What is happening with the Apprenticeship Levy and what can employers do?

Viewpoint

Ann Watson of Semta explains how employers can make the best use of the Appenticeship Levy to benefit engineering employees of all ages and maximise skills throughout their organisation.

Our industry produces endless reports about skills shortages, and by one estimate we need two million more engineers by 2025. There are numerous campaigns to tackle the issue, focusing on one issue or another – recruiting more women, encouraging older people to take up apprenticeships and ensuring UK engineering has the right skills supply post-Brexit. 

A key driver of employer behaviour is government policy. With the introduction of the Apprenticeship Levy, those paying it are now in control of directing their own funding, so can invest strategically to recruit and upskill to plan for future skills needs.  From 2018, this will include investing in their supply chains and other companies in the engineering sector. 

Employer control over funding means that they have freedom to decide on where it goes. Built into the new system is a mechanism of competition, with employers able to choose the provider they feel is best suited to meeting their particular training needs. Price is important, but employers are also able to see through the online Apprenticeship Service how well their peers rate different providers. As the system matures, we can expect metrics such as quality and service levels to become more and more important to employers, as they will be looking beyond the price tag when deciding who to give their apprenticeship vouchers to. 

Government funding can be used for existing employees, no matter what their age and, for the first time, apprenticeships can be funded for those who are training at the same or a lower level than their existing qualifications (so long as those taking them will acquire ‘substantive new skills’).  This provides greater flexibility for employers to upskill their existing workforce through the apprenticeship route – with degree apprenticeships and master’s level apprenticeships now ready to use, and doctorate-level apprenticeships a possibility, they really can be used to meet skills needs at every level. 

The levy means that apprenticeship funding is becoming increasingly relevant to finance directors, in terms of how it is being spent and the return on investment it is achieving – where research has shown that an engineering apprentice can deliver a return in as little as twelve months. This helps levy-paying employers to be more strategic in their training investment. For example, one Nottingham-based company Semta works with has formed a levy committee with finance, personnel and training colleagues working together to agree a levy plan. Having carried out an organisational needs analysis, they have taken a single approach across multiple sites to maximise the benefits of apprenticeships and their levy investment across all areas of the business.  

One challenge of the new system is the requirement for 20 per cent of funded apprenticeships to be off-the-job. For new engineering recruits, the first year of college training or block release means this may not be difficult. However, for existing employees it may be harder to design in the required 20 per cent and still ensure they are productive. It is important that employers understand this up front, so that they can plan in from the beginning the required off-the-job training element and implement an effective audit trail to evidence that training later.  

Funding guidelines say off-the-job training can include ‘practical training, shadowing, mentoring, industry visits and attendance at competitions’ (including the WorldSkills competitions Semta is proud to organise in engineering).  This gives scope for learning that does not have to be classroom-based. However, there has been some debate about what qualifies as ‘mentoring’ and ‘shadowing’; bodies such as the Association of Education and Learning Providers (AELP) have issued calls for clarification, while providing examples of good practice. My advice is to ensure this is very clearly specified in the training plan, with a good audit trail to verify it. 

For those levy payers who can’t spend all of their funding on their own apprenticeship programmes, there are important changes afoot which will help them to make good use of the money. From next year there will be opportunities for levy payers to transfer funds to other employers which use the online Apprenticeship Service, initially capped at 10 per cent of their total apprenticeship vouchers. The government is also consulting on supply chain apprenticeships. There are already some good programmes in the engineering sector, through which large employers can help their supply chains to meet their skills needs, such as Supply Chain 21, and the addition of funding transfers can only help to embed that ethos more widely. 

We now have an apprenticeship system where employers are in control; they have the power to design the apprenticeship standards they need and can direct funding to the areas where they have skills needs. It’s now in our hands to make a success of it. Levy-paying employers should already be using their levy funds or putting plans in place to do so, otherwise they risk losing them two years after payment. It’s your money — so use it rather than lose it. 

 For free apprenticeships support and advice contact:

customerservices@semta.org.uk or call 0845 643 9001 

Ann Watson is chief executive of Semta Group, the engineering skills body which offers free advice and support for employers on skills and maximising the levy