From education to employment

New English Apprenticeship incentives – Is it a sustainable way to increase opportunity?

Richard Marsh, Apprenticeship Director, Kaplan Financial
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So the English Apprenticeship ‘guarantee’ is here 

And although it isn’t a guarantee. The apprenticeship hiring incentive is a series of welcome incentives for employers:

  • £1,000 for taking providing unpaid work-experience for a Trainee
  • £1,000 for taking back a Furloughed worker
  • 6 months wage subsidy for hiring an unemployed young person (Kick-start)
  • A payment of £2,000 or £1,500 for taking on an Apprentice (for 6 months only) ##

## A payment of £2,000 will be made to employers who recruit an Apprentice aged 16-24 and £1,500 for those aged 25+ . And this is in addition to the existing £1,000 payment.

Although all of these incentives are designed to be looked at in the round I am most interested in the Apprenticeship incentive

This is in addition to the current £1,000 paid to an employer recruiting a 16-18 year old#. But only runs from Aug to Jan ’21.

So it is an increase of £2,000 per Apprentice 16-24 and £1,500 more for 24+ and could be accessed in addition to the other incentives – most notably the Kick start funding making taking on an Apprentice very attractive.  

There seems to be no change to the Apprenticeship levy, so;

  • Employers will still pay for training via their ‘levy’ or if not a levy payer then they will contribute 5% of training costs, unless they employ less than 50 people and take on a 16-18 year old (when the 5% is not required)
  • There will still be a rebate of employer National Insurance contributions for Apprentices aged under 25

And Employers can still claim National Insurance relief for Apprentices aged under 25.

# 18-24 if the individual has an Education Health Care plan (EHC)

How many more Apprentices will this generate?

That’s the million dollar question but no initial target seems to be present but there is an initial 6 month time period.For comparison, there were just under 50,000 starts for under 19s between August and December 2019.More realistically though, this is about preventing a collapse in opportunities at this point and any increase in numbers would be very welcome.

However, we will have to see these roles being advertised soon or potential applicants will be on courses in Colleges (not that this is a bad place to be!) and it will be too late for this summer’s education leavers.There is of course also the obvious concern that Apprentices might be released after their 6 month wage subsidy ends.

 The return on Apprenticeship investment

There are many good reasons to create Apprenticeships. They can be used to increase Social mobility and Diversify workforces or to retrain for Technological advances.

However at their core Apprenticeships are based on creating Returns On Investment (ROI) and there is no evidence of any large-scale Apprenticeship programme lasting for the long-term if these returns are not clear to all parties: 

  • Apprentice – Invests their time and effort. Accepts a potentially lower short-term wage in return for skills and experience; in the expectation of increased future earnings and career prospects.
  • Employer – Invests in the individual; in the expectation of future productivity / profit / other returns
  • State – Regulates for quality, equality of opportunity and invests in the core Educational costs; in the expectation of increased future tax returns.
  • Education provider – Invests in course materials, facilities and tutors; in the expectation of profitable outcomes  

What these new incentives do is to recognise that it is employers that create jobs (inc. Apprenticeships) and so it seeks to boost their ROI, by making their return both larger in size and quicker to realise. 

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Therefore increasing the attractiveness of the investment and (hopefully) the number of investors. The introduction of the Levy had the same intention. It forced larger employers to invest in Apprenticeships; and then to try and recoup that investment. But crucially the Levy allowed employers to decide who they wished to train and employers do not always prioritise younger workers or job seekers.

The new incentives have sought to address this by making these schemes age restricted.  Understanding the ROI of Apprenticeships in the UK The famous German and Swiss Apprenticeships systems have become part of the fabric of those societies; but they are supported by employers there because they deliver a well understood and proven profit.

The ROI of Apprenticeships is much less well understood in the UK. As Hogarth noted in the seminal Apprenticeship ROI 2010 study; In countries such as the UK, where the work-based VET pathway is less well established than in, say, Germany, but where there is commitment to increase the number of apprenticeship places, the emphasis is very much upon communicating the potential economic benefits to employers and young people to be derived from participating in this type of training.Warwick’s Institute for Economic research (IER) 2010 All of this is as true now as it was in 2010.

Indeed a recent (2019) IER study into the ROI that employers of Level 3 Accounting Apprentices can expect found that:

Initial costs of employing an Apprentice can be up to £14,615 in year 1 but that this becomes:- a net benefit ranging from £67 (for a levy payer recruiting an existing employee as an apprentice and retaining them for five years) to £25,784 (for a non-levy payer recruiting a new employee as an apprentice and retaining them for eight years). 

This COVID response incentive will cushion these initial costs and then only increase the long-term return that employers might expect to see. Giving them the confidence to recruit now and providing the opportunities that this summer’s Education leavers desperately need.

Scheme 

Age

Amount employers receive

Requirements

Conditions

 

 Furlough restart   any  £1,000 p.p  Must move from Furlough to work    Employee must be paid £520 PCM + until Jan’ 21 at least   Details TBC
Traineeship 16-24 £1,000 per trainee Provide 60-90 hours of work experience Max 10 per employer  From Sept’ 20  Details TBC
Job ‘kick-start’ 16-24 Up to 25 hours wages paid for 6 months Provide paid work Must be on Universal Credit before staring  Details TBC

Apprenticeship incentive

In addition  

16-18

16-24

25+

£1,000 plus

£2,000 for 16-24

£1,500 for 25+

New hire Apprenticeship 01 Aug to 31 Jan 21 Details TBC
National Insurance rebate 16-25 Employer contributions (approx. 11% of wage) Employee   Existing
 

Richard Marsh, Apprenticeship Director, Kaplan Financial

Want to know more? Kaplan will be running a free webinar about this incentive and Apprenticeship benefits on July 22nd – details to follow on LinkedIn Overview of announced incentives.
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