A new apprenticeship levy comes into force on 6 April 2017. It will require all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships.
Mark Farrar, Chief Executive at AAT (Association of Accounting Technicians) gives his verdict on the impact of the levy and shares some advice for SMEs.
The levy is seen as a key means of delivering the government commitment to reach 3m apprenticeship starts by 2020. It will also help to address decades of chronic underinvestment in skills.
Approximately twenty percent of AAT’s 80,000 student base are apprentices so we obviously take a keen interest in this area.
High quality, low drop outs
From the outset, AAT has supported the government’s commitment to three million apprenticeship starts by 2020 but has always stressed this should be backed up by a focus on timely completions and overall quality.
There is little point having a target for the number of people starting an apprenticeship if many fail to finish (overall almost 30% do fail to complete their apprenticeship). Likewise, what is the point in undertaking an apprenticeship if the apprenticeship completed either holds little real value in the eyes of employers or provides too little by way of transferable skills and knowledge for the individual? Unfortunately in a small, but still significant, number of instances, this remains the case.
Whilst supportive of the increased focus, it’s important to also recognise that the UK’s skills needs extend well beyond the scope of apprenticeships. The introduction of the new levy in April 2017 should ultimately recognise the varying requirements of different sectors and be aligned with industrial strategy.
Levy monies should be able to be spent on high quality traineeships and other forms of training that will benefit individuals, employers and the economy as a whole. I’d also like to see the Apprenticeship Levy renamed as the Skills Levy or the Apprenticeships & Skills Levy to reflect this. A description that also aligns with that of the Minister for Apprenticeships & Skills!
Last month we surveyed MPs across all parties on this issue and found that 65% support our suggestion that the levy should be developed to allow funding for skills other than apprenticeships.
Increasing the flexibility of the levy would foster improved productivity across the whole workforce, deliver greater value for money and yet have no further revenue implications for the taxpayer.
Small business, the big difference?
Although exempt from paying the new apprenticeship levy, small and medium sized businesses (SMEs) have a vital role to play in the success of the apprenticeship system, including helping the Government to reach their 3m apprenticeship start target.
In 2016 there were 5.5 million businesses in the UK, 99% of which were classed as being SMEs i.e. companies employing 0-249 people. This would appear to represent a significant pool from which to drive up apprenticeship numbers.
However, 75% of these SMEs do not have any employees; they are sole traders and are therefore extremely unlikely to take on apprentices. Admittedly this still leaves many SMEs for whom an apprentice would be a practical and worthwhile addition.
This year, we would like to see more SMEs taking on apprentices because this would be good for SMEs as well as apprentice numbers.
There are various sources of information available for SMEs to find out how to do this, for example the Informi web site for small businesses, but obtaining information and advice is just the first step. SMEs have to recognise that taking on an apprentice is good for their business – 96% of employers that take on an apprentice report benefits for their business – and then take action to deliver. The government can help by providing a supportive framework that makes taking on an apprentice as simple and cost-effective as possible.
To this end, AAT and various other organisations pressed the government to modify the apprenticeship levy so that large companies are permitted to help SMEs in their supply chain. This was listened to, and in November last year the government made a commitment to allow levy-paying employers to transfer up to 10% of their digital account funds to other employers. This further increases the chances of SME apprentice numbers rising. There are various other steps that could be taken – ensuring apprenticeship funding payments to the smallest companies are made from day one and on a monthly basis instead of 90 days after the apprentice starts work; making sure the new Institute for Apprenticeships has adequate SME representation; and making sure all schools and colleges are required to offer meaningful, independent careers information, advice and guidance that includes information about apprenticeships rather than maintaining the current fixation with a university education.
There are myriad opportunities to drive up SME apprenticeship involvement if the worlds of education, business and government work together. It’s incumbent on all of us to do what we can to make sure such opportunities are taken.
A version of this article first appeared on Huffington Post