The following article by Rob Gray first appeared in HR Magazine on May 1st, 2018. In it, he explores the apprenticeship levy’s teething problems a year in, and where employers would like to see changes
‘A nation flourishes when it realises the full potential of all of its people.’
Thus, rather grandly, begins the second paragraph of the government’s policy document English Apprenticeships: Our 2020 Vision, published after the chancellor’s announcement in July 2015 that an employer levy would be introduced to fund apprenticeships.
The ensuing text made the point that around the world apprenticeships have long been seen as a crucial way to develop the skills wanted by employers. To address the pressing skills gap, the government pledged to increase the quality and quantity of apprenticeships in England, laying out the bold objective of reaching three million starts by 2020.
At the centre of reforms was the introduction of the apprenticeship levy on 6 April 2017. Employers with an annual payroll of more than £3 million are required to pay 0.5% of their annual wage bill into an apprenticeship service account run by HMRC to pay for apprenticeship training and assessment. The government automatically adds a 10% top-up to funds, although any unused funds expire 24 months after entering an account.
But while the intention behind the overhaul is laudable, the outcomes have so far fallen short of the aspirations. A year after implementation of the levy, debate rages as to its effectiveness and opinion remains divided.
CIPD research released in January 2018 found almost a fifth (19%) of levy-paying firms don’t plan to use it at all to develop apprenticeships and will simply write it off as a tax. Moreover, many firms are re-badging existing training in an effort to claw back the levy they pay.
The upshot of this is that in many instances, instead of bringing additional value, the new system is creating burdensome bureaucracy and cost. And when the Department for Education released figures in January 2018 showing a decline in apprenticeships it elicited a scathing response from manufacturers’ organisation EEF, which asserted this was clear proof that the levy and wider reforms weren’t working and that a radical rethink was required.
So how do employers feel about the levy a year in? Do they see it as a success, failure or somewhere in-between? A work in progress or something that should be scrapped?
“The apprenticeship levy is quite a departure from previous types of learning grants,” says Rebecca Buck, outgoing head of HR at the Press Association (PA). “Both employers and approved training providers still have a lot of rules to get to grips with. Looking back, I don’t think anyone was fully prepared for the change in April 2017 and there is a significant gap in understanding.”