Your Thoughts: UK Apprenticeship Levy

Last week media outlets were ripe with the news that the UK government wants to implement an increase in the number of apprenticeships offered in England to three million by 2020. The aim is to boost employment and training opportunities available to younger generations.

The Apprenticeship Levy, effective from April 6th 2017, requires businesses with a paybill of over £3 million pa to fork out 0.5% on apprenticeships for young people. Research by XpertHR already reveals that 39.2% of employers plan to either increase apprentice recruitment or begin taking on apprentices for the first time.

Below Lawyer Monthly has heard from several experts and specialists in this arena, and put together a round-up of their thoughts on the levy, the impact the believe it will have, and the downsides involved for the businesses it prompts.

Suzanne Horne, Partner and Employment lawyer, Paul Hastings:

There is little doubt that the Levy is unpopular with some employers, particularly when you consider that group companies each with a pay bill of £3m and above will be required to pay it, with only one of them entitled to the £15,000 allowance. Many businesses will still have a lot of work to do before 6 April to ensure that they are ready to fulfil the requirements of the Levy and to better understand how they can make the Levy work for their organisation.

However, this is only one aspect of the apprenticeship reforms. Around 1,200 employers have stepped up to be ‘trailblazers’, working to create new apprenticeship standards across 29 sectors, thereby challenging pre-conceived ideas of the current limited use of apprenticeships in the workplace. This is not about ‘devaluing a brand’, more a brand-refresh for the 20th century workplace.

Catharine Geddes, Employment Partner and Head of HR, Lester Aldridge:

Employers who pay into the levy scheme should be given access to the Digital Apprentice Service in February 2017 and they can then better plan how the new apprenticeship scheme will work for them. Employers who don’t need to pay the levy should also consider where apprenticeships can best fit within their businesses as the government has confirmed it will contribute at least 90% towards the cost of apprenticeship training, with other grants and funding arrangements being available for small employers.

Adam Harper, Director of Strategy and Professional Standards, AAT:

The apprenticeship levy is seen as a key means of delivering the government commitment to reach three million apprenticeship starts by 2020. It will also help to address decades of chronic underinvestment in skills.

However, we do believe that if the levy’s main goal is to increase the number of apprenticeship starts, then it doesn’t go far enough. AAT has long since backed the commitment shown by the Government towards apprenticeship starts, but we emphasise the need for this to be supported by a focus on timely completions and overall quality. There is little point having a target for the number of people starting an apprenticeship if many fail to finish (overall almost 30% do fail to complete their apprenticeship). Likewise, what is the point in undertaking an apprenticeship if the apprenticeship completed either holds little real value in the eyes of employers or provides too little by way of transferable skills and knowledge for the individual? Unfortunately, in a small but still significant, number of instances, this remains the case.

It is our belief that the Apprenticeship Levy should be renamed as the Skills Levy, and that it should be possible for levy monies to be spent on high quality traineeships and other forms of training that will benefit individuals, employers and the economy as a whole. Last month we surveyed MPs across all parties on this issue, and found that 65% support our suggestion that the levy should be developed to allow funding for skills other than apprenticeships.

Increasing the flexibility of the levy would foster improved productivity across the whole workforce, deliver greater value for money and yet have no significant revenue implications for the taxpayer. It might also help encourage more small and medium-sized businesses (SMEs) to take on apprentices. Given that 99% of businesses in the UK are classed as SMEs, this provides a significant pool from which to drive up apprenticeship numbers.

Grace Mehanna, Campaign Director for Youth Employment, Business in the Community:

While the levy will allow businesses across all sectors an unprecedented opportunity to take a more active role in shaping the skills of the next generation, its success will come down to how it is implemented by businesses. Responsible business practices need to shape this process which means companies creating apprenticeships that are high quality, inclusive, accessible and offer progression within an industry. Achieving this takes thought from employers, but could pay dividends in helping them to avoid the short term unintended and damaging consequences that could arise from such a rapid expansion.

Ultimately, the Apprenticeship Levy creates a fantastic opportunity for the legal sector to create new entry level routes into the profession, beyond just graduate schemes. Degree apprenticeships offer a vocational pathway for young people to train as a solicitor, while other lower level apprenticeships can be used to train young people for paralegal positions and roles in finance, office management, IT, administrative support and facilities. Apprenticeships offer new ways into the sector for young people from different backgrounds and could be key to helping the sector to recruit a more diverse future workforce.

But developing these pathways is just half the battle. It’s also key for businesses to make sure that these routes are accessible and visible to young people from all backgrounds. This means thinking about how you recruit. From unnecessary work experience requirements to unclear application processes and job descriptions, young people currently face significant barriers in recruitment. Research we conducted with the City & Guilds Group, surveying 4,000 young people, shows that a third had a negative experience of recruitment, with 1 in 5 being put off a company as a result.

Apprenticeships open up opportunities but poor recruitment practices can close them down. From exploring new selection methods such as behaviour based recruitment to simplifying application processes and job descriptions, there’s are lots of practical small changes firms can make to increase accessibility. To build a strong and diverse talent pipeline, we would urge companies across the legal sector to make this a central part of their recruitment strategy for apprenticeships.

Marianne Hatcher, Learning and Development Manager, BPS World:

At BPS World we have to find and attract the brightest talent for ourselves and for our clients. The competition has never been greater and, with Brexit threatening to cut off our supply of skilled people from Europe, the skills crisis will only get worse. Apprenticeships are an intelligent way to solve the issue. In my view, apprentices should now form a vital part of every organisation’s workforce. The introduction of the Apprenticeship Levy in April 2017, which ends taxpayer funding for apprenticeships and instead levies a charge of 0.5% of an employer’s wage bill, means that employers who don’t embrace apprenticeships will find themselves paying for them anyway. Ignoring apprenticeships has never made sense, now it is a costly mistake.

