The majority of us in the public sector are struggling with the challenges of an ageing workforce, skills shortages in key roles and pressure of budgets. Surely the answer could be a better use of apprenticeships, growing and nurturing our young people and providing meaningful training for our workforce. However, the picture is not so encouraging. Councils, like many organisations, are confused by the apprenticeship levy and changing nature of the training providers. In this article, Tricia Palmer, HR consultant, argues that, in her experience, managers are under increasing pressure to deliver more effective apprenticeship arrangements against a backdrop of reducing workforces, financial constraints and competing pressures. She explores the opportunities and challenges of the new arrangements and draws on recent research and comment on progress.

The theory is good…

It is difficult to disagree with the Government’s commitment to create three million new apprenticeships, and to do this by giving public sector bodies with more than 250 employees a target of 2.3% of employees starting an apprenticeship programme every year until 2020. In addition, all of us involved in employee development would no doubt welcome ring-fenced monies on training and development, given that these are the funds most often raided when the going gets tough. Providing financial incentives to create the target number of around 36,000 new apprentice starts in local government by 2020 will no doubt concentrate the minds. Links with skills shortages would surely aid service delivery and have a positive impact on the local economy. The 10% top-up of the levy would provide extra investment, and the workforce would become more skilled, while also encouraging young people into public sector jobs. The encouragement and support for higher apprenticeships, including the equivalent of a masters’ degree, would give new pathways into professions, and enable individuals to continue working while pursuing a qualification. The ambition is to create new and more specific standards and better shape quality training provisions. Given that the majority of authorities are reporting skills shortages in many professional areas (social workers, engineers, legal, occupational therapists, educational psychologists, ICT to name but a few) this would seem a good way to allocate funding and lever in additional monies. This has been heralded as the future of workplace learning, and two years ago the Government said it was placing employers in the driving seat because “nobody understands the skills employers need better than themselves”. What could possibly go wrong? This article explores some of the barriers to making this work and offers some suggestions on making the most of the funding.

The basics

Although much has been written on apprenticeships it is probably worth first considering the basics and how apprenticeships work. Apprenticeships are paid jobs, which include on and off-the-job training. Apprentices have a right to the same terms and conditions as other employees and must be paid at least the minimum apprentice rate. A successful apprentice could gain a nationally recognised qualification on completion of their contract. Apprenticeships usually take between one and four years to complete and are said to be available in 150,000 occupations across 170 industries. They are available to anyone over the age of 16 living in England, although there are clearly different entry requirements, depending on the expected level of qualification.

There are a number of minimum standards to be achieved to secure apprenticeship funding, these are the following.

  • The apprentice must be employed for at least 30 hours a week, unless there are exceptional personal circumstances, in which case it is an absolute minimum of 16 hours a week.

  • The minimum length of an apprenticeship is 12 months, and can be longer for many apprenticeships. These lengths may be reduced for over 19s if they have relevant prior learning and achievement. If an apprentice works part time these timescales must be extended accordingly.

  • There is a requirement for guided learning of at least 280 hours in the first year, which must be off the job. Clear and verifiable evidence of learning is required.

  • If an apprentice does not already have level 2 (or equivalent) in English and Maths or Functional skills then the apprenticeship must offer training in these areas.

  • Apprentices must sign an apprenticeship agreement with their employer before the apprenticeship begins. This contract outlines the framework being followed, and the skill, trade or occupation the apprentice is working in. Without this agreement an apprenticeship completion certificate cannot be issued.

  • All apprenticeships need to follow minimum academic requirements for frameworks, which include qualification levels required for apprentices under vocational, technical and key skills elements as well as other areas such as team working and creative thinking. These standards are set out in the Specification of Apprenticeship Standards for England (SASE).

The funding is accessed through the digital apprenticeship service, and the national guidance provided by the Government at www.gov.uk recommends five steps to setting up your apprenticeship and managing the funding.

  1. Plan you programme — estimate how much you have to spend.

  2. Choose apprenticeship training and assessment — find the right type of training, choose a provider, choose who will assess your apprentice at the end of their apprenticeship.

  3. Advertise a vacancy to recruit an apprentice — work with your training provider to post your apprenticeship opportunity.

  4. Manage the funding for your apprenticeship — register securely to set up an employer account, check your current balance of your levy and any previous transactions, forecast future funding available.

  5. Start a new apprenticeship contract — agree the price with your training provider, manage your payments.

So now we have discussed how the system works; let’s look at the reality of implementation.

