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New apprenticeships funding won't go far enough, says HR

The government hopes new funding will create 20,000 new internships

Prime minister Rishi Sunak has pledged to invest £60 million in apprenticeships over the next year, but HR representatives say that it will not go far enough to boost increased take up of apprenticeships.

The funding, announced yesterday, is set to cover the full cost of apprenticeships for people aged 21 or under at small firms from 1 April 2024.

The UK government also announced that the amount of funding companies can pass on to other businesses through the apprenticeship levy will rise from 25% of unspent funds to 50% on 6 April 2024.

The levy is paid by large businesses to create apprenticeship places, but the CIPD found that apprenticeship starts fell by 31% in England from 2017 (when the levy was introduced) to October 2023.

The government has said it expects these changes to create 20,000 additional apprenticeships for small businesses.

Sunak is also expected to announce a reform of a 50% raise to the thresholds that determine a companies’ size. 

The size threshold for a medium-sized business is currently 250 employees, with a maximum annual turnover of £36m. For small businesses the threshold is currently 50 employees with a maximum annual turnover of £10.2m.

This change is set to come into play this autumn, and would mean that 132,000 more businesses qualify as small and medium-sized enterprises (SMEs).

Read more: Apprenticeships have plummeted since levy introduced

Speaking to HR magazine, Justin Rix, partner and head of people advisory at the insights firm Grant Thornton UK, said that the changes will not go far enough to encourage SMEs to use apprenticeships.

He said: “The changes to apprenticeship funding are welcome, but it is unlikely that these in isolation will move the dial far enough to reach the government’s target of enabling 20,000 additional apprenticeships. 

“Whilst the changes remove one barrier for SMEs other significant challenges remain.”

Rix noted that further investment will be needed to encourage SMEs to engage with apprenticeships.

He said: “To encourage full engagement from SMEs, more investment is required to increase availability of relevant programmes: increase funding caps, especially for lower-level apprenticeships, and challenge SMEs' misconceptions about the flexibility and administrative burdens of apprenticeships.”

Ben Willmott, head of public policy at the CIPD, explained that greater reform to the apprenticeship levy is needed.

He said: “Tackling these issues and the ongoing fall in investment in workplace training requires more fundamental reform of the apprenticeship levy to make it more flexible and responsive to employer and learner needs.

“A more flexible skills levy would mean employers could use levy funding to develop existing staff through other forms of accredited training and skills development, which are cheaper and usually much more suitable for employees aged 25 and over.”

Read more: How IBM bolstered early careers through apprenticeships

Anita Ibrahim, head of social mobility and partnerships at tech apprenticeship provider QA, told HR magazine that the changes are a step in the right direction to encourage employees to use apprenticeships.

She said: “Sunak’s announcement to reform apprenticeships goes in a positive direction to opening more doors for employers and employees to harness the benefits of apprenticeships.”

Ibrahim added that apprenticeships could help small businesses fill skills gaps in their organisations.

She continued: “For small businesses, hiring apprentices means you can plug your skills gap from day one. Introducing apprenticeship programmes also boost productivity of the whole team, diversifies your workforce and increases retention rates.”

David James, chief learning officer at 360Learning, told HR magazine that apprentices could be an asset to organisations’ skills in the long term.

He said: “It’s important to note that apprentices aren’t just at a business solely for the two or three years of training. If skilled up effectively, they can become a strategic asset for a company. 

“It’s important to have a long-term view of new apprenticeships and the roles they will eventually fill in a company, so they can become successful and productive members of the team.

James noted that organisations should be strategic about what skills they are looking for in potential apprentices.

He continued: “Before hiring anyone new for a role, organisations should map out the skills gaps in their organisations, such as through using a skills ontology, and then see where the holes are and how an apprentice could help to fill them.”