Why new apprenticeship levy deserves our support

By Tony Pitchford

The way the government funds apprenticeships in England is changing. It was recently announced that, from 6 April, some employers will be required to contribute to a new Apprenticeship Levy.

The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeship training. The size of the contributions will directly correlate with the size of a company’s annual pay bill. The contributions will automatically be taken from the company’s PAYE scheme and added to its apprenticeship service account.

The government will then apply a 10% top-up to the funds available. So for every £1.00 that enters the company’s account via its PAYE scheme, the government will put in 10p. Employers can then put this money towards apprenticeship training within the company.

This has been in the pipeline for some time – nearly two years, in fact. The recent announcement comes on the back of the government’s commitment to delivering 3 million apprenticeships by 2020. So in the world of further education, the new funding system is something that training providers have been planning very carefully for.

We had initially feared small businesses would be penalised by this new initiative but when you read the guidance that’s not the case and, what’s more, most businesses can really benefit.

The levy will provide ring-fenced funding and a sizeable return on investment for employers. Why? Quite simply, companies that take on apprentices see growth as a result. Indeed, there are estimates that companies will get around £3 back from every £1 of investment.

Apprentices have proven to be more loyal to their companies than those without workplace training and they are more likely to work through the ranks faster too. They also tend to be promoted within the first five years of joining a company, which demonstrates dedication and drive. In business, an apprentice is exactly the kind of employee you want on your team.

So we’ve spoken about the advantages for employers, but what of the disadvantages? Well these are hard to find. At first glance, you could argue that the apprenticeship levy is a tax at the top to benefit the bottom. But actually businesses of all shapes and sizes can expect to gain from this initiative.

Sure, some big blue chips may pay more into the pot than they could ever get out of it, but this only applies to a small minority. There may be opportunities further down the line for companies to provide financial support for training in a sector related to their business but to say more on that right now would be pure speculation.

There might appear to be a disadvantage to those companies who are levy payers but not paying a huge amount into the pot. To take an extreme but plausible example, this could be as little as just £23 a month. Small amounts won’t do much for these companies. But let’s get this in perspective, it only relates to about 20,000 SMEs across the UK overall.

There may be a temptation for these small companies to feel defeated by paying into a system that doesn’t return sufficient funds for them to be useful. They may feel like the money is simply lost. Indeed, it is true that if a company doesn’t use the funding it has paid into, however small, then the money will be automatically returned to the government but it needn’t be so disastrous. Smaller companies simply need to team up with further education providers and local colleges to explore the opportunities available through partnerships that will make their funds stretch further.

Walsall College is a key further education provider that my company, Intequal, has a partnership with. Indeed, we even have an Intequal office on the Walsall College campus.  They work closely with us to help ensure quality of delivery and it continues to be a very supportive business relationship.  We are exploring ways to better support local and national employers through this strategic partnership.

Of course, the new levy brings enormous benefits to prospective apprentices. Some companies will be looking at apprenticeships for the first time, opening new doors to school leavers and college leavers looking to gain both employment and training. And now all learners will carry the same weight of funding for employers, while before the focus was geared towards 16 to 18-year-olds. The apprenticeship levy has really levelled the playing field too, bringing an opportunity to refresh and, in some cases, revise employers’ preconceptions of apprentices, and reinforce just what an asset they can be to a business.

From a training provider’s point of view, we will be carrying on doing what we do. That is, helping employers fill a vacancy and helping young people get on the career ladder. There will be new apprenticeships standards too that help to ensure apprenticeships deliver maximum return on investment for employers. Training providers will need to quickly adapt to these. Previously the standards have been led by the awarding body rather than the employer, but new standards flip this on its head.

Fortunately, adapting to these new standards won’t be too much of a leap for my colleagues at Intequal as we’ve been running the Trailblazer apprenticeships successfully for some time. The new standards already cover a huge range of ‘soft’ skills as well as core, technical skills – a combination that we have found to be crucial to the employer. The levy applies to these new standards as it ensures far more employer engagement in apprenticeship schemes than ever before. Why? If a company’s investing its own money, it’s more likely to get involved in ensuring a good return on investment.

There will inevitably be teething problems for both training providers and employers, and most of these will relate to new systems and processes. But this is ever the case and it should be neither a barrier to change nor an excuse for not taking on an apprentice, which is a brilliant thing for businesses on so many levels. Indeed, in acknowledgment of this, Microsoft is delivering 30,000 new apprenticeships through its partner network, which Intequal is supporting wholeheartedly.

The new levy won’t be without its challenges but the opportunities far outweigh the potential teething problems. That said, the Government will need to implement this new levy right first time for it to be accepted long term.

If you know you are a qualifying company, you will have been informed through HMRC of the requirements and processes in place.  You don’t need to take any action before 6 April, but it would be wise to take as much advice from your current training partners as possible on managing your contribution.

If you are an employer that already has apprentices then they will be unaffected by these changes, but any new apprentices starting with you will come under the new rules.  Again, you should endeavour to work with colleges or training providers such as Intequal to get the best advice.

By identifying areas that will benefit from the training and development that comes with an apprenticeship, many more companies will find that apprentices are a great way to grow and sustain a business.

Tony Pitchford is head of sales and marketing at Intequal, a Microsoft Apprenticeship Programme Provider