Apprenticeship Levy: 92% of paying employers want greater flexibility

As businesses wait for a government consultation, new research has revealed that almost all want to see greater flexibility in how they can spend their Apprenticeship Levy allowance.

Nearly a quarter (23%) of levy-paying firms have no understanding of the Apprenticeship Levy or don’t know how their company will respond to it.
93% of levy-paying firms cite some form of barrier to investing in apprenticeships.

The research, published by City & Guilds, reveals that while businesses are keen to make the best use of their Apprenticeship Levy, the rigidity of the current system is holding many back:

  • 93% of levy-paying firms cite some form of barrier to investing in apprenticeships
  • 92% say they want to see greater flexibility in how they can spend funds
  • 95% of employers failed to spend the entirety of their apprenticeship budget in the first 12 months of the new system – raising questions about where levy money ultimately ends up

The findings serve as a stark reminder that the government has a long way to go to create an environment in which businesses can really benefit from increased investment in skills development, with no ‘one-size-fits-all’ solution for apprenticeships.

If employers had greater freedom with how to spend their Apprenticeship Levy funds:

  • 55% say they’d like to continue to spend on apprenticeships
  • 45% would like to be able to use money to invest in non-apprenticeship training, including:
    • professional courses and technical skills training (36%)
    • health, safety and compliance training (33%)
    • work placements & internships (32%)
    • leadership & management training (31%)

Greater flexibility

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92% say they want to see greater flexibility in how they can spend funds.

The government has already introduced some new freedoms to flex spend in the past year, including increasing the level of Apprenticeship Levy funds which can be transferred to other businesses in a supply chain from 10% to 25% – due to come in from April 2019.

However, the research shows that this still isn’t enough. If levy-paying employers could invest as much as they liked within their supply chain, they would transfer an average of 35%. That means the current plan to increase the transfer limit to 25% still won’t meet employers’ needs.

Only 10% of respondents said that they were already spending the full supply chain transfer allowance, with 8% stating that they were spending nothing at all with their supply chain.

When asked about the challenges that prevent them from investing in apprenticeships, almost all (93%) employers cite some form of barrier, including a lack of:

  • suitable apprentices in the area (31%)
  • availability of necessary training (30%)
  • information and support (22%)
  • buy-in from the board (22%),
  • as well as, 20% off the job training being unsuitable for the business (29%)

Kirstie Donnelly MBE, managing director, City & Guilds Group, commented: “The turmoil we are facing, as a result of uncertainty around Brexit as well as the rapidly changing world we live in, means that it’s never been more urgent to improve the skills of our workforce and invest in home-growing the skills that we may no longer be able to import from abroad.

“Apprenticeships have a huge potential to deliver on this, but the system is still not responsive enough to the needs of employers. Businesses need more flexibility to use the Apprenticeship Levy in a way that will truly help them fill skills gaps, upskill their workforce and shore up their talent pipeline for the future.

Greater clarity

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95% of employers failed to spend the entirety of their apprenticeship budget.

According to Donnelly, flexibility alone isn’t enough, the government must provide greater clarity on apprenticeship data in order to equip the industry with the holistic view it needs and enable employers to understand its wider impact.

City & Guilds has set out 12 recommendations, 11 of which are for the government to act on.

Amid calls for increased options when it comes to using the Apprenticeship Levy, the research also reveals the scale of disengagement with the levy.

Almost all employers (95%) failed to spend the entirety of their apprenticeship budget in the first 12 months, and businesses say that they only expect to spend an average of 56% of their allotted funds annually in the future.

Without transparent reporting of apprenticeship spend, however, industry bodies, training providers and employers are left in the dark about the true extent to which employers have taken up apprenticeships, and where any leftover money will end up.