Employers want to support apprenticeships and make the levy work

#Budget2020 – People, Place and Purpose at the Heart of Politics

Back in 2015, the Government pledged to create £3 million more apprenticeship starts by 2020.

Despite falling short of this target – and the number of starts declining – there is a strong sense that employers want to support apprenticeships and make the levy work.

At Catch22, we’ve made policy asks that we believe would support improving the system for both business and apprentices, including:

• Apprenticeship levy payers should dedicate at least half of their levy expenditure to under-30s.
• Any unspent apprenticeship levies should be ring-fenced to youth employment services.
• The apprenticeship minimum wage should be increased to the living wage to improve take up.
• There should be clear incentives for employers to take on underserved groups.

These, alongside increased flexibility, greater awareness of apprenticeships within schools and improved education for employers are vital if we’re to get the system right.

With today’s (11 Mar) impending budget, there may well be announcements from Government on changes to current apprenticeship policy – and the sector is waiting with bated breath.

Common Apprenticeship Myths

• ‘Apprenticeships are for young people…’
• ‘Apprenticeships are only for trades…’
• ‘There’s no advantage to businesses in taking on an apprentice…’

These are just some of the common myths you hear from employers, students and employees when talk about apprenticeships.

The result is a massive untapped resource. Thousands of young people are missing out on opportunities to embark on meaningful careers, and thousands of employers are missing out on nurturing talent that is directly suited to their business needs.

The apprenticeship levy: use it or lose it

All UK businesses with a payroll of £3 million or more are obliged to make monthly deposits of 0.5 per cent of their annual pay bill into the apprenticeship levy pot. These businesses are then given a rolling 24-month deadline to spend it.

Perhaps the most jaw-dropping fact about apprenticeships in the UK is that half of businesses who are paying into the levy pot are failing to use it.

In other words, they’ve already paid into a fund that is specifically designed to train new apprentices and existing staff, but they’re not using it. If unused, that money goes back into the Treasury coffers.

To put that into perspective, if your business has an annual payroll of £10 million, you will be paying £4,166 a month into your levy pot. If you fail to use it to train existing staff or new hires, you’ll be losing £50,000 a year.

There’s no shortage of information on the levy, who is eligible, how smaller business can access levy transfer funds, and the incentives on offer for employers hiring apprentices from particular groups.

Why hire an apprentice?

It’s not just the loss of money that should encourage businesses to sit up and take notice of apprenticeships. More importantly, apprentices are, time and again, proving to be hugely valuable assets.

• Boosting productivity: Research shows each apprentice brings a gain in productivity of more than £10,000 per year for their employer, with figures for some sectors being even higher.
• Filling skills gaps: As the needs of the workplace evolve and the impact of Brexit becomes clear, there will be skills gaps to fill. Taking on apprentices can help fill those gaps.
• Competing in the modern marketplace: You can train apprentices in the skills that your business needs now and in the future. In industry research, 77% of employers agreed that taking on apprentices helped to make their organisations more competitive.
• Building staff loyalty: Staff typically feel loyal to employers who have invested in their training and are therefore more engaged and motivated to stay.
• Cost-effective training: Apprenticeships are particularly cost-effective as a form of training because, while employers pay apprentices’ wages, funding is available to cover many other training costs.
• Supporting social mobility: ‘Earn and learn’ training opportunities, such as apprenticeships, are key to helping people from disadvantaged backgrounds enter the workplace and progress into fulfilling careers.

Beyond the trades

Apprenticeship are available at a range of levels (from those at the classic entry level 2, all the way to degree level 6 and 7 apprenticeships) and in a wide range of subjects and sectors. You can do apprenticeships in everything from accounting, banking and booking, marketing, social media marketing, pharmacy, policing, hospitality, beauty therapy, plumbing, rail engineering – and hundreds more. In fact, there are over 530 different apprenticeship standards available, so there really is something for everyone.

The beauty of apprenticeships is that they can be tailored to the needs of both the business and the apprentice. The best training providers won’t just deliver ‘off the shelf’ apprenticeships but will add bespoke modules to the three required elements of an apprenticeship (knowledge, skills and behaviours), to make sure it covers the skills required by the company.

Changing the conversation

Despite the clear benefits of hiring apprentices – both for employer and apprentice – the number of people embarking on apprenticeships is declining.

According to a House of Commons briefing paper on Apprenticeship Statistics, in 2018/19 there were 742,400 people participating in an apprenticeship in England, and 72,400 fewer people were participating in an apprenticeship in the last year than the year before.

We’re also seeing fewer new starters in apprenticeships – and more companies spending the levy on training existing employees at higher levels.

So why the falling numbers?

• Poor careers advice in schools: In general, apprenticeships are not given as much attention as other avenues (such as staying onto Sixth Form). There needs to be an onus on schools to give apprenticeships the platform they deserve, so pupils have a real choice at the age of 16.
• Negative perceptions: Parents, teachers, employers – and young people themselves – sometimes see apprenticeships as second best to getting a degree. Nothing could be further from the truth. The status of apprenticeships needs to be raised through good education and strong examples of how apprenticeships can lead to fulfilling long-term careers.
• Confusion about the levy: Some large employers aren’t aware of the rules about the apprenticeship levy or just how much money they’ve paid in. Equally, smaller business are often unaware that they’re eligible to benefit from levy transfers.
• Concerns about the training element: We often hear businesses raise concerns about the apprentice being out of the office training for one day a week, which they feel will affect their ability to deliver work effectively. The reality is, guidance states that 20% of an apprentice’s time should be spent on training and development. As well as the training delivered onsite by apprenticeship providers, this training can be completed online, or in the form of Continual Professional Development events. And crucially, it is training that develops skills relevant to the job.
• Lack of levy flexibility: Despite the government increasing the amount of levy that can be transferred from a large organisation to a smaller one (from 10% to 25%), there is still a huge levy underspend. There needs to be more flexibility to spend the levy further down the supply chain – for example on pre-apprenticeship training – and reduced bureaucracy when it comes to levy transfers.

Filling the skills gaps

It’s no secret that a number of sectors are facing concerning vacancies, including technology, construction, health and social care and hospitality. Hospitality is under particular strain, accounting for nearly 12% of all vacancies. There are shortages in key operational roles including chefs, and there is major problem with retention and supply and demand due to the often-seasonal nature of the work.

For this, and other industries facing skills shortages, the recently proposed points-based immigration system, plus the likely decrease in immigration from skilled EU workers as a result of Brexit, is only set to exacerbate the problem.

Employers will therefore need to adapt quickly to fill the gaps and make sure they have an appropriately skilled workforce.

Apprenticeships are an ideal way to address this, hiring an apprentice can transform your business too!

Chris Stoker-Jones, Director of Vocational Training, Catch22