Funding arrangements

The CIPFA report entitled The Levy, Apprenticeships and the Public Sector by Neil Merrick (2017) covers details of the funding arrangements, and states that the first issue for employers to understand is how the funding and system of apprenticeships works. A simple task one would think, but failure to appreciate the intricacies of the system could lead to financial penalties and employees missing out on the chance to be upskilled. The levy is paid monthly by those employers with a pay bill of over £3 million, the amount not being applicable to the first £3 million of the payroll. The levy is charged at 0.5% of the pay bill minus a levy allowance of £15,000. It is up to the employer to calculate how much they owe each month and pay it to HMRC, based on employees subject to Class 1 secondary National Insurance contributions. The levy will change on a monthly basis depending on the size of the workforce, and covers all types of staff, including temporary. It is anticipated that the public sector, including education, will contribute over £500 million per year to the apprenticeship fund.

The first levy payments were made to HMRC in April 2017. The funds are held in the employers’ apprenticeship service account and could be accessed from May 2017, but can only be used for training and assessment with a provider. They cannot be used for other costs such as wages. Once the apprenticeship training has started, monthly payments will automatically be taken from the employers’ digital account and paid to the training provider. The funds expire 24 months after they have entered the account, and therefore it is imperative that employers keep a good handle on this account or risk losing funds.

The funding system is based on each framework or standard being associated with a funding band, within which employers and training providers can negotiate a price for training and assessment. There are currently 15 funding bands, with upper limits ranging from £1500 to £27,000. Any costs above these limits will be paid for separately by the employer. Existing frameworks and standards have been placed within these bands. The Government has set the upper bands to ensure that employers consider the funding when negotiating the price with training providers.

Employers can use the funding in their levy accounts if the apprenticeship will provide the individual with a higher qualification than they already hold, whether they are an existing or new employee. In addition, the monies could be used for lower level qualifications than the individual already holds if the apprenticeship will enable them to acquire a substantial new skill.

In theory this means that councils could have started using the money this financial year, as long as it is against approved apprenticeship standards or frameworks, which started on or after 1 May 2017. Any training provided must be in accordance with the new standards, many of which are still in development and not due to come on stream until 2020. In addition to the 10% top-up, levy-paying employers who spend more than all the money in their digital account (where their levy is held) will only pay 10% of the additional cost of further training with the Government funding the rest. It would therefore make sense for employers to fully spend their allowance and more besides.

However, councils have been slow in accessing the funds due to a range of factors. The projected target of 36,000 new apprentice starts by 2020 is unrealistic. Estimates show that councils currently employ 6000 apprentices with a further 3000 starts predicted this year. As 35–40% of the local government workforce is in schools, councils have limited leverage over a significant proportion of their employees. Anecdotally, many schools are saying they simply cannot afford to take on apprentices.

In addition, many of the new apprenticeship standards are not ready and councils are scrambling to redirect the funding into existing programmes. Payments for training are spread over the time it takes for an employee to complete their apprenticeship with a final payment of 20% held back to the final month for assessment costs. The arrangements are complex and require good accounting and recording systems to ensure that the correct monies are claimed. Central training and development departments are struggling to encourage the take-up of new schemes in their councils, let alone navigate the digital service and find suitable providers. Many have endeavoured to become accredited training providers in an attempt to lever in income and support their own apprenticeships. The Local Government Association (LGA) has estimated that the levy cost is around £207 million for councils in England and could add an additional £400 million per year in salaries, administration and procurement. This is not new money and is in effect an additional cost on the pay bill, and, although it is early days, there is little evidence that the scheme is providing the uplift in development opportunities the Government had hoped for.

Additional funding available

It is worth noting that there are additional payments available for certain apprentices with special needs or from deprived backgrounds. These are the following.

  • Apprentices who are 16–18, or aged 19–24 and have been previously in care or subject to a local authority education, health and care plan. Both employers and training providers will each receive £1000 for each apprentice split into two payments — the first after three months and the second after 12 months. This payment reflects the support these apprentices are likely to need and the cost associated with this support.

  • For the first year of the funding system training providers will receive an additional £600 for apprentices on framework schemes who live in the more deprived areas. This amount is on a sliding scale and is intended to cover the additional costs needed to train individuals from disadvantaged backgrounds

  • If an apprentice needs training to reach the minimal standards in Maths and English then the provider will be able to claim £471 per qualification.

  • Providers may also be able to claim up to £150 a month for additional costs associated with training apprentices with a learning or other disability, and who require extra support.

  • These additional allowances are important in levering in funding to provide apprenticeships for those difficult-to-reach groups, and should be borne in mind when negotiating with training providers.

