Apprenticeship levy-paying employers are only using an average of 55.5% of available funds, according to research that finds the regime is not working as well as employers perceive it should.
Research from City & Guilds and The 5% Club has found that only one in 25 (4%) employers have used their full apprenticeship funding in the past five years, meaning millions of pounds that could be used to develop vital skills are going to waste.
Their survey of 1,000 HR leaders at levy-paying organisations found that 94% of firms that have not used all of their apprenticeship fund face at least one barrier to accessing it. Eighteen per cent said the process involved too much bureaucracy and administration.
Some also had practical difficulties in offering apprenticeships; 19% cannot commit to the length of time that an apprenticeship takes to complete, and 17% said they lacked the time to invest in apprenticeships.
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Apprenticeships must run for at least 12 months, and the curriculum and standards set by the government are rigid. City & Guilds and The 5% Club said this meant employers were unable to tailor learning and apprenticeship spending to the needs of their business.
This was of particular concern as UK employers face a skills crisis, the research suggested. The Levying Up report finds that only 10% of large companies were always able to recruit people with the skills they need, leaving 90% experiencing some difficulty in hiring the right people. A quarter of employers were looking to recruit people who already have the skills for the job.
Asked what would encourage organisations to spend more of their apprenticeship levy funds in future, 38% wanted to see the creation of a broader skills levy that allows them to fund different types of training, such as management training or work placements, and 38% wanted to be able to spend the levy on apprentices’ salaries.
A third said the apprenticeship system needed to be less bureaucratic.
The introduction of a broader skills levy, instead of the existing apprenticeship levy, would allow businesses like ours to offer different types of training that focus on career progression, rather than just ad hoc training courses that don’t serve as much development purpose.” – Warren Page, Xtrac
Kirstie Donnelly, CEO of City & Guilds, said: “Yet again the employer voice is coming through loud and clear – apprenticeships are a valuable recruitment and retention tool but the current system is just not working for them, leading to large sums of funding intended for the levy instead going back to the Treasury because they cannot be used, all this at a time of such acute skills gaps and shortages.
“This research reinforces previous calls we and the wider skills sector have made for more flexibility to the current system. As a fundamental pillar of our education and skills development system, apprenticeships must stay front of mind and employers should also have more control to respond to workforce and organisational needs if they’d prefer to spend the allocated funding – such as moving more along the supply chain or investing in broader skills development. If we are serious about levelling up – levying up is a key way towards that.”
The report recommends the creation of a broader skills levy, which ringfences a significant amount of funding for apprenticeships but also allows employers to choose which qualifications would best fit their skills needs.
Warren Page, apprentice manager at engineering company Xtrac, said: “Such a huge apprenticeship levy underspend is a pity for businesses who are keen to offer high-quality training to staff – existing or prospective, but that feel the current system doesn’t work well for them. The introduction of a broader skills levy, instead of the existing apprenticeship levy, would allow businesses like ours to offer different types of training that focus on career progression, rather than just ad hoc training courses that don’t serve as much development purpose.”
The report also suggested that the Department for Education and the Treasury should invest unspent levy funds into programmes designed to reduce skills shortages, such as incentives to encourage employers to invest in skills, or additional support with travel or equipment for hard-to-reach learners.
Other recommendations included reviewing apprenticeship standards to ensure they meet the needs of SMEs, as many of the standards were developed with large organisations in mind; cancelling plans to reduce the number of level 2 apprenticeships; introducing modular, bite-sized learning options; and providing better information and guidance around the funding and training options available.
The report also found that:
- 62% of employers see apprenticeships as the most effective route for training. This is followed by traineeships (55%) and university degrees (53%)
- Only a third of employers see T-levels are an effective training route
- Almost half of employers that have used apprenticeship levy funding directed it at training younger people (aged 16-25). 47% used it to train new starters and 27% used it to upskill existing employees
- Only 1% say there is no training they would like to spend their levy on, suggesting that the regime still has potential.
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