Rate Drop Rebate
Leveraging financial institutions to deliver change in employment
Rate Drop Rebate is a unique partnership that brings together financial institutions, the Government of Ontario and Social Capital Partners to deliver an innovative loan program that reduces unfair barriers to employment, helps grow the province’s small and mid-sized businesses and create a fairer economy for all.
Creating a fairer job market
Thousands of qualified workers in Ontario face unfair disadvantages when looking for employment. Groups that are particularly affected include new Canadians, people living with disabilities, youth with limited work experience, individuals with limited education or formal training, older job seekers and Aboriginals.
We are partnering with five financial institutions and the Ontario Government to deliver Rate Drop Rebate, a pilot project that’s helping to change this. Based on Social Capital Partners’ highly successful Community Employment Loans Program, Rate Drop Rebate aims to help 1,100 people secure good jobs by providing recruitment services and financial incentives to small and mid-sized business owners who hire people facing barriers to employment. Rate Drop Rebate is currently being trialled in Hamilton, London and Ottawa.
How it works
Rate Drop Rebate helps Ontario’s small businesses by providing a cash back rebate on the loans or lines of credit they need to grow their operations, as well as recruitment services to help them find the right workers. For every new employee hired through Rate Drop Rebate and retained for a minimum of six months, qualifying business owners receive a cash back rebate on a loan or line of credit arranged through one of our six partner financial institutions. The rebate will be equivalent to a 1% reduction in the interest rate on a term loan (up to a maximum reduction of 4%) or the actual interest paid over six months on the business’ line of credit (up to a maximum of two years interest-free).
Who is involved
Rate Drop Rebate is a partnership between Social Capital Partners, the Government of Ontario and five financial institutions (Alterna Savings, CIBC, FirstOntario Credit Union, Libro Credit Union and Meridian).
How it is being financed
The interest rebate is paid for by the Government of Ontario. However, the program is effectively self-financing as the payout only occurs after an employment outcome has been achieved that generates greater savings to public finances in areas such as reduced social assistance payouts.
Aim of the pilot project
With our Community Employment Loans Program, which has helped 80 businesses make 480 hires, Social Capital Partners demonstrated this model works and can make a tangible difference. The Rate Drop Rebate pilot has potential to create a much greater impact and show this idea can be applied broadly in different communities. The pilot will demonstrate the robustness of using banks, credit unions and community service organizations to deliver the project.
From our previous experiences with Community Employment Loans, we found that effectively addressing the needs of employers during the employee recruitment and retention processes was the single most powerful tool we had to generate job opportunities for those who most need them. Rate Drop Rebate has, therefore, been designed with the needs of both employer and job seeker in mind, providing high levels of support to both and viewing each as equally important clients and partners. The pilot project will provide further evidence of the effectiveness of this approach.
The potential for change
We aim to roll out Rate Drop Rebate across the entire province of Ontario after the pilot, which could reach 100 times the number of people that have been helped by our Community Employment Loans Program. A study we conducted together with Deloitte estimated that a province-wide roll out would result in up to $140 million in net savings to the Ontario government, 45,000 job placements and introduction of 11,000 businesses to this hiring channel.
Rate Drop Rebate also has the potential to create a broader change in the way we think about tackling social issues. By providing a mechanism for businesses and financial institutions to talk together about breaking down barriers to employment, Rate Drop Rebate is bringing powerful new actors into an area previously considered largely the domain of government.
We see clear potential in this collaboration for further insights and innovation that will help drive social change and create a fairer employment market for all.
Rate Drop Rebate in the news
Businesses offered interest rate rebate for hiring disadvantaged workers
Lenders in three Ontario cities offer rate break to businesses that hire disadvantaged Canadians
London Free Press
Province hopes rate drop spurs small businesses to hire people who have trouble finding work
Hamilton companies will get loan rebates if they give jobs to disabled, newcomers and hard to hire
Community Employment Loan Program
Small Business Financing…with a twist
The Community Employment Loan Program (CELP) was designed by Social Capital Partners as a way to test the effectiveness of combining a social finance strategy with an incentive program to encourage small business owners to hire more individuals from their community who are at a disadvantage in finding employment.
Creating a Different Model
Our Community Employment Loan Program facilitates access to subordinated debt financing for entrepreneurs, franchisees and small business owners who commit to hiring workers via community agencies and other employment service providers. The terms of these Community Employment Loans are linked directly to outcomes: for every employee an entrepreneur hires from one of our community partners, the interest rate on the loan decreases.
Proving the Win-Win
Our financing targets community-minded business owners who have a high number of entry-level positions with the potential for career advancement. It’s a win-win scenario. More job seekers from disadvantaged groups are offered opportunities for decent employment, while entrepreneurs gain access to attractive financing terms and strong, motivated employees.
Partnering for Scale
After years of experimentation and refinement, SCP brought the program to RBC Generator, the impact investing arm of RBC’s Social Finance initiative. RBC Generator has purchased $250,000 of the Community Employment Loan portfolio managed by SCP, and has made an additional commitment of up to $450,000 over a 3-year period. RBC’s involvement is helping provide more employment opportunities across more organizations, geographies and sectors.
