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The California Employment Training Panel provides public funding for training of incumbent workers in private companies in the state of California in the US. The Panel's programs are supported by a dedicated payroll tax. As part of its program, the Panel directs 17% of its funds into on-the-job training to support the transfer of skills from the classroom setting to the workplace. This paper presents the results of an evaluation of the on-the-job training component of training completed in 2002. The evaluation revealed five key issues related to on-the-job training that will need to be addressed by policy makers as they consider subsidising on-the-job training. Some issues represent barriers to the effectiveness of on-the-job training in terms of skill development and improved productivity. Others are related either to training cost or the ability to monitor training activities.