Apprenticeship Levy under fire for failing businesses

By Richard Stuart-Turner, Monday 25 June 2018

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More than a year has passed since the Apprenticeship Levy was launched last April and many feel that it is not working as intended.

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With the aim of creating 3 million new positions by 2020, the Department for Education (DfE) was looking to raise £2.8bn this year through the introduction of the scheme, which is paid for by employers with an annual wage bill of more than £3m, who are required to pay a 0.5% levy on their total wage bill.

The levy hands all companies a £15,000 allowance to put towards hiring and training an apprentice but, as of the start of April, only £108m of the £1.39bn paid into the levy by businesses had been used.

The DfE’s latest figures are also telling – 261,200 people started an apprenticeship between August 2017 and March 2018, down from the 362,400 starts reported in the equivalent period in 2016/17.

Business lobby London First has reacted by publishing a new report that calls on the government to simplify the levy’s administration and to make apprenticeships more flexible. It says the UK’s apprenticeship model “complicates rather than facilitates” taking on more apprentices.

Ian Cass, managing director of the Forum of Private Business, believes the main reason the levy is faltering is because many small businesses still do not understand how taking on an apprentice would benefit them.

“With small businesses you’re probably not dealing with an HR department but with an owner-operator trying to be a jack of all trades. Unless [the government] can communicate to them in a simple and effective manner what an apprentice can mean for their business and how the system works then they’re not going to engage in it.”

Many more willing SMEs, meanwhile, have no idea where to start. Recognising this, in his spring statement chancellor Philip Hammond pledged that up to £80m would be released to help SMEs engage.

BPIF chief executive Charles Jarrold urges printers in this situation to get in touch. “The BPIF are experts in the levy, so we’re able to help. We can either support HR departments, or for those that don’t have HR, we can provide the support.”

He adds the levy has actually changed relatively little in the print industry – which has a long history of extensive apprenticeship training – and points out that, for its flaws, it has importantly raised the profile of apprenticeship training generally.

“And it is creating budgets for training within organisations that may not have previously identified apprenticeship training is a good option for them.”

Jarrold says the main industry concerns around the levy have been around the stipulation for 20% of an apprentice’s time to be spent doing “off-the-job training”, which must be during “normal working hours”.

“This is too prescriptive and doesn’t recognise the realities of production environments, and the difficultly in defining what is ‘off-the-job’ and what isn’t – this is an issue that affects all apprenticeship training, not just print, and the definition depends on context.”

Print Scotland director Garry Richmond says the levy has been viewed as another tax by many businesses, and believes the system is too complex and confusing.

He would like to see the government give businesses more wage support to help take on apprentices.

“Some councils will have a mechanism in place to give wage support and some won’t. And some will want you to take their candidates and not people that you’ve recruited, so access to the employability fund seems a little bit haphazard.

“I think if the government has set targets to increase the number of apprenticeships across the UK, it needs to consider that even one salary can make the difference to a business. Even a low wage is a lot of money to train a young person if it’s coming off your bottom line.”

Stephen Docherty, managing director of Scottish book printer Bell & Bain, which pays the levy, says the firm currently has 11 apprentices and would happily take on more.

He would like it if the money raised by the levy went towards funding education for apprentices.

“I’d still have the same number of apprentices even if I didn’t get anything back and would happily donate my allowance per apprentice to a school for apprentices.”

With its target of 3 million new apprenticeships looking unlikely to be reached by 2020, many observers believe the government needs to review the levy and remove some of the red tape.

“I think it needs to be restructured somehow so that it’s very open and very clear how you do things and how you get money back from it,” Richmond concludes. 

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