By forcing large companies to pay into a fund that can only be used against the delivery of apprenticeships, the apprenticeship levy was supposed to incentivise employers to run apprenticeships or increase the number of apprentices they employ.
The large levy-paying firms can draw back their contributions to pay for apprenticeships, while small, non-levy paying companies will have 90 per cent of their apprenticeship costs paid for out of the levy surplus.
However, one year on from the introduction of the apprenticeship levy, the number of apprenticeship starts is falling. Despite a recent small rise in popularity (7 per cent from 2015 to 2016), initial data from EngineeringUK’s 2018 State of engineering report suggests that engineering-related apprenticeship starts are dropping. Further research by the OU revealed that only £108m of the £1.39bn collected has so far been withdrawn by employers.
In the IET’s 2017 survey on skills and demand in industry, only a quarter of engineering businesses (27 per cent) said the levy would increase the number of apprentices they took on, in contrast to more than half (53 per cent) that said it wouldn’t. A fifth of employers are still unsure of the impact the levy has had on their apprenticeship provision.
The government’s ambition to hit three million overall apprenticeship starts by 2020 therefore looks increasingly shaky, with the latest provisional figures provided by the Department for Education indicating that it is a significant 18 per cent below the target trajectory.
Making the levy work
Engineering apprenticeships are costly to deliver, often far exceeding the maximum levy funding, so many large companies find it is cheaper to pay the levy ‘tax’ than to deliver an apprenticeship.
However, some UK engineering employers are making full use of the levy to suit their individual business requirements and boost their apprenticeship provision. Siemens UK, for example, currently has just over 600 apprentices across the whole of its business. “As a company we are proactively looking to maximise the levy,” says Jason Phin, training solutions business manager at Siemens UK. “But simply taking on more apprentices isn’t the only answer. We’re also looking at ways in which we can use the levy to reskill members of our existing workforce, where opportunities allow; for example, as part of our graduate engineering development programme.
“Our question has to be: where is our need in the existing workforce to update skills, and can we use the levy, and the means by which apprenticeship standards can be leveraged, against the provision of these skills?
“We’re also using the levy as a business development opportunity – we’re finding that as we’re talking to our customers about training products and are able to demonstrate to them that we have strong internal apprenticeship services, we can educate them in terms of what they could and should be doing with the levy.”
The Siemens case study is a particularly good example of the scope, potential and flexibility provided by apprenticeship levy funding.
However, apprenticeships are primarily work-based learning programmes. Levy funding is available for 20 per cent of off-the-job training but, if some ‘on the job’ training could also be funded from the levy, companies could then use more of it and introduce more structure into their apprenticeship delivery to show how on-the-job training is delivered.
The IET agrees with employers and the CIPD, which are both asking for the levy funding rules to be simplified, more flexible and made less ambiguous.
John Beattie is apprenticeship adviser at the IET