Are you spending your levy funds?

Six months on, why have so few employers registered for the apprenticeship levy?

The apprenticeship levy has now been up and running for more than six months. Since April, organisations with an annual wage bill of more than £3m have been required to pay 0.5 per cent of this as a levy. In return, the government will provide 10p for every £1 spent on training, provided it meets certain guidelines.

But that hasn’t sparked a desire to spend the cash – in fact, far from it. The Department for Education (DfE) announced in early October that just 10,500 apprenticeship service accounts – the online accounts businesses can use to reclaim their funds – had been opened by the end of August, despite an estimated 19,150 levy-paying companies being eligible for the service.

Just a week later, the DfE also revealed that the number of new apprenticeship starts between May and July 2017 had fallen to 43,600, down 61 per cent from 113,000 in the same period the year before. The figures raise concerns that some businesses may be considering writing the expense off as a tax rather than ploughing it back into training.

Various surveys point to a widespread lack of understanding of how the levy works. For example, Evolve Learning Group recently warned that just two in five (37 per cent) employers with more than 150 staff felt they fully understood the levy and how it could be used to benefit their business.

“There’s still quite a lot of ignorance around the existence of the levy and what [employers] can and can’t do,” says Mark Dawe, chief executive of the Association of Employment and Learning Providers (AELP). He recalls how a representative of one major business said to him that it was a shame the levy could not be used to train part-time staff, when, in fact, the funds can be used to do just that.

Meanwhile, Lizzie Crowley, skills adviser at the CIPD, describes the meagre number of businesses registering for an account as “concerning”, but adds that it is “quite early to say” why they are yet to engage with the levy.

“The more positive scenario is that some employers are thinking: ‘How can I properly embed this in my workforce planning, and make sure that the apprenticeships I do take on are there to address issues that we’ve identified within the workforce?’ [Businesses] do have 24 months to spend their money, but it is still concerning that they haven’t signed up for an account,” she says.

One problem Dawe sees regularly is companies thinking too narrowly about who they can train. “In some of the big corporates, while their core business may be, say, engineering, there’s still finance, HR, data, data security, business processing, process work – all of that stuff,” he says. “Many levy payers say ‘oh, we can only spend a third of our money’, but once they’ve spent an hour with one of our providers they realise they can probably spend their levy and more.”

And it’s not just fresh-faced school leavers who can benefit from levy funds. In October, the Chartered Management Institute (CMI) helped create an MBA that qualifies for fund usage and is aimed at senior executives and C-suite level directors. Launching the qualifications, Petra Wilton, director of strategy at the CMI, says she hopes it will help “challenge snobbery around vocational routes”.

However, not everybody is a fan of such programmes. Critics argue that initiatives like these defeat the purpose of the apprenticeship levy by encouraging businesses to focus on training senior staff rather than upskilling juniors and new hires. In 2016, think tank the Institute for Public Policy Research said apprenticeship places were increasingly being awarded to those over 25 years old, while warning that 64 per cent of those receiving apprenticeship training were ‘internal recruits’ rather than new hires.

Dawe explains that, while he’s not completely opposed to such higher-level schemes, “they shouldn’t be to the detriment of the other stuff”. In September, the AELP said it had seen evidence of employers cutting back on recruiting apprentices aged 19 and under, as the rules had inadvertently incentivised organisations to favour the development of older, more experienced staff.

To redress the balance, the AELP called on ministers and politicians for all apprenticeships for 16 to 18-year-olds to be fully funded by the government.

Crowley says that many bigger organisations, which will likely be the ones paying the levy, already have extensive training programmes for senior employees. “I would be concerned if there was an explosion of rebadging existing business programmes at that type of level because that’s not really the challenge we need to address in the UK,” she says.

“We have lots of graduates, lots of people qualified at a very high level in the UK – one of the highest in the EU. But what we still don’t have is a strong technician-level skillset.”