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Apprenticeship Levy Changes: What HR Need to Know

16th Dec 2019
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It has now been two years since the apprenticeship levy scheme was introduced in the UK. The initiative was announced with the hope of training three million school and college leavers in vocational skills by 2020 to the benefit of the UK economy. At a time of severe skill shortages across a wide range of sectors, this was certainly welcome news to many. However, the results from this scheme can be described as underwhelming to say the least.

The initiative made it compulsory for organisations with annual wage bills in excess of £3million to set aside an equivalent of 0.5 percent of this sum to fund approved workplace training programmes.

However, 45 percent of the companies paying into the scheme said they had not used any of the money in their levy pots since the system was introduced, according to a survey conducted by accountancy firm Grant Thornton. In the Levy’s first full year, employers used just 15 percent of the £3.9 billion pot.

This is certainly an unfortunate waste, as we are all aware of the potential that learning and development has on individuals and the important role training plays in strengthening businesses. In fact, in Deloitte’s 2019 Global Human Capital Trends report, 86% of survey respondents said the need to improve learning and development in their companies was their biggest challenge, showing how much of a priority it is for firms globally.

While once vocational training was seen as inferior to an academic route of study, today more people are aware of how valuable learning on the job is. LinkedIn’s 2019 Workplace Learning Report discovered a high demand for social learning experiences at work, with over half of each generation valuing the ability to collaborate with instructors and/or peers while learning.

The apprenticeship levy scheme was intended to encourage this, however flaws were quickly revealed after its introduction. For example, some companies that were mandated to contribute found that they are not able to take advantage of the scheme. With the definition of a large company directly linked to the value of its payroll, even SME recruiters - which manage PAYE for temporary workers - quickly found themselves contributing to a scheme from which they struggled to see any real benefit.

It soon became apparent that many businesses across the board were losing out on the funding they were paying into their levy pots. In fact, in September 2019 the Government revealed that employers have lost a total of £133 million from apprenticeship levy accounts, due to funds expiring.

Apprenticeship levy scheme changes

The government, however, has taken feedback onboard and introduced new rules to maximise the benefit of the scheme. Changes introduced in April 2019 made it possible for employers who can’t use their entire pot to upskill their own talent to donate 25 percent of their funds to other companies, rather than it being absorbed by the Treasury.

A number of organisations have taken advantage of this development, and HR leaders should also capitalise on this change in rules. For example, APSCo has partnered with specialist training provider, Recruitment Juice and developed a new initiative which enables its members to share unused Apprenticeship Levy funds for the benefit of talent acquisition. Through its scheme, a number of suppliers to the sector have donated a portion of their pots to assist recruitment firms and hiring managers in sending delegates on Level 3 Team Leader and Level 3 Recruitment Consultant programmes from January 2020.

If HR leaders can partner with businesses that are donating their levy funds, they’ll be able to maximise the apprenticeship levy scheme’s potential. Nurturing emerging talent pools has been proven to be a successful method for finding top tier individuals and creating a strong pipeline of future leaders. For example, KPMG, Sky and other big companies have all celebrated recruiting esteemed employees through their apprenticeship schemes.

Today, there are more opportunities than ever for those wanting to develop their career in HR. For example, APSCo, in partnership with Cranfield School of Management and Grant Thornton UK LLP, have launched the Cranfield Executive MBA (Human Capital). For firms with Apprenticeship levy pots, two-thirds of the cost of the EMBA in Human Capital can be covered through the initiative.

For those without access to Levy funds, APSCo has secured the agreement of a number of MSPs and umbrella companies which have unused levy funds, for a transfer of up to 25% of those funds to APSCo members that wish to undertake this EMBA. This is the latest apprenticeship, which meets the requirements of the UK Level 7 Senior Leader Master’s Degree Apprenticeship Standard. It is designed for middle to senior managers wanting to move into a more senior leadership role and for those on a fast-track career path within their organisation.

HR teams must capitalise on opportunities for collaboration on the back of the apprenticeship levy scheme changes and ensure that they are using this chance to fund the training and development of their people.

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