Long reads

Will the apprenticeship levy ever work?

29 Mar 2018 By Robert Jeffery

To many employers, it is over-bureaucratic and imperfect, but with just 12 months left to spend their funds, how can they ensure it still delivers value?

Bad news, they say, often comes in threes. Which means the apprenticeship levy stands on the cusp of completing a unique and unwelcome triumvirate. 

Unveiled in 2015 as the lubricant to help the UK reach an ambitious target of three million apprenticeship starts by 2020, the financial provision – a tax, in effect, say its detractors – has been consistently kicked down by journalists, think tanks and commentators.

And recently, they have been handed two particularly powerful pieces of ammunition. In the first quarter of the levy’s operation, apprenticeship starts fell 59 per cent year on year; by November 2017, they were still 35 per cent behind 2016. Far from a fillip for apprenticeships, the levy appears to be actively repelling employers.

Then, in February, a House of Lords select committee savaged the scheme as “woefully inadequate” and “strikingly hit and miss”. The third and final indignity is likely to arrive in April, when the first anniversary of the levy’s introduction will almost certainly coincide with another set of disappointing figures on take-up, leaving that three million further away than ever and prompting another round of hand-wringing about the red tape faced by overburdened businesses. But is that the full picture? And is the levy a long-term medicine employers would be best advised to swallow?

The levy mandates that employers in England – or with a sizeable enough operation in England – put 0.5 per cent of an annual payroll of £3m or more into a digital account to pay for apprenticeships, which they have two years to disburse. What’s emerged from the first 12 months is a tale of bureaucratic wrangling as employers assume responsibility for arranging and administering apprenticeship training (often for the first time) against a backdrop of patchy awareness and technical unpreparedness. Not all of this is the government’s fault.

Despite the fanfare, employers fundamentally failed to plan ahead for the levy, says Lizzie Crowley, CIPD skills adviser: “Employers have to do a lot of the work themselves and many are finding it very bureaucratic. There’s been a lot of change, and a new requirement for 20 per cent off-the-job training for a minimum duration of 12 months – that has all helped reduce the number of short-term, low-quality apprenticeships and hopefully will drive out some of the worst practice. But employers didn’t plan ahead as much as they should have before the levy came in, and now is the time to step back and think about how they provide apprenticeships.”

Louise Doyle, director of Mesma and a further education consultant who works with employers on training provision, says: “There has been a misunderstanding about how much it would take to make this operable. Those levy payers who already use apprenticeships find the admin burden relatively straightforward – they’ve just had to get used to a new portal, which is a bit clunky.

“But businesses that are new to apprenticeships face a far greater challenge. They are having to think about how they direct their levy funding appropriately, how they manage apprenticeships and how they report on them to guarantee value for money. That’s not a bolt-on to someone’s existing job – it’s a job in itself.”

The problem, adds Doyle, is that larger levy payers haven’t invested in the planning and operational capacity to make the process effective. As she puts it: “If you want to get value for that enormous pot of money, why wouldn’t you invest in HR?”

But the issue goes deeper than paperwork and support. Many companies will only previously have welcomed apprentices into back-office functions rather than frontline operations. It means you need to create what Doyle calls an ‘internal market’, where managers understand the benefits of an apprentice and are encouraged to make a case for welcoming one. 

There is also, says Doyle, a tendency in some organisations to prevaricate rather than act: “I can see why the issue has been kicked into the long grass when businesses are incredibly busy, but there’s also been a lot of time spent preparing strategy documents and saying clever things about apprenticeships, rather than thinking about how you channel your operational L&D efforts to deal with them.”

Providers, too, have been a cause for concern. There are now more than 2,000 institutions offering apprenticeships – among them employers, colleges and dedicated training entities – but Ofsted reports that 51 per cent are rated inadequate or requiring improvement. 