Read about our partnership in The Globe and Mail >
“By linking interest rates to employment outcomes, SCP is demonstrating how financial incentives can drive social good in a way that makes sense for business owners. SCP is a leader in the social finance landscape in Canada, and through this initiative RBC hopes to further engage the private sector in using business to drive positive social impact.”
Sandra Odendahl, Head, RBC’s Social Finance initiative
Demand-Led Employment & Training
By showing how Canada can achieve both economic growth and productivity through “demand-led” employment systems, SCP’s partnership with Deloitte is offering a new vision for policy makers and business leaders. With its size, research capability, expertise, and ability to engage employers and government, Deloitte is helping drive change at the systems level.
Advancing Demand-Led Systems Change
SCP and Deloitte have released a White Paper that calls for transformative change. In it, we advance concrete recommendations for bridging supply and demand to the benefit of both employers and job seekers. By scaling a demand-led employment and training system nationwide, we believe that we can help build a more productive, prosperous and inclusive Canada. Deloitte’s investment of resources and commitment to leadership in this area will affect more organizations than we ever could alone.
Link to our White Paper, “Working together: Implementing a demand-led employment and training system.”
Breaking Down the Components
To better understand challenges and opportunities, Deloitte and SCP assessed the “current state” of affairs, conducting consultations with employment service providers, staffing agencies, job seekers, employers and other key players. We also interviewed leaders in workforce development and innovation, with an eye toward best practices. The result is both a clear understanding of today’s reality, challenges and opportunities, as well as a clear vision for the future.
Demand-Led Demonstration Projects
The perspective and learnings arrived at with Deloitte aided the design of concrete projects on the ground. Our goal is to prove the business case to employers and the return on investment for government. Deloitte and SCP identified seven industry sectors where demand-led demonstration projects can make the greatest difference – considering factors such as employers’ current and future needs, skills required for entry-level jobs, and the quality of jobs themselves. The result is a sharp focus on where demand-led programs can most powerfully drive access to employment. We are now working with employers and government partners in multiple provinces.
“Our belief is that Canada’s current employment training and social assistance systems… must be redesigned and implemented in a manner much more responsive to our future workforce development requirements. Employers currently play virtually no role in designing and delivering our employment and training programs and this must change or we will continue to pay a severe price in terms of employment and productivity.”
Paul Macmillan, Global Public Sector Industry Leader at Deloitte and Bill Young, President of SCP, in their introduction to “Working together: Implementing a demand-led employment and training system”
We would like to acknowledge the pro bono support that both Monitor and now Monitor Deloitte have provided along our journey.
MaRS Solutions Lab helps solve complex societal challenges that require systems change. One of their areas of focus is the “Future of Work and Learning.” SCP and MaRS have partnered to design and test solutions at a macro system level.
Taking a Lab Approach to System Change
Unemployment and lack of skills force many Canadians into the ranks of “marginalized communities” – they are at risk, or outside the economic mainstream. Our partnership with MaRS aims to address access to employment issues faced by over one million marginalized Canadians. Taking a “Lab” approach means starting by looking at the problem from the users’ perspective – in this case, jobseekers and employers. The process involves convening users and stakeholders to figure out causality, identify the root cause, develop prototypes, run experiments and scale what works.
Mapping the System
SCP and MaRS are together mapping the entire system, and identifying opportunities for change in the current landscape of employment and training. System mapping includes identifying all the actors involved and understanding how these stakeholders interact with each other. Our aim is to identify gaps and opportunities for different types of interaction that may produce better outcomes.
Developing a National Change Strategy
Together with MaRS, we are exploring and designing a national change strategy to address these problems. One element of this strategy is to establish a national group of experts and champions, representing employers, government, employment service providers, consultants, training providers, colleges, and others. This group, which will be engaged in developing solutions, will serve as a catalyst to change the behaviour of stakeholders throughout the system.
Building and scaling social enterprises
In our first five years, we facilitated access to financing and provided advisory services to build and scale social enterprises, which are businesses that integrate a social mission directly into their operations. In this phase, we helped establish and scale a portfolio of profitable social enterprises across Canada, including:
- Atira Property Management (Vancouver) – Employs women who are victims of violence
- Inner City Renovations (Winnipeg) – Employs urban aboriginal persons
- TurnAround Couriers (Toronto) – Employs at-risk youth
- Renaissance (Quebec) – Hires directly from provincial social assistance programs
How it worked
SCP would identify early stage companies with great business ideas and good management teams. We then provided them with patient risk capital, offered management support to help them grow, and we measured their performance looking for above average returns. Different from the mainstream investment sector at the time, we were primarily looking for social returns. The financial results were still important but we balanced them with our social bottom line.
Highlight: TurnAround Couriers
Started with just four couriers, one receptionist, one dispatcher and one very clear social mission: to only hire youth who faced barriers to the labour market to work as couriers and back office staff and to do so as a for-profit business. One of the primary goals is have the youth use this job as a stepping stone, giving them the power to “turn around” their lives.
“Wearing my business hat, I really don’t want them to leave, because it makes my life simple and they’re good at their jobs. Wearing my philanthropic hat, I’m conscious they’re ready for bigger and better things, and really, the position that they are filling here could or should be done by someone who is less skilled, or needs an opportunity to get those skills.”
Richard Derham, Founder and Former President, TurnAround Couriers
Social Return on Investment – 2007 Report