Experts have called for the government to ‘simplify’ the Apprenticeship Levy amidst claims that it has ‘complicated learning and development’.
A survey of UK firms conducted by the Managing Partners’ Forum suggested that the number of apprentices ‘would be boosted’ if the Apprenticeship Levy rules were simplified.
32% of businesses polled stated that the Apprenticeship Levy has ‘displaced budget away from the most needed learning and development’, whilst an additional 24% said that the Levy has ‘increased the cost of training’.
‘It is perhaps unsurprising that the Levy is viewed by many as an extra tax that complicates learning and development,’ said Richard Chaplin, Chief Executive of the Managing Partners’ Forum.
‘There is clearly support for the concept of apprenticeships, not least because of their important potential role in helping to address persistent issues around diversity and social mobility within the professions. However, simplification of the rules around apprenticeships – and particularly the Levy – must be considered for the real potential impact to be realised.’
A Freedom of Information request made by the Open University (OU) has revealed that £3 billion in Apprenticeship Levy funding remains unused, meaning that only 14% of available funding is being utilised by employers.
Further research carried out by the OU revealed that although employers agree in principle with the Apprenticeship Levy, many have been left feeling ‘frustrated’ with the scheme. A handful of employers stated that the process for applying for funding has ‘put them off’, while 66% reported that they find the system confusing.
Furthermore, some employers said that the apprenticeships available are ‘not flexible enough to meet their needs’, while others revealed that government changes mean that they are ‘unable to make long-term strategic decisions’.
Of those who have embraced the Apprenticeship Levy, 27% stated that it has been good for their organisation, while 20% said that working with apprentices has delivered ‘significant benefits’.
Commenting on the matter, David Willett, Corporate Director at the OU, said: ‘Employers are missing out on a golden opportunity to close skills gaps and ensure that their organisations are equipped with the ability, agility and knowledge required to handle upcoming challenges.
‘With so many employers experiencing skills shortages, it’s crucial that they make use of the Levy and invest in training to ensure that their organisations remain strong and competitive in the future.’
The Confederation of British Industry (CBI) has urged the government to ‘pick up the pace’ in regard to its reform of the Apprenticeship Levy initiative.
Introduced in April 2017, the Apprenticeship Levy has changed the way in which apprenticeships are funded: larger employers are required to invest a percentage of their annual pay bill in apprenticeships. The Levy is 0.5% of the pay bill, but there is an annual allowance of £15,000. It is reported and paid using the Pay as You Earn (PAYE) process.
The CBI’s statement comes following the recent publication of the latest Apprenticeship Levy statistics, which have revealed that, between August 2017 and April 2018, there were 290,500 apprenticeship starts – a fall of 34% when compared to 2016/17’s figure of 440,300.
The government is committed to achieving its target of creating three million apprenticeships in England by 2020.
Commenting on the statistics, John Cope, Head of Education and Skills at the CBI, said: ‘This stark drop in apprenticeship starts serves as a reminder that the Apprenticeship Levy is not working as intended. If we don’t significantly reform the Levy quickly, companies will find it harder to invest in the quality apprenticeships and skills training they value so highly.’
Meanwhile, the Institute of Directors (IoD) also warned that, if take-up of the Levy continues to be low, it ‘does not look possible for the government to meet its target’. The IoD added that ‘it’s now time for the government to rethink its approach and work with businesses’ in order to successfully reform the Levy.
More than half (53%) of employers currently paying the apprenticeship levy would like to see it replaced with a ‘training levy’, according to a new survey carried out by the Chartered Institute of Personnel and Development (CIPD).
Of more than 1,000 employers questioned, just 17% of those paying the levy said they supported it, while four in ten claimed it would make ‘little or no difference’ to the training they provide.
The study also revealed that 46% of levy-paying employers will simply ‘rebadge’ their existing training in order to meet the requirements.
Introduced in April 2017, the apprenticeship levy is paid by employers with a pay bill of more than £3 million each year. The levy is 0.5% of the pay bill, although there is an annual allowance of £15,000.
The change was included as part of a package of measures to reform the funding of apprenticeships for all employers.
Commenting on the survey’s findings, Lizzie Crowley, Skills Adviser at the CIPD, said: ‘Our research shows that the straitjacket of the apprenticeship levy is forcing many firms to re-badge a lot of their existing training as apprenticeships, as they seek to claw back the levy they pay. In many instances this is not adding any additional value and is creating a lot of additional bureaucracy and cost.
She continued: ‘The government needs to seriously review the levy to ensure it is flexible enough to respond to employers’ needs and to drive the greater investment in high quality training and workplace skills needed to boost UK productivity.’
The number of individuals starting apprenticeships in England has fallen by 59%, according to figures published by the Department for Education (DfE).
The data showed that, between May and July of this year, only 48,000 people began an apprenticeship – a significant fall when compared to the same period in 2016, when 117,000 individuals entered into an apprenticeship.
Experts believe that the introduction of the Apprenticeship Levy in April 2017 has contributed to the fall in the number of workers beginning an apprenticeship.
The Levy was introduced as part of a government target to encourage the creation of three million apprenticeships in England by 2020, with the stated aim of providing ‘a more sustainable workforce and helping to bridge the UK skills gap’.
It changes the way in which apprenticeships are funded, requiring larger UK employers with pay bills of over £l3 million to invest a percentage of their annual pay bill in apprenticeships.
Commenting on the DfE data, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘Getting more people doing apprenticeships is critical, especially if we are to tackle the skills shortage biting many small firms.
‘The Apprenticeship Levy isn’t solely to blame for this drop. The reality is that 98% of firms don’t pay the levy, and these small businesses will be essential to the government reaching its target of three million apprenticeships by 2020.’