#GrowingTalent – Employers want greater say in spending apprenticeship allowance – Sector Response

According to new research published today (10 Jan) by City & Guilds Group, “Flex for success?” an overwhelming 92% of levy-paying employers want to see greater flexibility in how they can spend their apprenticeship allowance.

The findings are a stark reminder that the Government has a long way to go to create an environment in which businesses can really benefit from increased investment in skills development, with no ‘one-size-fits-all’ solution for apprenticeships.

In October, the Government announced they will be arranging an employer consultation on apprenticeships in early 2019. This survey is due to be sent out over the next few weeks. 

In the meantime, DfE have set up an additional mailbox, [email protected] where they encourage employers to share their thoughts and feedback.

Sector Response

Sally Swift, Legal Services Manager at law firm Browne Jacobson, said:

“The Governments introduction of the apprentice levy was supposed to create opportunities for UK business to invest more in learning, training and developing apprentices.

“The rigid parameters that currently exist are stifling progress and innovation of how to use the levy to boost new apprentice numbers and developing skills, which surely was as the heart of the original reforms.

“There needs to be improved flexibility.

“The 20% off the job training needs relaxing, the Institute of Apprenticeships need to be quicker at improving new standards, compulsory apprentice guidance in schools should be introduced to promote what could be a fantastic opportunity to become a master craftsman in a chosen field and there needs to be more of a strategic partnership between education and industry.”

Stephen Evans, Chief Executive of Learning and Work Institute said:

“It’s not surprising that employers want more flexibility in how they spend their Levy funds. The challenge for the Government is balancing this against achieving the overall aims of the policy, which is to increase employer investment and engagement in training and make sure everyone gets a chance to build their skills, addressing the current skew toward those who already have high qualifications.

“We’ve set out some ideas for striking this balance, including the introduction of an Apprentice Premium to widen access to apprenticeships and a greater focus on outcomes such as employment and earnings outcomes for those that complete apprenticeships. It’s also important that policy doesn’t just focus on apprenticeships alone: we need other routes for learning and skills development too. Of course, employers can also invest beyond the Levy too if other forms of learning would benefit their business.

“There’s lots to welcome in the introduction of the Levy and expansion in recent decades of apprenticeships. We need further changes to build on this to meet our twin goals of boosting productivity and social justice.”

Kirstie Donnelly MBE, Managing Director, City & Guilds Group, comments: 

“The turmoil we are facing, as a result of uncertainty around Brexit as well as the rapidly changing world we live in, means that it’s never been more urgent to improve the skills of our workforce and invest in home-growing the skills that we may no longer be able to import from abroad. Apprenticeships have a huge potential to deliver on this, but the system is still not responsive enough to the needs of employers. Businesses need more flexibility to use the apprenticeship levy in a way that will truly help them fill skills gaps, upskill their workforce and shore up their talent pipeline for the future.

“But, flexibility alone isn’t enough. The Government must provide greater clarity on apprenticeship data in order to equip the industry with the holistic view it needs and enable employers to understand its wider impact. Although we welcome the Government’s commitment to introduce reforms, they are yet to set this in motion. We have set out a list of twelve recommendations, eleven of which are for the Government to act on, as we urge them to prioritise apprenticeships, maintain momentum and make better use of data to help all those involved to create the skilled and productive workforce we so desperately need.”

Claire Findlay, Head of Apprenticeships at Barclays said:

“Barclays benefits greatly from the Apprenticeship Levy, allowing us to ensure the apprentices currently on our programmes are being fully developed accessing qualifications (level 2 to level 7) across all of our business areas, including banking, operations, technology and finance (internal functions). 

“Since the Apprenticeship Levy was introduced, we’ve invested more money into our apprenticeship schemes, which led to us launching our Masters Degree Apprenticeship and thus enabling our employees to gain even higher qualifications through an apprenticeship programme. We’ve seen the business itself benefit too, with each apprentice contributing £18,000* of net productivity gain over the course of their programme.”

Our apprenticeship programme has been designed to be employer-driven and in response to feedback, we made the levy more flexible by introducing transfers in April 2018, allowing levy-paying organisations to transfer up to 10% of the annual value of funds entering their apprenticeship service account to other employers. This will increase to 25% from April 2019.

Alison Cox, Head of Apprenticeships & Stakeholder Engagement, said:

“Today’s Flex for Success report from City&Guilds chimes with what employers have told us about their experience with the levy: that the current system needs to be less bureaucratic, less confusing and more flexible. 

“As this research highlights, the vast majority of employers are failing to spend their levy budgets, which means they are missing out on the opportunity to skill, re-skill or up-skill their workers.

“CMI’s own 10-point plan for reforming the levy calls on the Government to listen to businesses’ experience. What employers want most is certainty. If businesses are to invest time and energy navigating the apprenticeship system, they need to know that quality will be maintained and that the Government’s reforms are here to stay.”

