As we await the outcome of the Government consultation on the proposed apprenticeship levy, Darren Maw examines what the levy will mean for employers.
The Conservative Government has undertaken to deliver 3m apprenticeships over the next five years. In order to achieve this ambitious target, the Government is placing the onus back on employers with the introduction of an ‘apprenticeship levy’. The levy will ensure that employers contribute to the cost of training apprentices.
So what do we know about the apprenticeship levy?
Full details of the levy will be announced in the Autumn but what we do know is that the Government is proposing that all large UK employers, both private and public will pay the levy. The levy payments will be converted into digital vouchers for employers to use to fund apprenticeship training from recognised providers.
The apprenticeship levy will only be payable by ‘large’ employers. The calculation of the size of employers will be based upon the total number of employees but what will amount to a ‘large’ employer is yet to be defined.
Skills training, including apprenticeships, is a devolved policy area in Northern Ireland, Scotland and Wales. As such, the proposal is limited to employers based in England and the digital vouchers can only be spent on apprenticeships in England. The limited geographical remit of the proposal will cause logistical challenges for employers operating across the UK; an issue addressed in the consultation paper.
Recognising that employers are best placed to identify the skills their organisations require, under the proposal, employers will be free to choose what apprenticeship training they invest in. The Department for Business, Innovation and Skills has also stated that employers that commit to apprenticeships will be able to get back more than they put in, although the details of how that will work in practice have not been provided.
What is the purpose of the levy?
The target of 3m apprentices by 2020 and the apprenticeship levy are all part of the Government’s aim to close the UK’s skills gap by reversing the decline in workplace training. Referring back to the era of John Major’s Conservative Government, July’s Budget document stated, ‘this approach will reverse the long-term trend of employer underinvestment in training, which has seen the number of employees who attend a training course away from the workplace fall from 141,000 in 1995 to 18,000 in 2014’.
Reversing the decline in workplace training is to be applauded but whether an apprenticeship levy is the best way to achieve this reversal remains to be seen.
So what would employers want to see in the final version of any apprenticeship levy?
Quality over quantity
There is a real danger that the rise in apprenticeships could impact on the quality of apprenticeships. A lot of work has been done over the last five years to both re-invent and more recently protect the apprenticeship brand.
The Confederation of British Industry (‘CBI’) referred to the apprenticeship levy as a ‘blunt tool’. John Cridland, Director-General of the CBI said, “A volunteer army is always better than conscription but the CBI will work with the government to make the best effect of this measure.” To maintain standards, the Government is proposing legislation to protect the term ‘apprenticeship’ in the form of the Enterprise Bill which is currently making its way through the House of Lords.
Cut the red tape
At present, if an apprentice is employed under an approved English apprenticeship agreement, the normal rules for breach of contract and unfair dismissal apply. This means that the employer can effectively manage underperforming or misbehaving apprentices as they would any other employee.
If, however, the employer fails to satisfy the conditions associated with an approved English apprenticeship agreement, they may inadvertently enter into a contract of apprenticeship, resulting in enhanced protection against termination and the potential for the employer to be liable for the remainder of the contract and future earnings in the event of early termination.
The red tape associated with apprenticeships and the risk that arises if employers get it wrong, is a deterrent to some employers and could partially explain the fall in apprentice numbers since 2011/12. For the apprenticeship levy to succeed it must be part of a simplified apprenticeship regime rather than further complicating an already technical area.
Are apprenticeships suitable for all organisations?
No.
Traditional apprenticeships are not suitable for all organisations; there are certain sectors in which apprenticeships are not a good fit.
As a result, some employers would be forced to pay the apprenticeship levy without deriving any direct benefit. One solution would be for employers that are obliged to pay the levy but are not in a position to employ apprentices to be permitted to pass their contributions to the levy onto suppliers, group companies or others from whom they will derive an indirect benefit. The Government needs to thrash out these scenarios if it hopes to get buy-in across the board from the large employers that the levy will apply to.
Keep it simple
Successive governments have a tendency to overburden employers with complex legislation, leaving employers confused about exactly where they stand. The UK previously attempted a training levy in the 70s, it didn’t go down well with large employers and was legislated out of existence in the 80s (with the exception the construction and engineering industries who opted to retain the levy).
This is not to say that levies cannot succeed. France currently operates an apprenticeship levy and over 50 countries, including the Netherlands, Denmark, that have some form of levy in place to fund training. Ultimately, employers up and down the country will want a system that is easily understood. If the Government is to prevent a repeat of the last attempt at the levy, keeping it simple will go a long way to achieving that goal.
Darren Maw is managing director of employment law and HR firm Vista
