The apprenticeship levy: what now?
Simon Creasey, May 05, 2016
With a year to go, and many claiming it is unfair and unworkable, the apprenticeship levy is dividing employers
When George Osborne unveiled plans to introduce an apprenticeship levy it polarised opinion. Some business leaders came out in support of the new levy. But many claimed it was unfair, unworkable and would have severe repercussions for UK businesses.
In December head of the Confederation of British Industry (CBI), Carolyn Fairbairn, said that thousands of jobs could be lost. Her comments echoed those of Tesco boss Dave Lewis, who told the CBI’s annual conference that the levy would effectively wipe out the equivalent of the grocery group’s entire training budget.
Other industry heavyweights have entered the fray, arguing that as well as job losses and cuts to training budgets there is also a strong possibility wages might be trimmed to offset the impact.
The HR community is equally unsure. In an HR magazine reader poll in October, 39% of employers supported the levy, 31% were against it and 30% were unsure.
Almost 12 months since the plans were announced few details have been forthcoming. So with a year to go before the scheme is introduced, what have employers done to prepare and has their view of the proposals changed at all?
Anecdotally it appears views haven’t really shifted since October. That’s partly because of a lack of information, which has led to a misunderstanding among some about how the scheme will work, says Richard Guy, apprenticeships advisor at City & Guilds.
“At a recent employer conference hosted by City & Guilds two-thirds of employers were only a little aware or unaware of how the payment would affect them. The jury is still out on whether it will encourage more apprenticeship take-up,” says Guy. “Just over half [53%] said the payment wouldn’t encourage them to take on more apprentices, while under half [47%] believed it would.”
This uncertainty is partly due to the fact that the government has only released details of how businesses with a pay bill of £3 million or more will be charged. It’s not yet known how SMEs will access apprenticeships and what support will be available for them, although further announcements are expected soon.
But the bigger uncertainty surrounds the knock-on effects, with employers citing a number of potential issues. For example, 30% of large employers say they think the levy will take funding away from other forms of workforce development, says Ben Willmott, the CIPD’s head of public policy.
“Some organisations will just take the hit, but some might change how they look at their overall investment in skills. That could have the effect of actually reducing some forms of workforce training development,” he says.
Charles Hipps, CEO of e-recruitment specialist WCN, says that although the ultimate aim of the levy is well-intentioned, he fears “it could encourage lots of bad behaviours and lots of wasted money because people are just doing it to get back the tax without thinking ‘do these skills really meet my needs?’”
While some may waste their training vouchers, others won’t be able to use them at all because apprenticeships are not suitable for all organisations or sectors.
“Large companies may be forced to pay the apprenticeship levy without getting any benefit from it,” cautions Darren Maw, managing director at Vista employment services. “In these cases the government needs to specify what will happen.”
For those businesses where apprenticeships are suitable, the main task ahead is assessing where training will be most beneficial. It’s a process that’s ongoing, says Phil Hitchcox, director of commercial and business development at training provider First4Skills.
“Lots of companies are looking at the many different roles across their organisations, rather than focusing on specific workforce areas,” he says. “This includes looking at their broader learning and development needs and internal development programmes to see how they can
be incorporated into the wider apprenticeship offer.”
He adds that most employers plan to increase the scale and breadth of apprenticeships in their business. Some will be linked to in-house training such as management development, while others are “increasing the number of apprentices they recruit into the business and aligning programmes with their graduate schemes”.
Training providers are already working hard to help companies who don’t have previous experience of running an apprenticeship scheme to take advantage of the levy – particularly in sectors where there is a major skills gap. One such area
“There is still much uncertainty about exactly how the levy will work, but tech employers want to work together to try to help ensure it is implemented in a way that delivers the best value for employers individually, and for the nation as a whole,” says Bob Clift, head of higher education at employers network Tech Partnership.
It’s a view shared by director at JTJ Workplace Solutions Adam Hayes, who believes the initiative is long overdue. “We have examples of major clients in the UK who are looking at relocation – not because they want to move out of the UK, but because of the fact the dynamics of skilled labour in terms of quality of labour and the projected growth in GDP does not support the labour force we have,” says Hayes. “Going forward this gives businesses the ability to get funded quality training that adheres to government Ofsted levels.”
This benefit is why just over a third of businesses have supported the levy from the outset. Real estate services company Savills is one such employer. “It will require significant financial and time investment, but it supports our strategy to develop future talent as we strive to continue to attract and retain the best possible people in our industry,” says director of people development Ema Saunders.
“Alongside our existing programmes, we are committed to working more closely with schools to ensure a talent pipeline for our apprenticeship places, as well as looking at other opportunities that recognise potential within the business.”
Food group McCain also backs the levy, although the company’s HRD Richard Smelt thinks the government still needs to issue some assurances. “We need to make sure there’s enough incentive for people who don’t currently have incentives,” says Smelt. “People who invest in apprentices already will continue to do so, and we’ve got to make sure that the cost of getting money back from the levy doesn’t exceed the money you get back. But we are positive about the apprenticeship levy.”
Skills minister Nick Boles previously stated that employers in England that pay the levy “and are committed to training” will get out more than they put in. But until more information is forthcoming the jury is still out as to whether it will do more harm than good.