Is the apprenticeship Levy working?

Wednesday, July 5, 2023

The implementation of the Apprenticeship Levy in the United Kingdom in April 2017 marked a significant shift in the government's approach to apprenticeships. The levy, a tax on large employers, was introduced with the aim of funding apprenticeship training and encouraging businesses to invest in developing the skills of their workforce. However, several years have passed since its inception, prompting the question: Is the Apprenticeship Levy working in the UK?


The Apprenticeship Levy was designed to address a pressing issue: the skills gap in the UK workforce. By incentivising employers to invest in apprenticeship training, the government sought to bridge this gap and equip individuals with the skills needed to succeed in the job market. Under the scheme, employers with an annual pay bill of over £3 million are required to contribute 0.5% of their payroll to the levy. These funds are then made available to the employers for investing in apprenticeship training.


One of the key objectives of the levy was to increase the number of apprenticeships across various industries. However, the initial impact was mixed. According to data from the Department for Education, apprenticeship starts saw a significant decline in the first year following the implementation of the levy. This drop was attributed to several factors, including confusion over the new system and the challenges faced by employers in adjusting their training strategies.


Despite the initial dip, there has been some recovery in the number of apprenticeship starts since then. In the 2018/2019 academic year, there were 393,400 apprenticeship starts in England, representing a slight increase from the previous year. However, it is important to note that these figures still fell short of the government's target of three million apprenticeship starts by 2020.


Critics argue that the Apprenticeship Levy has created unintended consequences for employers. Some businesses feel that the levy restricts their flexibility in utilising funds for training and development. The requirement to spend levy funds within a fixed timeframe, coupled with complex rules and regulations, has led to challenges in finding suitable apprenticeship training programs and providers. As a result, a significant portion of levy funds has gone unspent.


In response to these concerns, the government made amendments to the levy system. In 2018, employers were given the option to transfer up to 25% of their levy funds to other businesses within their supply chains, allowing them to support smaller enterprises in offering apprenticeship opportunities. This change aimed to address the issue of unspent funds and encourage collaboration between larger and smaller organisations.


Additionally, the government introduced the concept of "co-investment" for smaller employers who are not subject to the levy. Under this model, employers contribute 5% of the cost of apprenticeship training, while the government covers the remaining 95%. This approach has been well-received, as it provides more flexibility for smaller businesses to engage in apprenticeship programs without being burdened by the full cost.


The Apprenticeship Levy also sought to enhance the quality of apprenticeship training. The government introduced standards for apprenticeships, outlining the skills and knowledge that apprentices should acquire throughout their training. These standards were developed in collaboration with employers to ensure that apprenticeships align with industry needs and provide valuable skills to participants.


Apprenticeship Levy


Moreover, employers have been encouraged to focus on apprenticeship quality rather than just quantity. The levy system rewards employers who deliver high-quality apprenticeships by providing them with additional funding. This approach incentivises businesses to invest in comprehensive training programs that offer tangible benefits to apprentices, fostering their professional development and improving their long-term career prospects.


Despite these efforts, challenges persist in maximising the effectiveness of the Apprenticeship Levy. One issue is the lack of flexibility in using levy funds for non-apprenticeship training. Employers argue that a broader training levy, which allows funds to be utilised for a wider range of skills development, would be more beneficial in meeting their specific workforce needs.


Another concern is the perception that the levy primarily benefits larger employers, as they are the ones required to contribute. Smaller businesses, who may not be subject to the levy, face financial constraints in providing apprenticeship opportunities. Although measures have been introduced to support smaller enterprises, there is still a need for ongoing evaluation and adjustments to ensure equitable access to apprenticeship training for businesses of all sizes.


The question of whether the Apprenticeship Levy is working does not yield a simple answer. While there have been positive developments, such as increased apprenticeship starts and a focus on quality training, challenges remain. The government should continue to listen to the concerns of employers and adapt the levy system to ensure its effectiveness in bridging the skills gap and promoting apprenticeship opportunities across the country. By refining the system and addressing the specific needs of businesses, the Apprenticeship Levy has the potential to play a vital role in equipping individuals with the skills required for a prosperous and competitive workforce in the UK.

The Office Apprentice