How to make apprenticeships work for SMEs

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Prominent government figures have hailed apprenticeships as the antidote for youth unemployment and skills gaps. But how can SMEs afford to set up these schemes?

The Government talks about apprenticeships as if they are a cure-all for the high levels of youth unemployment and skills gaps. In a speech last summer, David Cameron vowed to make apprenticeships the new norm for school leavers who decide against going to university. He trumpeted that work-based training sits at the heart of the Government’s mission to rebuild the economy. 

While no one disputes that the aim is laudable, genuinely meaningful training and development comes at a cost. For major corporations with deep pockets, finding the time and money to access and harness apprenticeships may be fairly straightforward. But what of smaller employers who cannot call upon the same resources? Are they able to commit? Or, despite the Government’s eagerness, are fears about potential costs and administrative burden putting them off? 

Historically, SMEs have not heavily used apprenticeships. Reflecting long-standing concerns about this state of affairs, in February 2012 the Department for Business, Innovation & Skills asked businessman Jason Holt to head up a government review on making apprenticeships more accessible to SMEs. Holt was chosen because he is CEO of Holts Group, a collection of SMEs employing around 100 staff that has made a strong commitment to apprenticeships. The Holt review highlighted the scale of the challenge: despite 99% of all businesses being SMEs, the proportion of apprenticeships in SMEs is just under 10%, less than half that of larger companies. 

Making improvements to apprenticeship systems

Since publication of the review, the National Apprenticeship Service (NAS) has implemented the majority of Holt’s proposals, including the production of an Apprenticeships for Small Businesses toolkit and the Find an Apprenticeship Training Organisation web tool. The Government also appointed Holt to the new role of small business apprenticeship ambassador. 

“It was good that it wasn’t just a report sat on the shelf gathering dust,” says Holt. “It became a live, active plan that was implemented. I’m delighted with that from a personal point of view, but I think the big picture we are seeing is a cultural shift in the mind of the small business owner. When taking on a new person, they are more likely, I feel, to think of an apprenticeship than ever before. And not just employers in the manual trades but, crucially, in areasthat are newer to the apprenticeship arena like IT and hospitality.”

ICM research released in March 2014 supports Holt’s view that progress has been made. According to a study of 600 UK SMEs, 20% said they planned to take on one or more new apprentices in the next 12 months. Clearly, that’s a heartening finding, which puts SMEs broadly on par with larger employers. However, this might be a case of counting chickens before they hatch – good intentions are not always translated into actions.

Moreover, changes in the way funding is delivered may have some unintended drawbacks. In December’s Autumn Statement, chancellor George Osborne announced a new system where apprenticeship funding will be given directly to employers rather than training providers. Although empowering SMEs is a positive thing, many do not have dedicated HR teams. Instead they rely on training providers to undertake much of the paperwork involved in sourcing apprentices.

Training providers play a key role

Training providers play a key role in collecting data and supporting employers through the often complicated process. Skills education group City & Guilds argues that the reforms risk making it more difficult and time-consuming for employers to hire apprentices. 

“It’s not the focus on employer ownership that’s risky – that’s something we actually welcome,” says City & Guilds chief executive Chris Jones. “It’s the assumption that employers have the time – and indeed the will – to cope with the additional bureaucracy these reforms will entail. Rather than incentivising employers, I fear they’ll be put off by what’s been announced and decide it’s simply not worth the hassle. That would be a disaster, and another generation of young people in this country would lose out. All employers, regardless of size, will feel the effects. The reforms will require additional resources. There will be even more hoops to jump through to establish an apprenticeship. Where is the incentive there?” 

Construction company Gelder Group, which employs over 300 staff and has trained more than 200 apprentices in the past 25 years, is clearly a firm believer in the value of this investment. Group training manager Mike Johnson agrees that what deters most SMEs is not the perceived cost of the training, but difficulties in taking control of the process. “It’s not the risk factor that puts many SMEs off, it’s more the time factor,” he says. “To look after an apprentice you need to have a dedicated person to be their mentor. And over the last three or four years, most SMEs haven’t had the spare people to do that.” 

Brethertons, a firm of solicitors located in Oxfordshire and Warwickshire, has committed itself to apprenticeships to help it expand. It offers employment and training opportunities to young people in Banbury, via apprenticeships in business administration, finance, sales and marketing and legal services. 

“A working relationship with a proactive training provider is key to the success of the apprenticeships,” says HR partner Deborah Atkins. “We often turn to our training provider for advice and guidance and they are always on hand to support us and our apprentices.”

In response to some criticism, NAS has simplified access to the apprenticeship grant available to SMEs to recruit people aged 16 to 24. The £1,500 is now delivered as a single payment rather than in stages, and can be claimed for up to 10 apprentices per employer. 

NAS chief executive David Way has also gone on record saying one way to make apprenticeships more accessible to SMEs may be to pour more resource behind group training agencies (GTAs). These are groups of employers that work together to organise their apprenticeships, sharing training processes, facilities and costs between them to make apprenticeships more accessible for their members. This appeals to some smaller businesses that might otherwise be deterred because of fears they won’t have enough work or resources for the whole of the apprenticeship.

Government must support apprenticeship programmes 

This chimes with the thinking of The Work Foundation, which has called on Government to promote mechanisms to support SMEs. In its policy paper The road less travelled? Improving the apprenticeship pathway for young people, it suggested sector-based initiatives through industrial partnerships such as the Information Economy’s Shared Apprenticeship scheme, where SMEs employ apprentices jointly, sharing the costs of taking on a trainee.

Although 80% of apprentices in the UK are currently employed by businesses with less than 200 employees there is still a long way to go. As The Work Foundation points out, the current apprenticeships system has some major limitations. Educational content is typically low, and the model has been poorly adapted to the service sector, which is responsible for 85% of UK employment. Even in the manufacturing sector, there are companies who feel the system is not yet entirely fit for purpose.

“The main pitfall for smaller businesses in specialist sectors is that the standard apprentice modules are not a good fit for the skills we require. Also financial support for higher education courses as part of an apprenticeship is zero,” says Keith Walker, operations manager at Fairfield Control Systems, a specialist in industrial control systems. “We expect all of our apprentices to progress to degree level as a minimum. The apprentice schemes need to recognise this as a vital part of the personal development path in our type of company and provide the same level of support as for the more practical, hands-on vocations.”

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