Use it or lose it: Can businesses make the apprenticeship levy work for them?
This week marked the annual National Apprenticeship Week – an opportunity for businesses, policymakers and the education sector to come together to celebrate the best of apprenticeships and the positive impact on-the-job training has on the economy and employment market across the UK. But while the Government has attempted to dominate the news agenda this week with its ‘Blaze a Trail’ campaign, most coverage has instead focused on the ongoing concerns many businesses have regarding the apprenticeship levy. Two years on from its introduction, it remains a source of great contention.
National Apprenticeship Week has provided a useful hook for many concerned parties to highlight the scale of the problem, meaning that we have seen a number of research reports published in the last few days that won’t have made for pleasant reading within the Department for Education.
On Wednesday, The National Audit Office (NAO) published its report ‘The Apprenticeship Programme’, which reviewed the progress of the DfE’s policy since 2016 and looked at whether the current apprenticeship system is providing value for money. While the NAO acknowledged that the reformed system focuses far more on quality and meeting employers’ needs than before, the report highlighted stark concerns over current employer take-up of apprenticeship funding through the levy. In 2017-18, levy-paying employers only used 9% of the funds available to them to support new apprenticeships, equating to just £170 million from the almost £2.2 billion available.
The report concluded with the warning that apprenticeship starts have been falling ‘substantially’ since the introduction of the levy, with the number in 2017-18 at 375,800 – 26% lower than the 509,400 in 2015-16. The rate would need to double to reach the Government’s flagship target of three million starts by March 2020, a target the NAO regarded as ‘very unlikely’ to be achieved.
The CBI, which has been the driving force behind public criticism of the levy system, has used the news cycle this week to push again for more reform and increased flexibility for businesses. The organisation published the first in a series of planned reports on apprenticeships, pitched as a ‘business-backed blueprint’ that made a number of recommendations for making the system more business friendly. These included speeding up the apprenticeship standards approval process and the establishment of a Government-backed appeals system to give employers longer to use their levy funds where standards have yet to be finalised.
How can employers make the most of the levy?
With many employers questioning what the levy can actually do for them, how should businesses be making the most of the policy? First, if businesses don’t start using the funds allocated through their digital levy accounts soon, they won’t be able to reclaim them. April 2019 marks the end of the 24-month grace period introduced with the new reforms. From this point, if businesses don’t use it, they lose it. There is now arguably far more of an incentive for companies to start thinking creatively about how they can spend their levy funding, if they don’t want to just write it off as a payroll tax.
While many businesses may feel there is still a long way to go before we have an apprenticeship system which truly reflects the needs of employers, the Government has already agreed to some flexibilities to encourage take up. From April, businesses will be able to transfer 25% of their levy spend to other businesses, an increase from the previous 10% limit. Announcing the policy change at the Conservative Party Conference last October, Chancellor Philip Hammond said the Government had ‘heard the concerns about how the apprenticeship levy is working’. While the move has already been criticised for not going far enough, the Government will be hoping it gives apprenticeship starts a much needed boost this year. And with the NAO reporting that there may not be enough funding if demand from employers increases, given that the predicted cost of training per apprentice is approximately double the DfE’s original calculation, there is a clear case for employers to take action sooner rather than later.
The announcement this week that DfE plans to publish an annual leader board of top apprenticeship employers means there is an opportunity for businesses to be recognised for best practice in apprenticeship delivery, while demand for a diverse talent pipeline across all industries is going nowhere. For some businesses, investing in apprenticeship provision across all levels may be the secret to future-proofing.
While this year’s apprenticeship week may have highlighted a number of ongoing concerns, there are still opportunities for businesses to make the most of the current apprenticeship system. Whether it’s gaining a competitive edge, attracting new talent or supporting other businesses in their supply chain, many employees are already using their levy spend to their advantage.
It’s clear the Government still has some big questions to answer on the future structure of the levy. With organisations like the CBI continuing to push for reform and the Government committing to engaging employers on their plans for the ‘long-term operation of the levy’ after 2020, more flexibilities could be introduced. But with the use or lose it model coming into force from April, there is more reason for employers who haven’t yet used their funds to start thinking about how the levy could work for them.
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