Public sector targets

There has been some debate around what constitutes the public sector target, and the lobbying by Councils for schools to be excluded from the local authority’s headcount, given the lack of direct control over schools employment decisions, has not changed the position. The Government has made it clear that where the council is the employer, schools should be included. It also should be noted that the 2.3% target is headcount, not full-time equivalents, which adds further pressure to councils, where almost 50% of the workforce is part time. While employers are not expected to meet the target each year, the requirement is to hit an average of 2.3% new starts during the four years since the levy was introduced. The cumulative effect means that, should councils not meet their targets annually, the pressure increases as the years go by. For example a large county council with around 30,000 employees will need to achieve an average of 700 apprentice starts a year. For many councils, given their starting point, this could be at least a fourfold increase, and the Institute of Fiscal Studies (IFS), in its paper Reforms to Apprenticeship Funding in England (2017), calculates that 62% of new non-graduate public sector employees would have to start an apprenticeship for this target to be met. This appears very high, but is skewed by the currently low percentage of entry level roles. In the same report, the IFS estimates that 60% of employees will work for an employer who pays the levy. It has also calculated that 97% of the levy is paid by 0.9% of employers who have more than 250 employees. So it is inevitable that much of the burden is taken on by public sector bodies, where there are reductions in the workforce and freeze on recruitment. The IFS further comments that “this policy risks creating a lot of pointless, and costly, relabelling of existing activity or — even worse — shifting structures towards less efficient ways of working”. There have been increasing concerns that such a blanket target and the incentivisation of numbers would lead to quantity over quality and the rebadging of existing development programmes — a concern I share from personal experience of councils grappling with competing pressures of delivering quality programmes, while making the best use of the levy funding. The majority of apprenticeships are at levels 2 and 3 (equivalent of up 2 “A” levels), and it is feared that the annual targets would dissuade councils from offering higher apprenticeships, which last more than a year, although there is some evidence of a slow increase at level 4 (foundation degree).

The difficulty with implementing the targets is not the sole province of the public sector, as a recent BBC report (26 January 2018) shows. It commented on the release of official figures, which stated that the new apprenticeship levy had not yet increased the number of people being trained. Nationally there were 114,000 apprenticeship starts for the first quarter of the 2017/18 academic year. This compared to 155,600 in the same period the previous year. At the end of the previous academic year (between May and July 2017) 48,000 people began an apprenticeship. That was less than half the 117,000 for the same period the previous year. The Institute of Directors (IoD) observed that many employers were still struggling to understand how the system was meant to work. The BBC report concludes that “there has been a big fall in the number of workers starting apprenticeships in England since the introduction of the Government's levy scheme earlier this year.”

Possible impact on workforce issues

The target does not mean that councils have to take on more staff, as it covers existing employees. It will however impact on how employers make decisions on recruitment and training, and advice from the LGA supports a whole workforce approach to planning these changes.

While apprenticeships are clearly not just for the under 25s, there is still the perception that they are a young person’s game. In many ways this could go some way to addressing the balance of the ageing workforce if councils can find a way to open up recruitment into the lower level roles, and provide opportunities for entry level posts. Nigel Carruthers from the LGA recommends a whole organisation approach to apprenticeships. In his presentation Apprenticeships, Sink or Swim? he suggests that councils “brand apprenticeships” and reminds us that it should be about new skills not just new people. We should base our approach on “needs, not targets to get the levy back”. A sentiment many of us would agree with, but forget in the cold light of financial targets. A longer term approach to apprenticeships, which compliments the workforce strategy, is needed to ensure a sustainable turnover of apprentices.

It is interesting to note that, in its research into on-the-job and off-the-job training, the IFS has found that the total training in these areas amounts to around just under 3% of employees receiving either on-the-job or off-the-job training over a four-week period. This percentage has remained relatively static since 2005/06. However, the balance between these two types of training has changed over the years with off-the-job training reducing significantly and on-the-job increasing. The IFS also warns that there is a likelihood that increasing apprenticeships will not represent an overall increase in training as employers substitute apprenticeships for other forms of training.

Education providers

The education providers are equally struggling with issues relating to the new apprenticeship policy and, in the autumn of last year, the LGA organised a meeting with the Department for Education (DfE) to provide the employer’s view on the policy, as it affects education providers. The meeting sought to outline the issues and included the following.

  • Ongoing problems caused by lack of appropriate standards being in place, eg the need for an undergraduate progression route for non-university graduate teaching assistants from level 3 through to fully qualified teacher status.

  • Variable interest among schools/academies, with many never having delivered apprenticeships before so this is new territory for them.

  • Lack of resources to deliver on the imposed targets.

  • Use of headcount to calculate target gives a misleading impression of capacity of schools/academies to hire apprentices.

  • Twenty per cent off-the-job training is proving to be a barrier for many, particularly when there are other pathways into teaching available that do not require this and cost less.

  • Candidates for the teacher training apprenticeship also having to apply through UCAS, which is a different procedure to any other apprenticeships and therefore introduces added bureaucracy.

  • DfE communications not always finding their way to apprenticeship leads in organisations.

  • Training providers not always operating in the most professional of ways, eg requiring extra payments; providing incorrect information about what can and can’t be paid for from the levy and charging the funding band maximum for courses (negating any possibility of a market, and in many cases leading to a three-fold increase in cost compared to previous frameworks).

