“Drove my chevy to the levee, but the apprenticeship levy was dry”

The need to upskill workers through apprenticeships to close the skills gap before the impact of Brexit is felt, is a decision being increasingly made by employers up and down the country. This is supported by a recent study which highlighted that a third of businesses viewed apprentices as the most valuable source of emerging talent in 2018. But the apprenticeship levy is not without its flaws.

The CIPD published a report titled ‘assessing the early impacts of the apprenticeship levy’ earlier this year, which found that 53% of employers who pay the levy wanted a more flexible ‘training’ version. In what maybe be viewed as a response to this call for greater flexibility versus the potentially ‘dry’ levy that is currently in place (cue the pun intended title from a popular Don McLean song!), “the government has announced that from April, employers that pay the apprenticeship levy will have the option to transfer 10% of their annual apprenticeship funds to other organisations” (see source).

Employers will be able to make the transfer as long as they and the fund recipients are on the apprenticeship system (see source). The guidance that accompanies the new legislation also indicates:

  • The money can only be used to pay for the training and assessment cost of the apprenticeships agreed with the receiving employer
  • There are no restrictions as to whom employers can transfer the funding to
  • Funds are to be paid monthly for the duration of the apprenticeship
  • Companies making transfers and those receiving funds are required to agree on the details of the transfer, including factors such as how many apprentices it will cover(see source)

People Management highlights that “the regulations the government will introduce alongside this new option include that where an organisation currently has an apprentice funded by a transfer, it cannot transfer funds to another employer and, once a transfer is made, organisations cannot refund it to the sending employer”.

The publication continues that “should the business funding another employer’s apprenticeship run out of funds, the government will pay 90 per cent of the remaining cost, and the receiving organisation will be required to pay the remaining 10 per cent contribution – known as co-investment. But employers are free to choose to which organisations funds can be transferred”.

Some organisations have welcomed the greater sense of ownership over apprenticeships that this flexibility would bring, particularly given that employers have been asking for it since the original consultations in 2015 (see source). Others have delved a bit deeper into why the government are now introducing transfers that can be given to any employer the levy payer chooses: Mark Dawe, CEO of the Association of Employment and Learning Providers (AELP),suggests it could be down to the difficulty in policing “big employers helping out smaller firms in their supply chains” (see source).

From my perspective there are a lot more practical issues around this announcement and the levy’s current operation generally. Employers are telling me that the ‘banding cost’ of apprentices means they have had to significantly reduce apprentice numbers. Historically under co-investment, levy payers only funded 10% of an apprentice qualification in addition to salary. Now they they can only have a small number of apprentices and only in England before the levy funds are used up and then the business has to fund 10% of any other apprentice training through co-investment, which they are unlikely to do as there is also the small matter of training that is not qualification based for the rest of the workforce.  Devolution is a very real issue to for those who have a nationwide workforce given that no funding is automatic other than in England and then is proportionate to those with an English address.

On transfers I wonder why the government are offering to pay the rest of the costs of an apprentice if the transferor’s funds run out, isn’t that a licence to under-fund a transfer knowing you’re unlikely to have to foot the bill for the other employer? It also implies that transfers are restricted to levy payers, which means any smaller subsidiaries or suppliers cannot benefit from a transfer.

Whilst this flexibility might be welcome, a more radical overhaul after year two is likely – I’d suggest once the Brexit dust has settled.


People Management