What is the Formalize Your Business training and how does it contribute to decent work?

Instructional material | 27 June 2022

A game changer in supporting the formalization of small enterprises

“80 per cent of all economic units are informal and employment in the informal sector exceeds employment in the formal sector,” says Dragan Radic, Head of the SME Unit in the Enterprises Department of the International Labour Organization (ILO) at the webinar “What is Formalize Your Business Training and how does it contribute to decent work?”, organized on 15 June 2022. Through this webinar, the ILO introduced its new “Formalize Your Business” (FYB) training programme.

The webinar brought together ILO experts from the Enterprises, Social Protection and Governance and Tripartism departments and the ILO Country Office in Dakar to explain the rationale as well as the essential features of the FYB training programme. Aimed at entrepreneurs operating in the informal sector, the training programme has three main objectives: first, to raise awareness among men and women entrepreneurs on the importance of formalizing their businesses and complying with national legislation; second, to clarify how to achieve that in practice; and third, to provide guidance on how to address the challenges associated with formalizing micro and small enterprises (MSEs) in a particular country.

The webinar participants learned about the contents of the FYB training programme, which is split into two parts: a general part that allows trainees to discuss and reflect on the various dimensions of the business formalization process, its benefits and challenges. The second part is country-specific and explains, in a comprehensive and yet simple manner, the different formalization steps, such as business registration, setting up a bookkeeping system, understanding which labour and social security laws apply to the business and its workers, complying with taxation and social security requirements as well as sector-related requirements and how much time and money the entrepreneur needs to invest in registration and continued compliance.

ILO specialists in Enterprise Formalization, Labour Law and Social Protection explain how the training contributes to the Decent Work Agenda

Judith Van Doorn, ILO Enterprise Formalization Specialist, noted that the training was developed in line with ILO Recommendation No. 204 on the Transition from the Informal to the Formal Economy. “It enables entrepreneurs who run informal enterprises to learn not only how to formalize their business, but also how to provide decent jobs to their employees.” With respect to how the FYB training programme could support compliance with labour laws, Pablo Arellano, ILO Labour Law Specialist, informed participants that one of the main reasons for non-compliance with national regulations is the lack of awareness on existing rules. The FYB training programme takes this into account. The manuals are user-friendly in terms of language and scope, and explain the different steps and documents needed for formalization, why they are required and how formalization helps small businesses. He further stated that “if we help small businesses to better comply with labour regulations, the level of development in the country could improve.”

Furthermore, the FYB training programme provides practical information about social security. In particular, it focuses on what is available in the country as well as the entrepreneurs’ rights and obligations related to social security. Christina Behrendt, Head of the Social Policy Unit in the ILO Social Protection Department stressed that “this tool is a game changer because it raises awareness about the value of social security, both for entrepreneurs and their workers”. As there is a strong interest in many parts of the world in improving social security for self-employed workers, the training programme complements the ILO’s guidance and policy resource package on extending social security to workers in the informal economy. In addition, she noted the involvement of social security institutions in adapting the training programme to the country context, which can also help them to better engage with small business owners and learn about their specific challenges. Therefore, the implementation of the training programme could feed into larger processes aimed at extending social security to enterprises and workers in the informal sector, which is a key element of formalization strategies.

How is the training adapted at the country level? During the webinar, Alix Machiels who is a Junior Professional Officer in Social Protection and has experience working with the Enterprises department, illustrated the practical steps of developing the FYB training programme for a specific country. It includes: 1) mapping actors and initiatives which support the transition to formality in a country; 2) collecting and validating information on the specific steps involved in registration and compliance; 3) adapting the training programme to the country context; 4) proofreading and layout of training materials; and 5) conducting a training of trainers (ToTs) and rolling out the training to the ultimate beneficiaries i.e. entrepreneurs in the informal sector.

Experience from the field: Senegal and The Gambia

After its piloting in Côte d’Ivoire, the FYB programme has been successfully adapted and rolled out in Senegal and in The Gambia. Speaking on this, Aziz Dieng, National Project Coordinator in the ILO Decent Work Team and Office for West Africa, highlighted the ILO partnership with the national SME agency in Senegal to adapt and implement the training programme. Similarly, the ILO also collaborated with the Chamber of Commerce and Industry in The Gambia (GCCI) from the onset of the adaptation of the programme. Such partnerships are a win-win solution for both MSEs in the informal sector and the institutions involved as the FYB training programme can be integrated into their portfolio of activities, allowing them to better meet the needs of their members, contribute to their sustainability, and advance formalization, enterprise sustainability and decent work at the national level.

The ILO Formalize Your Business is a training programme designed to support the transition of informal economic units and their workers to the formal economy. This training aims to sensitize male and female entrepreneurs on the importance of formalization, how to achieve it in their country, and how to deal with the challenges of formalizing micro and small enterprises. It also raises awareness on why and how to comply with existing laws as a formalized business. The Formalize Your Business training can be carried out as a stand-alone training or complement the SIYB (Start and Improve Your Business) training programme of the International Labour Organization.

To know more, please visit our website or contact the SME Unit of the ILO (sme@ilo.org).