Getting to grips with the Apprenticeship Levy

I would ask for caution before people start writing the levy off as a failure. Any new system needs time to bed in – especially one with such significant changes involved.

14 March 2018 / Be the first to comment

By Kirstie Donnelly MBE, Managing Director - City & Guilds Group

Apprenticeships have been central to UK workplaces for centuries. But following widespread reforms to the way they are funded, it’s fair to say their popularity has come into question. With a significant drop in apprenticeship starts in the first year and accusations from employers that the new levy is nothing more than an unfair tax, it’s not hard to see why.

But I would ask for caution before people start writing the levy off as a failure. Any new system needs time to bed in – especially one with such significant changes involved. Employers have understandably needed time to get to grips with this. Just three months before the levy was introduced in April 2017, City & Guilds research found that many of those required to pay into this didn’t fully understand it or had taken steps to prepare to do so.

Just one year on from the start of the levy, there are indications that employers are actually embracing the new system more than the numbers and the headlines might suggest. While employers continue to have reservations about the way apprenticeships are funded, a new piece of research by City and Guilds and accounting firm Grant Thornton suggests that many are starting to use the new system.

Generation Apprentice interviewed 500 employers and 1,000 young people and parents to better understand attitudes towards apprenticeships on both sides of the fence. 
We found that 79% of employers stated the new levy has encouraged them to recruit more apprentices than they would have otherwise. 50% also say that they intend to recruit more apprentices in the next five years than they do now. Young people, too, recognise that apprenticeships are an important route into work.

There is still some way to go. Not enough SMEs are aware that despite not having to pay into the levy, they are still able to benefit. They are only required to fund 10% of the cost of the training of an apprentice, with the remainder being paid for by the Government. While a small investment is now required where it was not previously, this is a relatively small cost to pay for SMEs, who urgently need to invest in staff and skills if they are to remain competitive in the years to come.

Likewise, there is still not enough appreciation that the levy funding is not just for young people. It can be applied across the organisations, from new entrants to the workforce to mid- and senior- level managers.

It’s critical that this positive trend continues. Apprenticeships have an important role to play in closing current and future skills gaps in a wide range of industries. While the impact of Brexit is still uncertain, there is the likelihood that the UK’s potential talent pool will be reduced as we leave the EU. Employers will need to work hard to ensure they have a workforce that’s fit-for-purpose.

The HR community has a valuable role to play in ensuring apprenticeships continue to support the UK economy. To make the most of the levy, HR professionals mustn’t think about this in absolute terms. Instead, consider it as a ‘skills levy’ that can be more broadly applied across their business from entry level though to senior managers.

Whilst fully embedding the framework will take more time, it is vital that employers and HR professionals take action today. Those required to pay into the levy will be able to access funds via digital accounts which must be used within two years. After this, any money which hasn’t been paid will automatically go to the Treasury. 
To support the widespread adoption of the system, policymakers must guarantee some stability now. The Government needs to continue to work with employers - and the skills and education sector - to tackle any remaining confusion and help organisations understand how to apply the levy to get the most out of it.

For the sake of the UK economy, it’s vital that we get this right and begin to see apprentices as a crucially important part of our workforce.

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