“I worry about the number of employer-providers that are emerging,” says Doyle. “I’m not sure they always appreciate what it means to deliver apprenticeships under a funded regime.” Crowley adds: “A significant proportion of the providers that have registered have never offered an apprenticeship before. There is an awful lot of reputational risk for an employer if you end up choosing a provider that either goes bust or is in the market for the wrong reasons.”

But the most controversial aspect of the levy is far from new. After the last round of apprenticeship reform at the turn of the century, concerns emerged that employers were ‘rebadging’ training for existing employees as an apprenticeship to recoup government funds. Those fears have returned with a vengeance. In a January 2018 CIPD survey, 46 per cent of employers said they would rebadge existing training under the levy.

Not all rebadging, however, looks the same. At one end of the scale, offering opportunities to minimum wage staff to gain qualifications (perhaps for the first time) could be said to represent a positive investment in lifelong learning. But news that Deloitte has put half of its graduates into an apprenticeship scheme coincides with questions over whether levy funds are diverting existing spend in some businesses. 

“I can think of examples where degree-level apprenticeships would really work for someone,” says Doyle. “But we have to be careful we don’t see a member of staff being forced into an apprenticeship they don’t even know they are on. That has no value to the individual. 

“If someone has been in a job for 15 years and that job hasn’t changed, that’s the wrong way to use an apprenticeship. We need some clear lines in the sand about that. The levy creates incentives to crowbar something that isn’t an apprenticeship into one, and HR comes under huge pressure [to do so].”

Deloitte would argue it is still taking on numerous new apprentices as well as graduates. Others may be tempted to simply divert the funds. But the government’s own messages on this crucial issue have been mixed. While stating that the apprenticeship levy is fundamentally about increasing routes into the workplace, it has recently confirmed that up to £18,000 can be used to fund MBA courses. 

For Crowley, that is problematic. “Workforce training goes disproportionately to the highly skilled and highly qualified. If you are in a low-skilled job, you are probably going to miss out on the opportunity to receive training. And with tuition fees so high, a viable alternative to university is really important for social mobility too.”

Hilary Steedman, research associate at the London School of Economics’ Centre for Vocational Education Research, says: “I’m prepared to be quite tolerant of rebadging as long as it is a proper apprenticeship.” But she suggests we may eventually need to introduce a quota for overall apprenticeships that must be new hires.

A different take on rebadging can be seen at Whitbread, the parent company of Premier Inn and Costa Coffee. Its head of education, Sandra Kelly, has long been a fan of apprenticeships and has relentlessly driven the agenda internally. Renaming existing training, she says, would be “frankly unethical” but is also impractical: “It means you would miss out on some of the most incredible individuals. Our apprentices have a huge sense of loyalty and emotional engagement with us, and higher levels of productivity.”

Whitbread demonstrates the value of long-term planning, too – it began investing in this area in 2012 and has been preparing to make sure the levy delivered since it was announced. “The business challenges we’ve had for decades are around attracting people, retaining them and progressing them,” says Kelly. 

Apprentices, she adds, offer a ready-made answer, and the business now boasts 2,500 of them. Almost two-thirds of all new hires cited the quality of Whitbread’s apprenticeships as a reason for deciding to join. But crucial to the success of the scheme was putting the levy on to every department’s P&L sheet, so that managers and leaders knew they were paying for something and wanted to see value from it: “We held a lot of internal conversations about the value of bringing an apprentice in. For example, rather than hiring an expensive individual into the digital marketing team, they brought in a self-taught 18-year-old who happened to have chosen not to go to university.”

Whitbread isn’t the only organisation to see positives in the situation. The CIPD has argued that the levy should cover training more broadly rather than honing in on apprenticeships, but Crowley says: “It has the potential to do good – particularly by putting the power back in the hands of employers. But there is still a need for fundamental reform. Rather than the three million target, we need a smaller number of higher-quality apprenticeships.”

Doyle says the fact that universities are seriously invested in apprenticeships for the first time can only be good, and attributes many of the issues to date to teething problems. Whether the negative headlines will go away remains to be seen, but one thing’s for sure: no amount of complaining about the system will get your levy money spent before the deadline.

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