Ben Rowland Co-Founder of  Arch Apprentices, said: 

“The levy was designed to catalyse a massive change in large employers’ approaches to training. The greater the change of mindset required the longer it has taken employers to get their heads around this. Those who started to do this when the levy first came in are now “up and running” and benefiting from their levy use, those who have started more recently are the ones who are most worried.

“It is also worth noting that the biggest drop in apprenticeship numbers has been in those programmes where there were most concerns about quality, and conversely, those apprenticeship programmes that are seen as high quality (for example in tech and professional services) are growing rapidly. It is a success story.”

Mark Dawe, Chief Executive, Association of Employment and Learning Providers, said:

“AELP strongly supports the levy in principle but how it works in practice requires some fundamental and urgent changes.  The government should resist calls that the levy should be used for other types of training in addition to apprenticeships.  Its growing consumption while paradoxically the numbers have fallen demonstrate that the focus should remain on restoring the number of apprenticeships we had previously.

“The fact is that the largest levy payers are in the process of consuming nearly all of the levy to the point that very little money will be left soon for non-levy paying SMEs to offer apprenticeships, potentially leaving some areas of the country as apprenticeship deserts.  The reason why the money is running short is that the levy is being used up by large employers because of the cumulative effect of funding both apprentices carrying on their programmes from a previous year and new apprentice starts.

“The government has also badly miscalculated how much is being consumed by fewer but much more costly apprenticeships at the higher levels.  From the moment the levy was introduced, AELP has maintained that a separate apprenticeship budget of at least £1bn a year was needed for non-levy employers because we anticipated these challenges.  We will make this call a key part of our Spending Review submission.”

A Department for Education spokesperson said:

The apprenticeship levy gives employers flexibility to provide their staff with a huge range of apprenticeship training opportunities. It helps them to get the skills their business needs, in occupations from accountancy through to bricklaying, and at levels from GCSE-equivalent all the way up to degree apprenticeships.

We are continuing to work with employers to build awareness on how businesses can use their apprenticeship levy fund. Businesses can now transfer up to 10% of their levy funds to other employers – this will be increasing to 25% from April 2019. We continue to work with business to make sure they make best use of the levy transfer and their own levy funds.

City & Guilds Group surveyed 765 levy-paying businesses for their take on the current system.

The research reveals that while, encouragingly, businesses are keen to make the best use of their levy, the rigidity of the current system is holding many back.

If employers had greater freedom with how to spend their levy funds, 55% say they’d like to continue to spend on apprenticeships, while 45% would like to be able to use money to invest in non-apprenticeship training – including professional courses and technical skills training (36%); health, safety and compliance training (33%); work placements and internships (32%); and leadership and management training (31%).

When asked about the challenges that prevent them from investing in apprenticeships, almost all (93%) employers cite some form of barrier. The list includes a lack of: suitable apprentices in the area (31%), availability of necessary training (30%), information and support (22%), and buy-in from the board (22%); as well as 20% off the job training being unsuitable for the business (29%).

Promisingly, the Government has introduced some new freedoms to flex spend in the last year, including increasing the level of levy funds which can be transferred to other businesses in a supply chain from 10% to 25%, from April 2019. But City & Guilds Group’s research found that this still isn’t enough: if levy-paying employers could invest as much as they liked within their supply chain, they would transfer an average of 35%, meaning current plans for increased flexibility still won’t meet employers’ needs.

Amid calls for increased options when it comes to using the apprenticeship levy, the research also reveals the scale of disengagement with the levy, as 95% of employers failed to spend the entirety of their apprenticeship budget in the first 12 months of the new system and businesses say that they only expect to spend an average of 56% of their allotted funds annually in the future. Without transparent reporting of apprenticeship spend, however, industry bodies, training providers and employers are left in the dark about the true extent to which employers have taken up apprenticeships, and where any leftover money will end up.

About the research

On 16 October 2018 skills development organisations City & Guilds and ILM, part of the City & Guilds Group, in collaboration with the Confederation of British Industry (CBI) and HR network Changeboard, ran a breakfast seminar with a select group of senior HR professionals to discuss the apprenticeship levy. The session investigated whether employers wanted to see greater flexibility in the use of the apprenticeship levy.

In November 2018 City & Guilds and ILM worked together with research agency Censuswide, to carry out a survey of 765 people with decision making responsibility for apprenticeships who were working within businesses in the UK that pay the apprenticeship levy. This was done to gauge their experience of using the apprenticeship system to date and provide input about what could be done to improve it in the future.

The survey asked a series of 20 questions to understand if employers were currently spending their levy, if they planned to spend more or less in the future and if making any changes to the current system would allow them to gain more value from their investment.

About the City & Guilds Group: A world leader in skills development. Working in over 100 countries across the world, our purpose is to enable people and organisations to develop their skills for growth.

From setting the standard for on-the-job training through to supporting skills development around the world, the City & Guilds Group has almost 140 years’ experience in preparing people to contribute to successful businesses and thriving economies.

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