The Apprenticeship Levy: Do Employers Know Enough?

On 6th April 2017 the way the government funds apprenticeships will change in England with the introduction of a new apprenticeship levy.

This levy is initially made up of cash contributions that HMRC will deduct from employers and place in an apprenticeship levy account and will apply to employers across all sectors, who have a payroll bill in excess of ￡3m per year this money will be used for funding new apprenticeships, these deductions will be made regardless of whether they train apprentices or not. The main driver for this policy shift is to increase the number of apprentices and apprenticeships and to also drive up the quality of apprenticeships by allowing employers to completely re-shape and define the content of apprenticeship training standards. With employers contributing to the design and cost of the investment in vocational skills, it is hoped we will see many more apprenticeships over the coming years. This can only be regarded as a positive when you consider that post-Brexit, UK plc will need to improve the skills of its workforce of all ages and across all sectors.

The 0.5% levy rate will apply to any company with an annual wage bill of more than ￡3 million or any company group companies/charities who in total have an annual wage bill of more than ￡3 million. There is a ￡15,000 allowance to offset against the cost of implementing and administering the levy account so if a company payroll bill is just over ￡3m, they won't pay anything until the allowance is exceeded. According to the government's figures this means that less that 2% of UK employers will need to pay the levy.

Affected Companies Still Confused... With Just Weeks to Go!

But that 2% is still a lot of companies who from next month will be paying the levy. What is startling though is that some are nowhere near ready or even worse, don't even know that they will need to pay it. A recent survey carried out by the Awarding Organisation, City & Guilds, found that "one-third of UK employers who are eligible to pay the apprenticeship levy are not even aware of its existence". The survey, which was carried out on 500 senior decision makers, found that almost a quarter (23%) were not aware of the levy and a further 28% were not sure whether it would affect their company.

Assessing the findings, Kirstie Donnelly, Managing Director of City & Guilds stated that “The lack of awareness about the new apprenticeship system among our respondents is a cause for concern." The results of the survey are clearly alarming with the start of the levy looming and recognising this, Kirstie calls for action: "...it’s vital that everyone in the skills sector and Government gets out there and communicates with these less enlightened businesses to help them see the huge potential benefits apprenticeships can bring.”

It's not just employers who need to be better informed, more information is needed for the training providers too. After all, they are the businesses who will be providing the services to the employers and so they need to know how it will work on a practical level. More importantly they need to know now, to be able to get set up and running so that when employers turn to them they know exactly what is required of both sides. Training providers are key players in ensuring this incentive successfully creates more apprenticeships and helps the government hit its target of 3 million new apprenticeships by 2020. Surely then educating and informing them should be a priority too?

So Why are Companies Still in the Dark About the Apprenticeship Levy?

The answer is simple, a lack of mainstream promotion to get the why's and how's out there to all companies in England. There has been no substantial advertising campaigns raising awareness of the policy and initiative to speak of so it's easy to see how some employers have failed to notice it even exists. Communicating to companies about if and how it will affect them and the benefits, is a basic yet undeniably essential factor in ensuring the success of the levy. Aimed at encouraging employers to increase the number of apprenticeships, results of surveys like the one carried out by City & Guilds clearly show that the incentive is falling at the first hurdle in bringing employers on board.

It seems to have fallen to colleges and independent training providers to educate employers. Indeed a search online for the benefits of the levy and how it will affect employers brings up countless college and training provider sites without which, very little information would be out there at all. Harts Learning & Development have a page on their site dedicated to explaining what the levy is and who will be affected and here they also shout about how they can help employers work out how to make the most of the levy. Similarly, the organisation I represent, NGTC clearly identifies the importance of employers needing to be armed with information ahead of time, "... you can never be too prepared for something that's going to impact so heavily on your business.

That's why NGTC has a dedicated apprenticeship team ready to answer your questions and guide you through the complexities of the new system."

This is what we should be getting through mainstream promotion. It seems strange then that an incentive which is aimed at getting employers on board to take such a positive step towards increasing apprenticeships in England, is failing to educate those very same people on how and why they should do so. Especially when encouragingly, some of those that are affected do seem to be positively embracing it.

Better Informed, Means More Reassured and Ultimately More Apprenticeships.

The communications consultancy Gerard Kelly & Partners carried out an analysis of how the apprenticeship levy will affect football clubs in the English Premier League. As part of the analysis, they asked the traditional top six league clubs whether they would be reclaiming the levy they pay to put towards apprenticeships they will offer. Overall it seemed to be a positive reaction to embrace the ability to do so. A spokesperson at Manchester City explained that the apprenticeship levy “will see a holistic approach to support individuals enhance their skill set and we will continue to explore opportunities and openings across the business.” Equally Chelsea seem to be looking into how to invest in their developing skillset, “We are working with the Skills Funding Agency and other relevant parties to explore how the levy can be spent in the most effective way.”

However, looking beyond the positive outlook of this article which was published 6th March 2017 - yes with just over 4 weeks until the levy is introduced; it illustrates that even big companies such as Chelsea Football Club who will have to pay a levy of over one million (￡1,090,000 according to the Gerard Kelly & Partners analysis), are still only in the early stages of investigating how they can work with training providers.

Unfortunately it seems then that the lack of promotion in the mainstream media has left employers confused and unsure what to believe. With the start date looming, many employees find themselves suddenly having to plan for something they had up until recently been completely unaware of.

So as we enter the final weeks until the introduction of the levy, let's see a push from the government to communicate to employers some of which are big household, how they can make the apprenticeship levy work for them by investing in apprenticeships.