The Apprenticeship Levy: it can work for everyone

The Apprenticeship Levy, which came into force in April, obliges firms with wage bills in excess of £3m to pay 0.5% of that bill towards funding the creation of three-million new apprenticeships. It is not a popular measure, but Kate Maddison-Greenwell believes that if fully embraced, it can be beneficial for all.

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The UK is significantly behind Europe when it comes to investing in skills and education for young people.

Employers can bemoan it or embrace it, but the Apprenticeship Levy is happening. While there are understandable reservations from some UK businesses, the forward-thinking ones have now accepted it is reality and are looking at how they can best capitalise on the opportunities it presents. Indeed, many have asked me how they can make the Levy work for them.

First, it is important to understand why the government has implemented this so-called ‘payroll tax’. The UK is significantly behind Europe when it comes to investing in skills and education for young people. And business leaders have consistently reported in recent years that there is a major skills shortage facing the majority of sectors.

To address this problem the government has pledged to create three-million apprenticeships. However, to make this plan work, the government needs to overcome reluctance among those that will be required to pay the Apprenticeship Levy. Clients and senior leaders that I have encountered across the country have voiced similar concerns, so let’s examine some of the most common issues raised.

Quality

Typical comments I have heard include, ‘Apprenticeships are notorious for being poor quality’, not to mention ‘only young people should be an apprentice’ or ‘it’s just money for old rope, isn’t it?’ I appreciate it can be difficult to measure something as intangible as a need for training. Often, there isn’t a need for training right now, but there will be if you have an ageing workforce, or your business is expected to diversify or expand in the future.

When the need is not immediate it is easy to put training off until it is too late. Several high-profile employers have come unstuck for this reason. Furthermore, since some unscrupulous training providers have exploited this problem, the negative perception of apprenticeships has increased.

The Apprenticeship Levy

  • Revenue from the Levy will help fund all post-16 apprenticeships in the UK
  • No national insurance contributions for apprentices under the age of 25
  • Funding will be directly controlled by employers via apprenticeship vouchers, which means they can tailor it to their own company’s needs
  • Businesses will be able to ‘get back more than they put in’ by showing their commitment to training and increasing their apprenticeship numbers
  • Companies can use the Levy to boost the skills of their current workforce, using the fund to offer degree-level or higher professional apprenticeships to their existing employees.
  • SMEs will have access to funds to recruit apprenticeships and tailor the programme to their requirements, therefore thus helping to grow their own workforce and positively impact the UK economy

There is also an assumption that if you are academically successful then you choose the university route, and start your career later. There is a totally unjustified stigma attached to apprenticeships – the belief that they are an option that only appeals to the unambitious or low achievers.

Significant work has gone into challenging and overcoming these assumptions, such as the launch of the Trailblazer Initiative. This is an employer-led project that has set apprenticeship standards across multiple sectors and industries.

As a result of this, training providers are no longer able to tell employers what ‘good’ looks like, as there are now independent agreed criteria on what qualifies as a good-quality apprenticeship.

This enables employers not only to recognise the value of these apprenticeships, but also to take ownership of their commitment to undertaking apprenticeships in their organisations. With the introduction of the Levy they are now also able to invest their money into this beneficial scheme.

Furthermore, as some apprenticeships are now degree-level, they can both silence some doubters and also attract those that would otherwise go straight to university.

Complexity

An oft-hear complaint is that, ‘It’s too complicated.’ To be honest, I sympathise – it is a complex topic with a lot of jargon and unfamiliar terminology – Digital Apprenticeship System (DAS), standards, frameworks, NAS, SFA, Trailblazers and end-point assessment – to name just a few.

I won’t attempt to explain everything but I can assure you that help is out there. Your company can get the support it needs to help you get your payments set up and advise you on how best to maximise your Levy contribution. After all, if you don’t use it, you lose it (after 24 months) – you really do need to act now.

Payment

Of course, top of the list of many complaints is, ‘Why should my company have to pay?’ It is fundamentally a question of resources. On the one hand, the government’s productivity agenda and the commitment to tackle the national skills shortage by introducing three-million more apprenticeships is to be welcomed.

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A government survey has found that nearly 60% of employers would no longer train if asked to co-fund apprenticeship training.

On the other, in 2012, a survey of employers by the Department of Business Innovation and Skills (now Department for Business, Energy and Industrial Strategy – BEIS), found that nearly 60% of employers would no longer train if asked to co-fund apprenticeship training.

Clearly, we want and need the skills and quality – but, whichever way we look at it the sums do not add up, as pointed out by economist Alison Wolf (Baroness Wolf of Dulwich CBE). Bringing in the Apprenticeship Levy is the only logical solution to our skills problem and to avoid being left behind by Europe.

A Levy will drive an increase in ownership of good-quality training by employers. It will also boost training volumes and will contribute to reducing the problems that employers often have when it comes to training – a lack of understanding of the costs and benefits of training and losing trained workers to competitors.

Embrace the Levy!

The Apprenticeship Levy – when utilised correctly by employers – has many benefits to both the apprentice and employer, as well as to the wider economy. The Levy will contribute to our future workforce, help boost skills, increase employee loyalty and retention, and create training opportunities for young people as an alternative to traditional further education routes.

Kate Maddison-Greenwell, head of employability – Skills and Learning, Gi Group UK.