Apprenticeships Levy: Benefit Or Burden?

Our industry traditionally recruits apprentices in line with academic years, with three-quarters of manufacturers typically recruiting candidates aged 16 to 18.
[title size=”4″]Verity Davidge, Head of Education & Skills Policy at EEF, the manufacturers’ organisation, provides a guide through the maze of recruitment, payment, accounting – and value for money – of the Apprenticeship Levy[/title]

APPRENTICESHIP STARTS IN THE UK, RECENT CHANGE

Full year 2014/15 there were 74,060 manufacturing and engineering starts
Full year 2015/16 there were 78,480 manufacturing and engineering starts
In 2016/17 there were 74,010 manufacturing and engineering apprenticeship starts, which includes the post Levy period from May 2017 to July 2017, a fall of 5.6% since 2015/16
Between May and July 2017 (immediately after the Levy), all apprenticeship starts decreased to 48,000 from 117,800 in the previous year (a fall of 59%).
Source: The Data Service, Apprenticeship Starts by Sector Subject Framework

 
[title size=”2″]A drop in starts hits the headlines[/title]
“Apprenticeships fall 61% since the Apprenticeship Levy”: was the headline that the Government didn’t want but got anyway. It should act as a clear warning sign to Government that change is needed – now – in order to safeguard the future of apprenticeships, let alone the 3 million target.
[title size=”2”]Ready, Steady, Levy?[/title]

We spent the best part of two years preparing employers as much as we could, touring the country with our Ready, Steady, Levy roadshows, hosting webinars on every topic and holding multiple roundtables. We wanted to ensure that manufacturers embraced the Levy to the best of their ability and utilised it to deliver even more high quality apprenticeships than they do now.
A survey of members earlier in 2017 found that 8% had taken the decision to simply write it off as a tax; 47% planned to use it on existing training programmes; 46% intended to increase their engineering apprenticeship intake; and 35% were looking to put apprentices in other parts of the business, such as sales and marketing, IT, finance and HR. So – what happened to produce a year-on-year dip of 2.5% and dramatic hollowing out of starts in the period from May to July 2017?
Our industry traditionally recruits apprentices in line with academic years, with three-quarters of manufacturers typically recruiting candidates aged 16 to 18. That snapshot of May to July won’t have captured the starts from September/ October onwards, which is when colleges and younger apprentices would normally begin to enrol. However, employers Levy funds have an expiry date of 24 months; those companies that have followed that traditional practice have lost a good six months from the life of their funds. Not great when the average engineering apprenticeship lasts 48 months
and many small and mid-sized companies only recruit every second or third year!
[title size=”2″]Stalling on standards[/title]
We are also hearing some extremely concerning stories from companies who haven’t been able to enrol apprentices over the last few months. One particular reason that stands out is that standards that were due to be ready for delivery, simply haven’t been. Problems have included disagreements about end point assessment plans; funding bands; and even the title of the standard itself! There is an urgent need for streamlining and simplification; this situation must not be repeated.
[title size=”2″]Payment profiles and profits[/title]
Before the Levy was introduced, an employer would agree a payment schedule that worked for them and the provider; now, payments are taken on a monthly basis but with 20% held back until completion. While that may work for a year-anda-day apprenticeship with no upfront costs, it isn’t so great for four-year engineering apprenticeships, where Y1 and Y2 costs are far greater than subsequently. The unintended consequence is that colleges are less willing and able to deliver high cost, high quality apprenticeships; they are offering lower level, lower cost and, ultimately, lower-risk provision.
 

 
 
 
 
[title size=”2″]Systems and services setbacks[/title]

 
 

In order to access and spend Levy funds, businesses need to register on the digital apprenticeship service (DAS). The first hurdle is the employer contract, introduced by the Education and Skills Funding Agency (ESFA). It has caused major problems.
Employers who are multi-sited and operate multiple PAYE schemes have
struggled to add the right schemes onto their account, which means they are not receiving all their funds. Companies were sold DAS as the one-stop shop that would enable them to forecast their funds, see when they expire, and view their commitments. I continue to receive calls saying that accounts simply aren’t doing what they said on the tin.

[title size=”2″]Purchasing power promised but yet to prevail[/title]
Over a quarter of companies cited having greater purchasing power as an advantage to the Apprenticeship Levy. It was seen as a game-changer, driving colleges and providers to deliver what employers want. However, government’s decision to apply a maximum funding cap for each apprenticeship has meant that the majority of providers and colleges have charged the top price for delivering training. Any additional needs are in addition; and businesses that have tried to negotiate on price have seen modules and elements of training cut to keep it in the price point.
[title size=”2″]Urgent action need[/title]

 
Urgent action is needed. The maximum funding band to reflect the true cost of delivering higher and degree apprentice ships must be reviewed. Companies must be allowed to agree their own payment schedule with training providers. The amount of unused funds that can be transferred must be raised, from 10% to 50%. Standards sign-off must be got right.
This isn’t just about employers. Young people up and down the country who have been told they were going to start their apprenticeship have had their hopes dashed. If that’s not a big enough reason for the Government to make change happen now: I don’t know what is.
[title size=”2″]Voices from Manufacturing[/title]

From left to right: Simon Cutler, Ishida Corporation(SC)

Mike Newman, Group Learning and Development Manager, Stannah Group (MN)

Matt Dale, of Martin Baker (MD)