Apprenticeship levy review Strategic HR
are less than encouraging. In the first
quarter of the 2019/20 academic
year new starts were down 4.7% to
125,800 from 132,000 in the same
quarter the year before.
Despite this downturn in new
starts, apprenticeship funding is
running out – at least for non-levypayers.
Under the current system a
levy-paying business can transfer
up to 25% of its funds to non-levypaying
SMEs in its supply chain.
The government had envisaged
that this would create enough
funding to supplement the cost of
apprenticeships for SMEs, but recent
research by the Association of
Employment and Learning Providers
(AELP) found this not to be the case.
On average apprenticeship
providers are turning down
approaches from 40 SMEs per month
because of lack of funds. In designing
the system this way the government
seems to have underestimated how
much of their entitlement levypayers
would actually use and what
they would spend it on.
The most recent HMRC
statistics for August to October
2019 reveal that ‘starts’ on level
six (degree-equivalent) and level
seven (masters-equivalent)
apprenticeships have risen 49.4%
since the same quarter in 2018/19
and are now nearly five times higher
than the same period in 2017.
Consider that a level seven MBAstyle
apprenticeship can cost up to
£27,000 and you start to uncover
some of what’s at the root
of the funding shortfall.
“The fact that it’s running out of
money actually means that it’s
working well,” says Anthony Impey,
founder of IT service provider
Optimity and chair of the
Federation of Small Business’ skills
and apprenticeship policy group.
David Hare, director in the talent
solutions team at Grant Thornton,
agrees: “What we’ve seen is that
the uptake of apprenticeships has
perhaps been a bit higher than the
government initially anticipated.
There is more spending going on in
the system than the Budget had
allowed for.”
That may be the case, but the
dramatic increase in degree-level
apprenticeships certainly prompts
speculation as to whether employers
are using their funds in the right
places. Is such spending going to help
organisations meet their future skills
needs and, crucially, what role does
HR have to play in influencing how
that money is spent?
Hare says that skills shortages have
prompted employers to take action
and many are coming alive to the fact
that apprenticeships can be a good
solution for this. But he also
acknowledges that there will have
been some pressure from finance
directors to ensure the money is
spent before it expires.
“The dilemma is that the system
incentivises employers to look at how
they can reclaim their levy funding,”
says Ben Willmott, head of public
policy at the CIPD.
Tom Richmond, founder and
director of educational think
tank EDSK, believes that this
model has led to an explosion of
‘fake apprenticeships’.
A 2020 report by EDSK claims
more than £1.2 billion of levy
funding has been allocated for
apprenticeships that wouldn’t have
been classed as such prior to 2017.
“In many respects employers have
responded rationally to the incentives
created by the government. Levypaying
employers are keen to re-label
their existing training courses as
apprenticeships to draw down their
own levy contributions as quickly as
possible,” comments Richmond.
“The small pot of money reserved
for non-levy employers operates on a
first-come first-served basis, so they
are understandably keen to use up
the available funding before someone
else does.”
According to Willmott rebadging
existing, and often expensive,
training programmes undermines
the ambition of the apprenticeship
system, and makes them a “proxy for
all workplace training”.
But Mark Dawe, chief executive
of AELP, argues that the commitment
by levy-payers to spend their funds is
predominantly a good thing.
“My view is that the more levypayers
engage, the more they’re
showing everyone the power
of apprenticeships, the better,”
he comments.
David Phillips, interim managing
director of skills credentialing at City
& Guilds, says that fundamentally we
just need to trust that employers
are making the right choices for
their organisations.
Impey, who also chairs the
Department for Education’s
Apprenticeship Stakeholder Board,
agrees: “We can’t create a system
that is based on giving employers
control... and then turn around and
say ‘we know we gave you a choice,
but I’m afraid you’ve been making
the wrong choice’.”
But how does HR know what
the ‘right choice’ is for their business?
“HR should have a very good
strategic understanding of the
skills that they have, and that the
organisation needs, in order to
succeed,” says Willmott. “That way
decisions around investment in skills
are not purely tactical and are not
made simply to utilise levy funding.”
The key to getting this workforce
planning right is to resist the
temptation to solely focus on
immediate skills gaps, says Sebastian
Tindall, head of L&D at Vitality.
“For us the pressure has never been
to spend the money at all costs but
rather invest it wisely to get the best
out of our people,” he says.
Andy Moat, people director of
B&Q, agrees that sometimes the
incentive to spend the levy funds can
be a distraction for employers.
“We’ve fallen into the trap in the
past of treating government-funded
learning like a KPI and chased a
target, at the expense of the learning
experience,” he says.
The retailer has recently seen 123
employees complete its level three
retail team leader apprenticeship and
has bigger plans. By May 2020 B&Q
aims to have 1,100 of its employees
on apprenticeships, across 28
standards that encompass all of its
business functions.
“We were determined not to repeat
the same mistake, so we are very
The fact
that it’s
running out
of money
actually
means that
it’s working
hrmagazine.co.uk April 2020 HR 33
/hrmagazine.co.uk