular, inflation, interest and exchange rates, taxation, employment and social stability);
(b) establish and apply appropriate legal provisions as regards, in particular, property rights, location, enforcement of contracts, and adequate social and labour legislation.
6. The measures referred to in paragraph 5 should be complemented by policies for the promotion of efficient and competitive small and medium-sized enterprises able to provide productive and sustainable employment under adequate social conditions. To this end, Members should consider policies that:
(1) create conditions which:
(a) provide for all sizes and types of enterprises:
(i) equal opportunity as regards, in particular, access to credit, foreign exchange and imported inputs; and
(ii) fair taxation;
(b) ensure the equal application of labour legislation, in order to raise the quality of employment in small and medium-sized enterprises;
(c) promote observance by small and medium-sized enterprises of international labour standards related to child labour;
(2) remove constraints to the development and growth of small and medium-sized enterprises, as regards:
(a) insufficient access to credit;
(b) low levels of technical and managerial skills;
(c) inadequate information;
(d) low levels of productivity and quality;
(e) insufficient access to markets;
(f) difficulties of access to new technologies;
(g) inadequate or overly burdensome registration, licensing, reporting and other administrative requirements, including those which are disincentives to the hiring of personnel, without prejudice to the effectiveness of labour inspection and the system of supervision of working conditions and related issues;
(3) include specific measures aimed at assisting and upgrading the informal sector to become part of the organized sector.
7. With a view to the formulation of such policies Members should, where appropriate:
(1) collect adequate national data on the small and medium-sized enterprise sector, covering inter alia quantitative and qualitative aspects of employment, while ensuring that this does not result in undue administrative burdens for small and medium-sized enterprises;
(2) undertake a comprehensive review of the impact of existing policies and regulations on small and medium-sized enterprises, with particular attention to the impact of structural adjustment programmes on job creation;
(3) review labour and social legislation, in consultation with the most representative employers' and workers' organizations as well as with the representative organizations of the employers and workers concerned, if they exist, to determine whether:
(a) such legislation meets the special needs of small and medium-sized enterprises, while ensuring adequate protection and working conditions for their workers;
(b) there is a need for supplementary measures as regards social protection, such as voluntary schemes, cooperative initiatives and others;
(c) such social protection extends to workers in small and medium-sized enterprises and there are adequate provisions to ensure compliance with social security regulations.
8. In formulating these policies, Members:
(1) may consult, in addition to the most representative employers' and workers' organizations, other concerned and competent parties as they deem appropriate;
(2) should take into account other policies in such areas as fiscal and monetary matters, trade and industry, employment, labour, social protection, education and training, gender equality and occupational safety and health;
(3) should establish mechanisms to review these policies, in consultation with the most representative employers' and workers' organizations, and to update them.
III. Development of an enterprise culture
9. Members should adopt measures, drawn up in consultation with the most representative employers' and workers' organizations, to create and strengthen an enterprise culture which favours initiatives, enterprise creation, productivity, environmental consciousness, quality, good labour and industrial relations, and adequate social practices which are equitable. To this end, Members should consider:
(1) pursuing the development of entrepreneurial attitudes, through the system and programmes of education and training linked to job needs and the attainment of economic growth and development, with particular emphasis being given to the importance of good labour relations and the multiple vocational and managerial skills needed by small and medium-sized enterprises;
(2) encouraging a process of lifelong learning for all categories of workers and entrepreneurs;
(3) designing and implementing, with full involvement of the organizations of employers and workers concerned, awareness campaigns to promote:
(a) respect for the rule of law and workers' rights, better working conditions, higher productivity and improved quality of goods and services;
(b) entrepreneurial role models and award schemes, taking due account of the specific needs of women, and of disadvantaged and marginalized groups.
IV. Development of an effective service infrastructure
10. In order to enhance the growth, job-creation potential and competitiveness of small and medium-sized enterprises, consideration should be given to the availability of a range of direct and indirect support services for them, such as:
(a) managerial and vocational skills enhancement;
(b) consultancy and research services;
(c) access to capital markets, credit and loan guarantees;
(d) quality testing and measurement;
(e) market research and marketing assistance;
(f) packaging services;
(g) assistance in product design, development and presentation;
(h) business start-up and development assistance, including business planning;
(i) information services, including advice on government policies;
(j) assistance in understanding and applying labour legislation, including provisions on workers' rights, as well as in human resources development and the promotion of gender equality;
(k) export promotion and domestic and international trade opportunities;
(l) advice regarding technology;
(m) access to energy, telecommunications, and physical infrastructure such as water, electricity, premises, transportation and roads, provided directly or through private sector intermediaries;
(n) support for innovation and modernization;
(o) legal, accounting and financial services;
(p) business incubators;
(q) computer systems application and information technology services;
(r) environmental management services;
(s) promotion and development of enterprise-based training.
11. As far as possible, the support services referred to in paragraph 10 should be designed and provided to ensure optimum relevance and efficiency through such means as:
(a) adapting the services and their delivery to the specific needs of small and medium-sized enterprises, taking into account prevailing economic, social and cultural conditions, as well as differences in terms of size, sector and stage of development;
(b) ensuring active involvement of small and medium-sized enterprises and the most representative employers' and workers' organizations in the determination of services to be offered;
(c) involving the public and private sector in the delivery of such services through, for example, employers' and workers' organizations, semi-public organizations, private consultants, technology parks, business incubators and small and medium-sized enterprises themselves;
(d) decentralizing the delivery of services, thereby bringing them as physically close to small and medium-sized enterprises as possible;
(e) promoting easy access to an integrated range of services through "single window" arrangements or referral services;
(f) aiming towards self-sustainability for service providers through a reasonable degree of cost recovery from small and medium-sized enterprises and other sources, in such a manner as to avoid distorting the markets for such services;
(g) ensuring professionalism and accountability in the management of service delivery;
(h) establishing mechanisms for continuous monitoring, evaluation and updating of services.