  • Each employer spending time and money on developing its own procurement scheme, leading to substantial duplication.

  • Whether the levy could be used in more creative ways for example to support wages for care leavers and therefore deliver on other key policy initiatives.

The DfE has responded to these concerns and has committed to updating the guidance. In the meantime it has confirmed that it is expected that a higher level teaching assistant qualification will be developed, as will a leadership apprenticeship. They also asked the LGA to put forward the “three top issues they would like to see resolved in order to deliver the policy issues”.

Benefits of apprenticeships

While all this seems very hard work, we should not be put off trying to make it work. In its report English Apprenticeships: Our 2020 Vision the Department for Business, Energy and Industrial Strategy outlined the benefits where individual apprentices were achieving higher levels of qualification and increasing their own prospects, productivity and wages, and employers were reporting benefits in terms of service and productivity. These included the following.

  • Eighty-three per cent of apprentices stating their career prospects had improved.

  • Apprentices completing apprenticeships at level 4 or above could earn on average £150,000 or more over their lifetime.

  • Seventy per cent of (surveyed) employers saying that apprenticeships improved quality and service.

  • The cost of training an apprentice paying for itself within a couple of years of completing through increased productivity.

  • Apprenticeships typically providing a return of £26–£28 for every £1 of investment at level 2 and 3.

It is worth noting here that the investment by UK employers in training has rapidly declined over the last 20 years and is low compared to our international competitors, so any proposal to reverse this position should be welcomed.

In its briefing paper Apprenticeships Policy in England 2017 the Government identified the number of apprentices from 2015/16 as 900,000, with 23,000 vacancies being advertised. It is sad to think that over the last year the number of new apprentice starts has dropped significantly — alleged to be as much as 59%. The national apprenticeship service encourages apprenticeships because they include “the chance to earn a salary, while also undertaking the training that employers want , excellent progression opportunities, increased future earning potential and the support of a mentor”.

What can councils do to support apprenticeships?

There are a range of measures a council can take to improve its ability to make the best use of funding and provide high quality apprenticeships. Some suggestions are as follows.

  1. First get support from senior managers and members to apprenticeship schemes and develop the idea of “Think Apprentice”. Build any targets into the organisation’s corporate plan. This is a whole organisation issue and not just the responsibility of HR/L&D.

  2. It will be important to identify a range of roles, where apprenticeships could be suitable. This should be done in conjunction with HR/L&D specialists and the relevant managers. As suggested by the LGA this is an exercise which should be built into your workforce planning and recruitment processes. At each stage of discussions on recruitment it would be wise to ask the question — is this role suitable for an apprentice?

  3. Learning and development plans should incorporate targets for apprenticeships including for existing staff. How can the funding be used to develop careers and training in those difficult to fill posts?

  4. Get to know your training providers well and build up relationships, which encourage joint problem solving.

  5. Make good use of the additional funding to support the council’s wider objectives of improving opportunities for disadvantaged groups.

  6. Think imaginatively how the funding could be used. For example, where individuals need to be redeployed and are considering a new role, the funding can be used for them to acquire new skills even if the apprenticeship is at a lower level than the qualification they already hold

  7. Ensure that you have good accounting and reporting systems to support the funding arrangements, so opportunities are not missed.

Comment

Personally I have seen many individuals fly under good apprenticeship schemes, and go on to worthwhile and fulfilling careers in local government. It would be a shame to lose this due to the complexity and changing nature of the apprenticeship landscape. The development of new frameworks is set to provide increasing opportunities, particularly for those who have not traditionally done so well in the world of academia.

HR professionals are committed to making the best use of these schemes, if they can find their way through the tangle of funding and new standards. However, they will need the support of the whole organisation to obtain the level of targets required and make the best use of funding.

Bibliography

CIPFA — The Levy, Apprenticeships and the Public Sector

Available on the CIPFA website www.cipfa.org

House of Commons Library briefing paper (number CBP 03052) — Apprenticeships Policy in England

www.parliament.uk

Briefing note on Apprenticeship policy — Employer Link at the LGA

Apprenticeships — Sink or Swim? Presentation by Nigel Carruthers, senior adviser at the LGA

Institute of Fiscal Studies (IFS) — Reforms to Apprenticeship Funding in England (2017)

www.ifs.org.uk

English Apprenticeships: Our 2020 Vision, the Department for Business, Innovation and Skill (now the Department for Business, Energy and Industrial Strategy)

www.gov.uk

Author

Tricia Palmer is a consultant in HR, interim director and leadership trainer. She is a regular contributor to Croner-i for Local Government. Croner-i for Local Government is an online employment law and practice reference source designed specifically for HR managers and their teams in local government.

Last reviewed 6 March 2018