HR · 19 January 2018

Employers remain in the dark over new apprenticeship funding arrangements

The government has set a target of three million new apprenticeships by 2020
The government has set a target of three million new apprenticeships by 2020

Over one in three employers remain unaware of new apprenticeship funding arrangements designed to increase in-work training opportunities, new research has found.

Since the introduction of the Apprenticeship Levy in April 2017, employers with a payroll of over £3m have been charged 0.5 per cent on annual bills to fund the government target of three million new apprenticeships by 2020.

However, a survey of 500 business owners, undertaken by the London Chamber of Commerce and Industry (LCCI), revealed at least third of employers at London-based firms did not know how the new apprenticeship funding system could benefit their company.

To increase in-work training opportunities at small businesses, a new “co-investment” system was introduced. Non-levy paying employers now pay ten per cent towards apprenticeship training, with the remaining 90 per cent paid by government up to the maximum funding band.

For business owners with fewer than 50 staff, the Apprenticeship Levy will fund all training for 16 to 18 year olds, and 19 to 24 year olds with an Education Health Care (EHC) plan.

Find out everything you need to know about the Apprenticeship Levy

The latest research suggest employers are not only struggling to understand the new system, but reluctant to invest in apprenticeships altogether. Only nine per cent of respondents to LCCI’s survey had hired more apprentices since the levy was introduced.

Meanwhile, 57 per cent did not believe offering more apprenticeships would benefit their business, compared to just 14 per cent who felt they would.

Commenting on the findings, Colin Standbridge, chief executive of LCCI, said more needed to be done to make employers aware of the new system’s benefits.

“Worryingly what is most clear, is that there is a lack of understanding and indeed perceived clarity over the levy and how it can benefit businesses,” he warned.

“At a time when many companies and industries in the capital facing skills shortages apprenticeships can be a vital tool, but such schemes will only work with increased business understanding and involvement.”

Placements plummet

Recent figures from the Department for Education (DfE) showed that apprenticeship numbers have in fact fallen at a rapid rate since the levy was introduced.

Apprenticeship enrolments dropped 59 per cent in the final three months of the 2017 academic year. In the three months to July, only 48,000 placements were entered, compared to 117,800 in the same period in 2016.

“[The figures] have confirmed our fears over a significant drop in apprenticeships. Getting more people doing apprenticeships is critical, especially if we are to tackle the skills shortage biting many small firms,” said Mike Cherry, chairman of the Federation of Small Businesses (FSB).

“The apprenticeship levy isn’t solely to blame for this drop. The reality is that 98 per cent 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.”

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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