The Apprenticeship levy – BIS provides clarification

A few days ago I wrote an article about the forthcoming Apprenticeship Levy scheme. My interpretation of the information contained within the latest joint BIS/Department of Education briefing document “English Apprenticeships: Our 2020 Vision” was that all businesses in the UK would pay the levy but that companies with a wage bill of £3m or less would receive a graduated rebate in the form of an “allowance” paid into their digital Apprenticeship Account.

BIS have responded directly and stated categorically that businesses with a wage bill of £3m or less will not pay the levy. I’m delighted that in this particular case I have been proved wrong and that BIS have provided a definitive response. I very much hope that over the coming weeks, they will be able to offer similarly clear answers to the many questions which both employers and providers will be asking about the implementation of both the Levy and the new funding arrangements.

So we can now be quite clear that we have two distinct groups of employers – those companies with a wage bill in excess of £3m per annum who will pay the Levy and those who won’t. Moreover, within each of those groups there will be employers who are already engaged in Apprenticeship programmes and those who aren’t but whom the government hopes will now want to participate. If the government’s plans to create 3m Apprenticeships are to succeed, the response of these different groups to both the levy and the new funding proposals, is crucial and I think it might be useful to consider how each group might react.

Arguably, the biggest winners are large employers with existing schemes. Although as yet we have no details (can you help please BIS?), they will presumably be able to use their Levy payments in some way to support their existing Apprenticeship programmes. Moreover, they will no longer be subject to a statutory 25% reduction in funding nor will they be required to contribute 50% towards the cost of Functional Skills (the government has stated that it will fund providers directly, albeit it at a very unsatisfactory rate of £471 per Aim). Most of these employers already invest significantly in their Apprenticeship schemes so the concept of co-funding will not faze them and with the added bonus of generous completion payments, I would expect to see many of these companies significantly increasing the size and scope of their programmes.

The response of large companies who are currently not involved with Apprenticeships, is less easy to predict. However, I suspect that having paid their Levy, many will want to get some return on their “investment” and will be tempted into the water.

I believe that the biggest challenge for the government will be to persuade the remaining 98% of businesses to participate in the new world of Employer Ownership. Whilst they may not have to pay the levy, they will still (unless the government does a huge U-turn in the next few months), be expected to co-fund their Apprenticeship programmes, contributing £1 for every £2 of government funding. Many SMEs who are involved in existing schemes, have been brought up on a culture of “free training” from providers who will administer the programmes on their behalf. Even with proposed additional payments for businesses with less than 50 employees, I am not convinced that there is sufficient incentive for them to continue with their involvement. “If it was free in the past”, they will say “why should we have to start paying now?”

Finally, I would question whether there is any real incentive for SMEs who are not currently on board, to start Apprenticeship schemes. If they haven’t been convinced to date by the many offers of “free training”, why should they start now?

Of course the government will argue that the Apprenticeship Reforms are not just about funding and they are right to do so. I have argued consistently in favour of Employer Ownership and continue to believe that a “demand” led Apprenticeship model is the only one which can deliver a world-class programme. However, whatever the merits of the new Standards and Assessment processes, costs and funding will continue to be the key factors in determining the response to these reforms. What the government cannot afford to do is to create a two-tier system whereby large Levy-paying employers buy into the process and SMEs remain on the sidelines. That would be disastrous and rather than simply saying “98% of businesses will not pay the Apprenticeship Levy”, BIS may need to dangle a few more carrots if they really want to bring these companies into the fold.

Roger Francis is a director with Creative Learning Partners Ltd, a specialist vocational training company focusing on the delivery of Functional Skills