• Terry Hayward
  • 21 March 2018

The Apprenticeship Levy – one year on

Following the recent National Apprenticeship Week, it’s a good time to reflect on the past 12 months and look to the future now that we’ve reached and celebrated one year of the Apprenticeship Levy.

You could still be forgiven for considering it to be a new initiative and one that some businesses haven’t quite got their corporate heads around yet. However, it appears to be here to stay and, whilst there may be some fine tuning needed to make it an easy-to-follow process, the early signs from those businesses that have developed schemes are encouraging, and future developments are bound to promote apprenticeships as an important route for effective career development.

Businesses with an annual pay bill of £3m or above are subject to the levy (0.5% of the annual pay bill) and, in return, are able to claim a £15,000 allowance, which is offset against the levy to invest in apprenticeship training. Those companies with a smaller annual pay bill are also entitled to receive funding despite not paying the levy themselves. This acts as a carrot and stick method to encourage businesses to use some of the money they are paying in rather than just regard it as a tax. The online apprenticeship service distributes the funds raised by the levy for companies to use on apprenticeship training and assessment.

The government’s target is three million apprenticeships in the UK by 2020 and the Chartered Management Institute reported that managers they surveyed were mostly confident that could be achieved, with a larger number in broad support of the opportunities that the levy brings. With university tuition fees being unreachable for some, the apprenticeship levy is allowing schemes to be seen as a viable and equal option to that of university by young people.

The striking benefit of the levy is that it has focused companies’ minds to think about how they can make use of it and consider whether roles within their organisations could accommodate an apprenticeship scheme. This has enabled a change in thinking about apprenticeships away from purely manual or low-skilled roles to anything and everything.

A good example would be the area of law. In the vast majority of cases the standard route to become a qualified solicitor is to attain a university degree, usually in law, although there are conversion courses available. A qualified solicitor will have to have completed the classroom and exam based LPC (Legal Practice Course). Under the new proposed scheme, the SQE (Solicitor’s Qualification Examination), the Law Society are developing opportunities for individuals to achieve qualified solicitor status via an apprenticeship scheme instead. This is quite a seismic shift for apprenticeships in the UK and clearly underlines the faith that the government and recent survey respondents have in the levy.

Another clear advantage of the levy is that it is not confined to new starters as companies can use the fund to offer apprenticeships to existing staff as an alternative to existing training schemes. It’s also not confined to young job seekers as the levy has also benefited women with children returning to work as well as those looking for a hands-on career change.

It’s not all been plain sailing so far though. There are still some companies who have yet to engage with the process and have opted to treat the levy as a tax and not look at the option of engaging with apprenticeship schemes. This may not be entirely their fault; a survey by DPG found that a large majority of managers hadn’t even heard of the apprenticeship levy. Additionally, those that have tried to access funds have reported that it’s not always been easy to get hold of the money in time, meaning that some people who were offered places on a scheme have had to be deferred until the funding could be secured.

This and the possibility that companies were still in the process of setting up their schemes have meant that it’s been a slower start than expected. Department for Education statistics from 2017 showed that there were fewer apprenticeships offered in May-June 2017 than in the corresponding period the previous year, by a whopping 59%. This is not helped by the fact that the current apprentice minimum wage is only £3.50 per hour in their first year.

However, the government is keen to change attitudes and has even indicated that it would keep the current flexibility regarding the apprenticeship levy under review, perhaps suggesting that a larger stick might be necessary to get some organisations to consider setting up their own apprenticeship schemes.

In addition, the government is increasing the scope of apprenticeships in the future with Masters degree-level apprenticeships and the ability to transfer apprenticeships between companies to help enhance an individual’s breadth of experience and learning. The push for vocational learning, therefore, is very much how the government sees the future and it will be very interesting to see how this plays out and how universities respond if faced with a potentially shrinking number of UK students for traditional degree courses.

As it stands though, the Apprenticeship Levy is very much here, and UK businesses have the option to embrace it. Well-known companies such as the BBC have got on board with the scheme and others from a wide range of sectors such as banking, retail, digital and agricultural are now benefitting from the positive outcomes that apprentices can bring to their businesses.