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Practical guide – how to make the most of the Apprenticeship Levy right now

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Authors: Professor Elena Beleska-Spasova, Head of Post Experience and Apprenticeship Programmes, Henley Business School and Josie Cluer, Director, EY.

Henley Business School and EY have come together to host a programme of work examining how increasing skills in the UK economy can help weather the storm, for the economy at large, organisations within it, and individuals themselves.

Following the Chancellor’s announcement last week on the second phase of his Plan for Jobs, this week we take a look what employers can do to make the most of the Apprenticeship Levy right now, and leverage the skills gained to drive recovery.

1. The Apprenticeship Levy explained

The Apprenticeship Levy is one of the most significant step changes in skills development in a generation. All businesses in the UK with an annual pay bill above £3m pay the Apprenticeship Levy, with the Government applying a 10% top-up. These funds can then be accessed to purchase apprenticeship education from Levels 2 to 7 via the Government Gateway’s Digital Apprenticeship Service (DAS), but must be spent within two years. By creating a ring-fenced fund for apprenticeship education, the Government sent a clear message that it sees skills development as an important driver of productivity of growth and is prepared to invest in apprenticeship education as well as mandate that investment from employers.

As an employer, how do I know what type of apprenticeships are available? Apprenticeships are organised into “standards” required for specific jobs. You can find Standards that have been approved and are ready for delivery, as well as those that are in development on the Government’s Apprenticeships Hub.

How do I know the standards will meet the needs of my organisation and sector? Each Standard is created by a Trailblazer group of employers from relevant sectors, who have identified the critical Knowledge, Skills, and Behaviours required to develop specific workforce capabilities. The Standard represents an occupational profile across different sectors of the economy.

How much does an apprenticeship cost? Each Standard has a funding band that sets the top price that the Government will contribute to the delivery of the training. Businesses can negotiate rates with providers, but costs that exceed the upper limit are funded directly by the business.

Who is eligible? Broadly, people are eligible if they are aged 16 and above; employed or recruited to a vacancy; residing in England and PAYE contributors.

What has changed recently? Last week, the Chancellor announced the second phase of the Government’s Plan for Jobs (listen to our latest podcast here), which included a £1.6bn investment in scaling up employment support schemes, training and apprenticeships to help people looking for a job, in particular young people. Businesses now have further incentive to take advantage of apprenticeship education, with an additional £2,000 in Government support for each new apprentice they hire under the age of 25, on top of the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices and those aged under 25 with an Education, Health and Care Plan. This provides an excellent opportunity for businesses to review their use of levy funds and how they can make the most of them to increase the skills within their organisation, and leverage this to drive recovery.

2. Top tips: What does this mean for me, and how can it help my business recover?

Treat it as an opportunity not a tax

L&D budgets are particularly vulnerable in this current climate, yet investing in skills will be a critical factor in organisations positioning themselves for recovery – and the levy provides guaranteed funding to enable this and boost productivity as well as employee satisfaction.

Furthermore, the money is "use it or lose it": if you don't spend it within 2 years, it goes back to HMRC. However, another opportunity, for businesses who cannot utilise their owns funds, is to find employers who want to receive a transfer, which can support skills gaps, build skills in the supply chain, and support sectors and regions.

Jo Radford-Cutler, says “some organisations are using the levy funding to completely re-imagine how they recruit, develop and deploy their people, saving millions in the process.”

Be strategic, not tactical

The employers who will get the most from the Levy during the current climate are those who are aligning it to their strategic business needs. Now is the time to transform your learning function and build organisational capacity through a well-designed agile learning strategy and structure. Where are your skills gaps as you navigate the new normal, and how can the levy be spent to meet these gaps?

Professor Elena Beleska-Spasova, says “apprenticeship programmes develop skills and capabilities in real time with immediate return on investment as work-based learning generates immediate productivity gains and innovative solutions.”

Do some myth busting about apprenticeships

"Apprenticeships" typically conjure up an image of 17 year-old plumbers. But apprenticeships are much, much more flexible than that. Apprentices can be:

  • any ages
  • any level, from G.C.S.E (Level 2) to Masters level (Level 7)
  • existing employees, or new employees
  • in any profession.

So, whilst your school leaver programme might be a good place to start, don't stop there. There are many existing employees in your organisation, on the front line, in the back office, and even in the corner office, who could benefit from the Apprenticeship Levy. Apprenticeships are a fantastic way to engage your workforce in relevant learning experience to develop critical skills and build resilience for the future.

Engage with the business

Now is the right time to drive forward future-facing capabilities, and to do this successfully requires a business-wide approach to skills development and apprenticeship education. To get real value from the Levy, the apprenticeship strategy needs to be sponsored right from the top, and owned by the business.

Be a demanding, intelligent, proactive customer

The Apprenticeship Levy is designed to put the power - and the money - in the hands of employers. Businesses have the opportunity to influence the standards and contribute to Route reviews and consultations (such as the recent consultation on proposed changes to the Level 7 Senior Leader Degree Apprenticeship, requested by Education Secretary Gavin Williamson), as well as working closely with training providers to specify their requirements and satisfy their organisation’s needs.

Professor Elena Beleska-Spasova, says “employers can unlock the true potential of levy funded people development strategy by working in close partnership with the apprenticeship provider to identify and map organisations’ skill gaps to relevant standards, contextualise the levy provision to its growth or transformation agendas, and develop talent fit for their future world of work.”

Coming up soon in this series:

We explore further how investment in skills can help organisations navigate the new normal, and the impacts of re-skilling on diverse segments in the workforce.

Published 17th July 2020
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