At BPS World we see apprenticeships as an investment tool and an economic imperative. We believe that they boost social mobility and increase productivity within businesses.

The qualifications gained during an apprenticeship can now go right up to degree and even masters level.  Apprentices don’t expect the salaries of inexperienced graduates and the government will pay you £1,000 for each 16-18-year-old you employ. There are a few key things to remember:

  • You can get back more than you pay in and you can use it to develop other people in the business. The government will top-up 10% to funds you put in in form of the levy.
  • Apprentices must be spending 20% + of their time on off-the-job training and the programme must be a minimum of 12 months.

Employer branding is very important when promoting your apprenticeship programme and companies need to have effective mentoring programmes in place to support apprentices. Apprentice attraction campaigns are resource heavy so you need to be resilient and focus on what your business objectives are and how apprenticeship programmes can help you achieve them. Apprentices also need to have a clearly defined career path offering development opportunities continuously – they will keep asking ‘what’s next?’

The recruitment industry was one of the last to offer apprenticeship programmes and BPS was the first in the sector to take part. We’re very proud of our apprentice, Bradley Carton who joined us in 2015 and in 2016 was awarded REC Recruitment Apprentice Winner of the Year. It is great to see our investment in him and the other BPS Apprentices being recognised at a national level. I hope that the levy will force even the most reluctant employers to at last see the immense value apprentices add to a business.

Kirsti Laird, Senior Associate in the Employment team, Charles Russell Speechlys:

Some concern has been raised as to whether employers’ desire to make use of the apprenticeship funds available from the government will lead to a down-grading of quality for apprenticeships. In the short term this concern is likely to be justified. Apprenticeships will be offered by employers unfamiliar with apprenticeship schemes and in sectors and job skills which traditionally have not been open to apprentices. Similarly, those institutions responsible for monitoring the quality of apprenticeships are likely to be overwhelmed by the needs of these newbies.

However, it seems logical to assume that these issues will resolve themselves reasonably quickly. Even if employers have capitalised on the “free money” offering, and even if they have limited interest in the quality of training being provided, these employers will still have to deal on a daily basis with the apprentices in their premises.

Employers will not want apprentices with no skills and no ability to meaningfully add to the value of the business. Employers will not want to pay apprentices to be doing nothing. Furthermore, employers know that having poor performing and poorly trained employees causes significant harm to the business. It takes considerable management time to fix mistakes and monitor performance. It therefore seems likely that employers will go to the effort of formalising an apprenticeship programme, and finesse it over time, if only to save themselves time and effort in the longer term.

Apprentices will want to be learning, working and will want to see a career path and job opportunities ahead of them. It seems very unlikely that any apprentice who feels that they are being “used” and not getting value out of their apprenticeship will be quiet about it, even if they do not have the financial freedom to simply leave. Whether or not the apprenticeships are taken up by young or old, we can expect that issues will be made public, whether through social media or an official complaints process.

Many employers already resent the management and human resources time spent in managing poor performers and other disgruntled workers. Put simply, for a variety of reasons, some workers actually cost a business more than the value their work product adds. No employer wants to keep those workers in their business. Many employers therefore go to considerable efforts to provide training and improve engagement of their workers. It therefore makes sense that they would do the same for their apprentices.

David Way CBE, Visiting Professor, University of Winchester, and former CEO, National Apprenticeship Service:

When plans for an apprenticeship levy were announced, they took most employers by surprise. This new policy had barely been trailed and employers have been scrambling ever since to prepare themselves for April 2017. Attempts to delay the start were resisted by a Government with no realistic alternative funding options and lofty manifesto ambitions for apprenticeship numbers by 2020. The legal profession is relatively well placed for the change because it has embraced apprenticeships progressively over recent years. The more the profession provides opportunities for both entry and progression through apprenticeships, the better it should fare under the levy. Most employers have undertaken a journey that first ensures they understand the levy and are set up to use the systems that underpin it – some of which are still in the final stages of testing.

There are though a surprising number of employers seemingly still to appreciate this imminent change is for real. Employers then typically establish how they can get their money back. Will they need to adapt training practices to make them eligible to reclaim levy payments? Should they write this off as a tax? It will be interesting to see how many take the latter view. If so, the policy will have been a failure except as a tax-raising initiative. The hope and expectation of the new levy is that more employers will be motivated to invest more in training and ensure that the apprenticeship route works well for them and for future recruits. The new levy incentivises businesses to re-examine their recruitment and training practices; and improve the quantity and quality of training that is undertaken. At a recent HR Summit, there was a great deal of interest in new standards for apprenticeship training. This stemmed from the desire to ensure that if employers could only get their levy funds back through apprenticeships, they had better be fit for purpose.

While the Government has been restrictive in only funding apprenticeships rather than other types of training, it has pinned its colours to a programme that gives great returns on investment to both employers and apprentices. So, Government is backing an approach that works well here and in most of our economic competitors. Government has been especially helpful in making apprenticeships at all levels eligible for funding. This has further incentivised Higher Education to introduce more Higher and Degree Apprenticeships with standards linked to professional body requirements. The policy therefore suits professions that have high skill expectations and accessible routes for people to achieve them. Taxation or benefit? Employers will decide but sectors and professions that readily embrace apprenticeships and adopt high quality standards and access routes to the top will benefit most.

David Way is also the editor of ‘A Race to the Top – Achieving Three Million More Apprenticeships by 2020’ which you can buy here.

We would also love to hear Your Thoughts on this, so feel free to comment below and tell us what you think!

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