Apprenticeships and the levy

Training throughout UK industry is undergoing a process of change as the government seeks to make it more focused on the needs of employers. 

Yet, in the construction industry at least, the Apprenticeship Levy and associated changes are disliked because they do not take account of the way that the industry works.

The Apprenticeship Levy applies to any organisation that has an annual wage bill of more than £3m – which amounts to roughly 2% of all employers. HMRC takes the money at the rate of 0.5% of the pay bill and puts it into a digital account, which is topped up by a further 10% by the government.

There are two issues here. First, if an employer does not use the funds in the digital account within two years then they ‘expire’: the Treasury keeps the money. Second, most of the apprenticeships offered in the construction industry are provided by small companies with pay bills that are nowhere near £3m. Steve Radley, policy director at the CITB, reckons that two-thirds of apprenticeships are with firms employing less than 50 staff, while the FMB puts the figure at 68%.

The house-building sector is certainly unhappy. The HBF set up its own Home Building Skills Partnership, a pan-industry body aimed at tackling the industry’s skills shortage, in 2016 and so feels that “the introduction of the Apprenticeship Levy means that many home builders are effectively being taxed twice for skills provision”.

When the Apprenticeship Levy was first introduced in April last year, there was a provision that large firms could pass up to 10% of their levy vouchers to smaller firms in the supply chain. In October this year, at the Tory party conference in Birmingham, chancellor Philip Hammond increased this to 25%.

Sarah McMonagle of the FMB was unimpressed. “It should be 100%,” she says. “What’s happening is that the larger companies are using the apprenticeship levy to train apprentices in office administration to recoup their contributions because they can’t spend it on training the bricklayers, carpenters and joiners that the industry needs.”

A similar trend was outlined in the report The Great Training Robbery, Assessing the first year of the apprenticeship levy, published this year by Reform, an independent, non-party public-service think-tank, which stated: “Employers are also using the levy to rebadge existing training courses as apprenticeships to shift the costs of training onto the government instead. 

“The most obvious examples of this relabelling are found in leadership and management skills. The list of the most popular apprenticeship standards includes becoming a ‘Team Leader’, ‘Supervisor’ or ‘Manager’. Cranfield University’s prestigious School of Management has even re-designated its existing Executive MBA as an apprenticeship to attract up to a 90% government subsidy towards the programme costs.” 

The job of preventing this sort of rebadging falls to the Institute for Apprenticeships, which started operating in April 2017. Its role, says Benita Notley, head of standards development, is to act independently of the government as an arms-length organisation that works with employer groups to develop new apprenticeship standards. 

Notley is one of two heads of standards development, each with 16 sectoral areas, and construction falls within her remit. This involves working with employers in what are called ‘trailblazer groups’ to define each trade in terms of knowledge, skills and behaviour and what the ‘endpoint assessment’ would involve. 

“There needs to be a consensus over, for example, what a bricklayer does so that a bricklayer that has qualified through the apprenticeship scheme will be employable as a bricklayer throughout the UK,” she says.

The trailblazer groups are made up of at least 10 employers of the chosen occupation and must be representative. Recognising that the smaller businesses might not be able to make time to attend the meetings, the groups can also design the content of the apprenticeship by means of email, trade bodies or the CITB to ensure that the training is ‘fit for purpose’ and suitable for all sizes of employer business. Training bodies, says Notley, are also encouraged to participate so that the training is ‘deliverable’. 

The ‘endpoint assessment’ to judge whether the apprentice has qualified will vary according to occupation and could include online tests as well on-site observation. An independent organisation must be involved in the end-point assessment of each apprentice so that all apprentices following the same standard are assessed consistently. 

Only organisations on the register of end-point assessment organisations are eligible to conduct independent end-point assessment of apprentices, and that register is governed by the Education and Skills Funding Agency (ESFA). 

The Institute has been liaising with the Construction Leadership Council to meet a target of 70 apprenticeship standards to be agreed by the beginning of 2019. According to Notley this is achievable, with 66 having been finalised by November.

The practical steps required once an employer decides to take on an apprentice are not a one-stop shop by any measure. There are five steps required before they can draw down their levy funds: 

1. The employer chooses which ‘apprenticeship standard’ (i.e. training course) they want their apprentice to work towards. 

2. The employer selects a ‘training provider’ from a list of organisations approved by the ESFA. 

3. The employer also selects an ‘assessment organisation’ approved by the ESFA to carry out the final assessment at the end of the apprenticeship. 

4. The employer and the training provider agree a price for each apprenticeship, which includes the costs of training and assessment. 

5. The employer pays for training and assessment with funds through their digital account. 

Each apprenticeship is allocated to one of 30 funding bands, which range from £1,500 to £27,000. Determining the funding band is another role for the Institute, which makes a funding band recommendation to the secretary of state for education, who takes the final decision. 

This article was first published in the December/January 2019 issue of The Construction Index magazine

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