What does the Apprenticeship Levy mean for your business?

Coming into effect from April 2017, the levy has the potential to make one of the most significant changes to the apprenticeship landscape in the UK for decades.

It is a change that will undoubtedly have an impact on SMEs as well as large organisations, considering the threshold is based on wage bill and not employee numbers.

But whilst some welcome the levy as a way to raise funds to increase the quality of apprenticeships across UK industry and as a tool for ensuring apprenticeships are built into business plans, others are acutely aware – and wary – of both the cost of this approach, and the potential damage that could be done by focusing on the quantity rather than quality of apprenticeships.

Indeed, the Confederation of British Industry (CBI) published an analysis underlining the additional cost to business as a result of the change in government policies and the Apprenticeship Levy, which made headlines as it confirmed some businesses’ fears. Questions are being asked about what businesses are receiving for their money.

Much of the analysis has focused on how businesses will achieve “value for money”. As an example, the internet is full of examples suggesting that a business with a payroll of £10m would be paying a levy of £50,000.

This therefore suggests that if training costs £10,000 per candidate, the business would need to employ five apprentices a year to break even.

As most business owners will tell you, this completely misses the point. Organisations of every size should focus on recruiting and developing the right skills for their needs. If you don’t need five apprentices, then the cost of recruiting, employing and training them will be far more than the £50,000 you may receive through the levy.

So why is the levy important? Well, the principle of a hypothecated tax has the potential to drive transparency into the market – a transparency that is long overdue.

In previous years, the apprenticeship delivery model has been dominated by provider-side incentives as a way of driving the skills agenda forward. 

Many of these initiatives have been well meaning, but the ever-increasing complexity of funding, inspection and audit guidelines has led to a situation where training providers are having to increasingly focus more on administration rather than delivering the right skills for apprentices.

Read more on apprenticeships:

• Government’s target of 3m apprenticeships by 2020 gains momentum with Delivery Board
• Apprenticeship levy to create £3bn to raise British skills
• Are apprenticeships the solution to the UK’s productivity downfall?

At GetMyFirstJob, we work closely with UK training providers and employers to drive forward quality apprenticeship programmes and leverage them on our platform to find young people the right roles. 

And over recent months, we have witnessed first-hand the concern from both companies and training providers around the complexities of the new funding system.

The danger is that an increasing number of businesses will shy away from investing in apprentices because of fear that the administration around such programmes will not be cost or resource efficient.

Instead, more focus should be paid to ensuring that we make it easier for employers and trainers to recruit. The talent is out there, and indeed most employers do recognise that the long-term value an apprentice can bring to the business far outstrips the initial training costs.

Last year, we asked our database of SMEs if apprentices had added value to their team since joining and almost 90 per cent said yes. The reasons given ranged from the enthusiasm and energy apprentices bring to a workforce, to increased productivity and a positive contribution to long term growth.

Finding the right training provider to help discover the skills set specific to your business’ needs is crucial in the apprentice marketplace. A good training provider will ensure they recruit for the best fit rather than simply providing a candidate that ticks certain boxes in the administrative process.

And working closely with them will enable SMEs to navigate the new system with ease and provide a clear solution to the problems of providing the UK’s talented and skilled workforce for the future.
 
I believe the Apprenticeship Levy is therefore far more than a way for the treasury to raise taxes to spend on apprenticeships. It reflects a new approach that has the potential to fix the fundamental failures in the current system and provide a stronger pipeline for British SMEs.

Despite the push for apprenticeships, it’s fair to say the UK has an unnatural obsession with university.

David Allison is founder and MD of GetMyFirstJob.co.uk, an innovative web platform that improves the speed and quality of matching young people to the right apprenticeship and the right employer/ training provider.

Image: Shutterstock

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