The apprenticeship levy launched by the government in 2017 has not had the expected success but the CIPD has proposed new guidelines for the levy to improve it.
Prior to the launch of the apprenticeship levy, investment by employers in non-essential job training and employee development, as well as apprenticeship schemes, was declining. The UK government introduced the levy in 2017 to combat this and support participating companies in offering more apprenticeships and improving non-essential training to benefit employees.
The levy became mandatory for employers whose payroll is in excess of £3 million. The levy is charged at 0.5% on their overall payroll and is paid directly through PAYE as well as national insurance and income tax.
Levy contributions are managed in an online account which the employer can access to facilitate and finance apprenticeship training or End-point Assessment. Levy funds are available in the account for 24 months after which point they are returned to the government.
Employers who do not qualify for mandatory levy payments can pay 5% of the course cost for apprenticeship training and the remaining 95% is subsidised by the government.
How successful has it been?
Four years after the launch of the levy, the Chartered Institute of Personnel and Development (CIPD) gathered feedback and statistics on the success of the scheme. While there have been individual success cases attributed to the levy, on the whole statistics are more damning than celebratory:
- In 2016/17 there were 494,900 apprenticeships – this fell to 322,500 in 2019/20
- Under 19s held 122,800 apprenticeships in 2016/17 – this fell to 76,300 in 2019/20
- 19–24-year-olds held 142,200 apprenticeships in 2016/17 – this fell to 95,300 in 2019/20
- Investment in non-essential job training in England fell by £2.3bn between 2017 and 2019.
- In 2016 11% of SMEs (defined as less than 50 employees) employed apprentices, but this had fallen to 9% by 2019.
How could the government improve the apprenticeship levy?
Despite the recent announcement in the spring budget of an increase in investments in traineeships, and increased incentives for apprenticeships, there is still a call for the government to provide a long-term strategy focusing on reforming the apprenticeship levy.
The CIPD has proposed a reform that would change the apprenticeship levy to a flexible and broader reaching training levy to boost employee skills, engagement and satisfaction and improve workplace productivity, as well as continuing to increase employment opportunities for young people.
The concern with the apprenticeship levy remaining unchanged is that it restricts employers, and their money is ringfenced with strict limitations on how and where they can invest it. This is particularly concerning at a time when companies need access to their funds to support employees and boost business skills in relevant ways to survive the pandemic.
The CIPD suggests the following amends to the levy:
- A broader training levy means employers can invest in accredited training and skills development outside of the current levy requirements which could be cheaper and more relevant for employees over 25, meaning more money is available for apprenticeships.
- Employers can engage with local training and education facilities providing a boost to the local economy, encouraging young people to continue engaging with education, and supporting the goals in the Government Skills for Jobs scheme.
- Employers can also invest in more industry-specific training and skills to support more relevant learning and development for their employees.
