Apprenticeship levy failing to make grade for employers

A new survey by the CIPD finds over half of employers paying the apprenticeship levy want it replaced with a more general training liability.

Apprenticeship training levy
The professional body for HR and people development's study of 1,000 employers is leading the CIPD to warn of the apprenticeship levy’s unintended consequences.Almost half (46%) of employers paying the levy expect their organisation to simply rebadge existing training. A similar proportion (53%) say they would prefer a training levy to the current arrangement.With the government’s Industrial Strategy prioritising skills and productivity, the survey also reports four in ten (40%) levy-paying employers believe the apprenticeship tax will make little or no difference to the amount of training they offer.The current arrangement gained the support of only 17% of levy payers.

Apprenticeships falling out of favour?

The CIPD’s findings in Assessing the Early Impact of the Apprenticeship Levy follow a sharp decline in the number of apprenticeship starts. Just 48,000 new apprenticeship commenced between May 2017 and July 2017. This is a 59% drop on the same period in 2016.One consequence of rebadging apprenticeships and training finds the CIPD is that an increasing proportion of apprenticeships are going to existing and often older employees, including already well-qualified managers. This means fewer apprenticeships are available to help young people make the transition from education to the workplace – the original purpose of apprenticeships. 
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What is the apprenticeship levy?

The CIPD study also suggests more could be done to increase awareness around the scheme, which was launched last April and aims to fund 3 million additional apprenticeships over the next five years. The levy requires employers with a payroll of more than £3 million a year (around two per cent of businesses in the UK) to pay 0.5 per cent of this to fund apprenticeship costs. Yet, more than a fifth (22%) of all employers also still don’t know whether they are liable to pay the levy, according to the CIPD’s analysis. In addition, a fifth (19%) of levy paying firms, including 35% of SMEs, don’t plan to use the levy at all to develop apprenticeships, but will simply write it off as a tax.Lizzie Crowley, skills adviser at the CIPD, said: “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.“There also needs to be much better support for small- and medium-sized firms (SMEs), both for those that pay the levy and those that don’t, to help them to design and implement effective apprenticeship schemes. Our research shows too many SMEs are either not planning to use levy funding to invest in apprenticeships or are planning to write the levy off as a tax.”

Is a training levy the answer?

Lizzie Crowley continued: “Apprenticeships are extremely important, but other forms of training are equally valuable and often more flexible and better suited to the needs of organisations."A move to a more flexible training levy would have the effect of continuing to prompt greater employer investment in skills, including apprenticeships, but in a way that is much more responsive to employers’ needs." In order to ensure that the apprenticeship levy increases both the quantity and quality of apprenticeship starts, the report recommends that the government:
  • Reforms the apprenticeship levy into a more flexible training levy
  • Runs an awareness campaign to promote the levy and its benefits to businesses across England
  • Invests £13m a year to provide HR support to small businesses in order to give them the capability to respond positively to government initiatives such as the apprenticeship levy
  • Commissions an urgent review of apprenticeship standards, carried out by the Institute for Apprenticeships and Technical Education in order to ensure that they are providing quality learning and education.
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