12. Services should be designed to include productivity-enhancing and other approaches which promote efficiency and help small and medium-sized enterprises to sustain competitiveness in domestic and international markets, while at the same time improving labour practices and working conditions.
13. Members should facilitate access of small and medium-sized enterprises to finance and credit under satisfactory conditions. In this connection:
(1) credit and other financial services should as far as possible be provided on commercial terms to ensure their sustainability, except in the case of particularly vulnerable groups of entrepreneurs;
(2) supplementary measures should be taken to simplify administrative procedures, reduce transaction costs and overcome problems related to inadequate collateral by, for example, the creation of non-governmental financial retail agencies and development finance institutions addressing poverty alleviation;
(3) small and medium-sized enterprises may be encouraged to organize in mutual guarantee associations.
14. Members should consider policies to improve the terms and conditions of employment in small and medium-sized enterprises by ensuring equal application of protective labour legislation.
15. Members should, in addition:
(1) facilitate the development of organizations, where appropriate, which can effectively support the growth and competitiveness of small and medium-sized enterprises. In this regard, consultation with the most representative employers' and workers' organizations should be considered;
(2) consider adequate measures to promote cooperative linkages between small and medium-sized enterprises and larger enterprises. In this connection, measures should be taken to safeguard the legitimate interests of the small and medium-sized enterprises concerned;
(3) consider measures to promote linkages between small and medium-sized enterprises to encourage the exchange of experience as well the sharing of resources and risks. In this connection, small and medium-sized enterprises might be encouraged to form structures such as consortia, networks and service cooperatives, taking into account the importance of the role of employers' and workers' organizations;
(4) consider specific measures for persons aspiring to become entrepreneurs among selected categories of the population, such as: women, long-term unemployed, persons affected by structural adjustment or restrictive and discriminatory practices, disabled persons, demobilized military personnel, young persons including graduates, older workers, ethnic minorities and indigenous and tribal peoples. The detailed identification of these categories should be carried out, taking into account national socio-economic priorities and circumstances;
(5) consider measures to improve communication between government agencies and organizations of small and medium-sized enterprises, in order to improve the effectiveness of government policies aimed at job creation;
(6) encourage support for female entrepreneurship, recognizing the growing importance of women in the economy, through measures designed specifically for women who are or wish to become entrepreneurs.
V. Roles of employers' and workers' organizations
16. Employers' or workers' organizations should consider contributing to the development of small and medium-sized enterprises in the following ways:
(a) articulating to governments the concerns of small and medium-sized enterprises or their workers, as appropriate, regarding the policy and legal framework in which they operate;
(b) providing direct support services in such areas as training, consultancy, easier access to credit, marketing, advice on industrial relations and promoting linkages with larger enterprises;
(c) cooperating with national, regional and local institutions which provide support to small and medium-sized enterprises in such areas as training, consultancy, business start-up and quality control;
(d) participation in councils, task forces and other bodies at national, regional and local levels established to deal with important economic and social issues, including policies and programmes, affecting small and medium-sized enterprises;
(e) promoting economically beneficial and socially progressive restructuring (by such means as retraining and promotion of self-employment) with appropriate social safety nets;
(f) involvement in promotion of exchange of experience and establishment of commercial linkages between small and medium-sized enterprises;
(g) participating in the monitoring and analysis of social and labour-market issues affecting small and medium-sized enterprises, concerning such matter as terms of employment, working conditions, social protection and vocational training, and promoting corrective action as appropriate;
(h) involvement in activities to raise quality and productivity, as well as to promote ethical standards and gender equality;
(i) preparing studies on small and medium-sized enterprises, collecting statistical and other types of information relevant to the sector, including gender disaggregated statistics, and sharing with other national and international employers' and workers' organizations this information as well as lessons of best practice;
(j) providing services and advice on workers' rights, labour legislation and social protection for workers in small and medium-sized enterprises.
17. Small and medium-sized enterprises and their workers should be encouraged to be adequately represented, in full respect for freedom of association. In this connection, employers' and workers' organizations should consider widening their membership base to include small and medium-sized enterprises.
VI. International cooperation
18. Appropriate international cooperation should be encouraged in the following areas:
(a) exchange of information, gender disaggregated where appropriate, on best practices in terms of policies and programmes to create jobs and to raise the quality of employment in small and medium-sized enterprises;
(b) creation of linkages between national and international bodies and institutions that are involved in the development of small and medium-sized enterprises, including employers' and workers' organizations, in order to facilitate:
(i) exchange of staff and ideas;
(ii) exchange of training materials, training methodologies and reference materials;
(iii) compilation of research findings and other quantitative and qualitative data, gender disaggregated where appropriate, on small and medium-sized enterprises and their development;
(iv) establishment of international partnerships and alliances of small and medium-sized enterprises, subcontracting arrangements and other commercial linkages;
(v) development of new mechanisms, utilizing modern information technology, for the exchange of information between governments, employers' and workers' organizations on experience gained with regard to the promotion of small and medium-sized enterprises;
(c) international meetings and discussion groups on approaches to job creation through the development of small and medium-sized enterprises, including support for female entrepreneurship;
(d) systematic research in a variety of contexts and countries into key success factors for promoting small and medium-sized enterprises which are both efficient and capable of creating jobs providing good working conditions and adequate social protection;
(e) promotion of access by small and medium-sized enterprises and their workers to national and international databases on such subjects as employment opportunities, market information, laws and regulations, technology and product standards.