David Way CBE
10 Mar 2017
Plans for the apprenticeship levy have monopolised skills discussions for more than a year. Employers have typically followed a process of understanding and influencing, appreciating the financial consequences and then planning for mitigation. Many may have reached the final stage that the policy is intended to achieve, namely increased investment in high quality training.
However, with the operation of the levy coming into place next month, it was worrying and somewhat surprising to read recent reports that many employers remain unaware of the imminent introduction of the apprenticeship levy. Thankfully, there is still time to get ready if employers act now. So, with April 2017 upon us, what else might employers be thinking about at this time?
Firstly, the levy is planned as a permanent arrangement and employers will not lose the opportunity to reclaim the funds taken initially as a payroll tax if they get themselves organised soon. While technically levy funds left unclaimed will not be lost for two years, it is certainly best to draw down money for training well before that cut-off period or risk distorting normal preferred recruitment and training patterns.
Secondly, employers can now try out the systems designed to support the recruitment and training of apprentices and to enable the operation of the digital account that tracks levy spending and payment for training. While employers would have liked all of the digital apprenticeship service elements available sooner, they have been assured that the testing process has indeed gone well. Operating the digital account confidently and sorting out the basis of workforce calculations and eligible apprenticeship spending is essential for businesses. This will minimise bureaucracy, enabling employers to focus on the important work of implementing their own recruitment and training strategies.
Thirdly, eligibility rules have been drawn encouragingly wide in respect to the level of apprenticeships, up to the equivalent of degree and professional qualification levels, while there is no age limit on apprenticeship entry. This will help those many employers who are looking to recruit the best of young talent through both apprenticeships and higher education routes or to upskill their current workforce. Businesses need to consider their individual approach.
The expectation was that many employers would be reviewing their strategies in the light of the levy and compelling evidence about the business benefits of apprenticeships. The hope was that it would spark the active engagement of many more Managing Directors and Finance Directors in apprenticeships when faced with this change to their balance sheets. Only time will tell how many more apprenticeships will be produced as a result. However, reports from training organisations suggest there has been greater interest from many employers in introducing or expanding apprenticeship programmes.
If the new levy proves to be no more than a payroll tax that employers simply absorb somewhat grudgingly, this policy will have failed except in the narrowest sense as filling a gap in public expenditure. Whilst this is clearly a payroll tax, I believe that employers should regard it as a hypothecated tax with appropriate transparency and accountability for the way the funds are spent. This way, Government might remember that this is employers’ own money to be spent in line with their employer-ownership aspirations for skills.
It was interesting to hear employers at January’s HR Summit taking a greater interest in how they could ensure that the standards to which apprentices would be trained, met their needs. This was evidence of the levy motivating them to become more engaged in apprenticeships. Other employers, recognising that they were unlikely to use their full levy allocation themselves, were keen to accelerate the process by which their supply chain could benefit.
The issue of repackaging isn’t straightforward but seems likely to be raised as a criticism in future. It is worth remembering that apprenticeships are the UK’s flagship work-based programme for a reason. Employer surveys and research into return on investment are very positive while most of our international competitors adopt apprenticeships as their primary skills programme.
I see nothing wrong with comparing current practices with apprenticeships and seeing if adjustments would help make the programme more effective. One person’s repackaging could be another’s aligning with best sector practice. Employers are best placed to make the decisions about changes to their training and Government has sufficient quality mechanisms in place to provide necessary safeguards. Indeed, the Institute for Apprenticeships has been set up to provide quality assurances. It should be encouraged to examine any criticisms of repackaging in due course to ensure that business and apprenticeship reputations are not adversely affected.
Employers will be in different places in preparing for the levy, but one thing is sure. The levy is here to stay. If nature abhors a vacuum, then Government abhors a funding gap.
David Way CBE is editor of A Race to the Top – Achieving Three Million More Apprenticeships by 2020, former CEO of the National Apprenticeship Service and Visiting Professor at the University of Winchester.