Last reviewed 27 May 2022

The Apprenticeship Levy, charged through PAYE on all employers with a wage bill over £3 million, has not lacked for critics with, as one example, the House of Lords Built Environment Committee recently reporting that the number of apprenticeship starts has fallen by over 25% since its introduction.

Now the British Retail Consortium (BRC) has joined the business groups demanding that the system be reformed.

If this happens, the BRC highlights, some retailers estimate that they could create up to 1000 new apprenticeships each and it points to previous studies which suggest that greater flexibility would bring about thousands of new apprenticeship places within the industry.

In a survey to mark the fifth anniversary of the introduction of the Levy, available here, the Consortium found that 65% of retailers say that more than 40% of their Levy funds go unspent.

“The money sits in each business’s pot for 24 months, after which any unused funds expire and return to the Government”, it explains, pointing to one retailer which reported that it had paid £12 million since the current system began in 2017.

BRC chief executive, Helen Dickinson, said: “Retailers want to invest in a higher skilled, more productive, and better paid workforce. They want to create more opportunities and contribute to local communities across the country. However, this broken system is holding them back.”

With 95% of those responding telling the BRC that the system needs to change, she urged the Government to make the Levy simpler and more flexible so that retailers can use the funds for high quality pre-employment courses, short in-work developmental courses and to cover other costs related to training their people.

It could, for example, allow apprenticeship funding to cover some costs associated with hiring an apprentice, for example covering the cost of back-filling roles while apprentices are on off-the-job training.

Comment by Kate Palmer, HR Advice and Consultancy Director at Peninsula

The current Apprenticeship Levy remains widely unused and is seen by most as another tax that must be paid, rather than an initiative to support inexperienced and unskilled workers.

Opening up the scope of it to be a wider training levy as opposed to an apprenticeship levy would likely see more people utilise it and gain benefit from it. The levy would be especially valuable if it could be used to retrain or upskill existing staff members.

In the midst of the Great Resignation, employees are looking for ways they can continue to learn and grow, so they are turning to their employers to facilitate the availability of such offerings. Those who fail to do so risk losing key people to competitors.

As such, being able to utilise a training levy to continue to support and develop them internally would be a win-win for all.