Apprenticeship levy: Doing the right thing, the wrong way?

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The Government carried out a comprehensive consultation process - only 711 employers responded. Further consultations have been undertaken on points of detail, however, its clear that its here to ...


Read More Philip Addison
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Many employers argue that the levy will divert funding and focus away from existing successful schemes

When the government announced a drive to create three million new apprenticeships by 2020 it was greeted by a chorus of approval from employers. But the means of reaching that target – the apprenticeship levy – has divided opinion.

The government has ignored a host of employer calls for, as the CBI put it, “a radical rethink” and pressed ahead with a 6 April 2017 start, giving just three weeks for a consultation (during August).

The guidance released on 12 August by newly-appointed apprenticeships and skills minister Robert Halfon has retained some of the controversial central tenets of the levy – it will still apply to companies with an annual salary bill of more than £3 million, at a rate of 0.5%, subject to a £15,0000 allowance, and can only be spent on approved apprenticeship training, plus some costs.

But some of the extra details revealed have been welcomed, such as the favourable 90/10 co-funding rate for non-levy payers and those who have used up their levy allowance. There is also extra money to employ apprentices who are aged 16 to 18 or have an education, health and care plan, and for STEM sector work.

These will support access to work, social inclusion and workforce development, according to Catherine Ward, group director of human resources at Interserve. She likes that employers can use the levy to retrain existing employees in new skills and to become apprentice providers themselves.

But Rentokil’s global head of U+ (learning and development) and HRIS Richard Gregory believes many firms will struggle to supervise the number of apprentices they will be paying for, let alone find jobs for them when qualified.

“The government is trying to do the right thing but in the wrong way,” he says, adding that any scheme that cannot be used for new apprentice wages or existing training will never work.

Group head of people and culture at Hays Sandra Henke agrees, saying existing training schemes should be recognised and eligible for levy funding or the diversion of resources may affect the quality of training.

The CBI says there is a strong case for the apprenticeship levy to be reframed as a training levy and is pushing for this.

There is also a chasm between public perception of apprenticeships versus university education, according to Ward. Interserve surveyed 4,307 young people, parents and employers on the subject and found 47% of young people thought having a university degree is the most useful way to start a career, against 17% for apprenticeships. Three-quarters (75%) of parents and 68% of SMEs said they had not heard of degree-level apprenticeships.

Ward believes the message needs to get through to pupils at a much earlier age, so is in favour of the apprenticeships and skills brief moving from the Department for Business, Energy and Industrial Strategy (formerly BIS) to the Department for Education.

There are huge skills gaps but those needs do not filter through to teachers, leading to an over-reliance on recruiting from abroad, she says.

“Brexit makes this debate more important,” she adds. “We don’t know if there will be free movement of labour post-Brexit but we do know we need to do more to equip people who are in the country already with the skills we need. If all of this causes us to think more thoughtfully about how we give people access to work and enables motivated people to climb as high as they can, then that is positive.”

In another survey the CIPD found 28% of employers do not expect to use levy funding to develop or enhance apprenticeship programmes and only 9% predict using it to start a new one. The CIPD’s concern is that those who do will create too many Level 2 apprenticeships and not enough Level 3 or higher programmes.

Apprentice provider Jigsaw Training currently delivers training for 1,500 apprentices, 75% at Level 2 (intermediate) and the rest at Level 3 (advanced), for employers including Mitie and Transport for London. Development director Nicola Parkinson says employers should look strategically at “how apprenticeships give a good return to their business rather than just wanting to get the levy back”. “There’s a risk of quantity overtaking quality. We might have a more highly-qualified workforce but will this really mean we get a more skilled workforce?”

For the CIPD’s head of public policy Ben Willmott this focus on fitting a policy around a target rather than targeting a policy at a need, risks repeating the result of New Labour’s goal of 50% of young people going to university, which has failed to address the skills gap or improve UK productivity.

“There’s always a danger with these types of targets. They have unintended consequences that are only understood later,” he says.

“It’s comforting to be able to say we’ve created x number of apprenticeships. But we need to take stock. What skills do we need in the labour market and what routes?”

Willmott says what’s needed is an in-depth review of skills policy. The last one was in 2006.

Others are optimistic about the move to the Department for Education. Henke says the skills gap needs to be tackled at a grassroots level. “We suffer from one of the most severe talent mismatches globally – we just don’t produce sufficient numbers of people who are qualified and skilled in the areas that businesses need them. The global mobility of skills will need to be considered as part of this.”

CBI head of education and skills Pippa Morgan adds: “It’s a positive step to put education and skills under the same roof. If it’s going to address the skills gap we’ve got to start with better careers guidance. There’s an opportunity to take a step back from the previous plans and look at it in the round.”

Henke believes the move “should work if both departments [Department for Business, Energy and Industrial Strategy and the Department for Education] work hand-in-hand”.

“The departments need to appreciate that the skills gap is prevalent now and businesses need immediate access to skills too,” she adds.

Also keen is Gregory who says it was lack of consultation with HRDs and talent developers that led to the “completely out of touch” levy.

“I think the issue is the government doesn’t talk to a wide enough range of employers. If it does it doesn’t talk to the actual people in the organisations that make people tick – it talks to the CEOs. If ministers really want to make a difference they need to interact with organisations but lower down – HRDs or talent directors or L&D.”

Comments

The Government carried out a comprehensive consultation process - only 711 employers responded. Further consultations have been undertaken on points of detail, however, its clear that its here to stay. Employers and other interested parties should get behind this initiative which is needed to address the productivity & skills issues the UK faces. I have little sympathy with those who say at .5% of payroll, the levy will leave no more to invest in other training as its clear to survive as an organisation or a country you need to invest more than ,5% in the development of your most important asset.


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The quantity over quality is a fair challenge. I work in Hertfordshire - the County of Opportunity. I vote for us all working together (employers/individuals/parents/FEs/schools and business) to come together and use this as a positive opportunity.


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