Unintended Implications: CIPD’s Head of Policy Ben Willmott on CIPD’s latest research on employer attitudes to the Apprenticeship Levy

June 22 2016  —  by Ben Willmott, Head of Policy, CIPD

The creation of more and better quality apprenticeships can play a role in boosting the UK’s flat-lining productivity growth. They can help employers address recruitment difficulties and skills shortages that could otherwise harm performance—in fact, organisations that offer official apprenticeships are more likely to have hard-to-fill vacancies. As well as helping businesses develop the skills they need to grow, apprenticeships, when done properly, help employees gain a set of valuable skills, and can open the door to a rewarding and long-lasting career.

Since the general election, the government has taken significant steps to achieve its target of 3 million apprenticeship starts by 2020, most notably by introducing a levy on employers from April 2017. With less than a year to go before the levy is in place, the CIPD has published the first detailed investigation of the implications for employers. What has emerged is that the levy could have two significant unintended implications for businesses.

First, it could lower the quality of apprenticeships. Against the backdrop of new higher labour costs, due to the National Living Wage and pensions auto-enrolment, some employers will want to recoup as much of their levy payment (0.5% of a wage bill of more than £3million) as quickly and as easily as possible. That might mean opting for shorter, lower-quality apprenticeships or simply re-branding existing training. In our survey of 500 employers, over one-fifth (21%) of those that have calculated the cost of the levy to them have said that they will increase the overall proportion of level 2 apprenticeships while decreasing the proportion of level 3 apprenticeships.

The “pile them high, sell them cheap” approach thus runs the risk of damaging the apprenticeship brand that the government is so keen to build. To be a truly equal alternative to university, apprenticeships need to be perceived as being of high quality. Without that shift in perception, finding the 3m will be extremely challenging. Besides, offering apprenticeships at level 2 will do little to meet employers’ skills shortages.

Second, the cost of the levy could force some employers to spend less elsewhere. Over one-third (36%) of employers that have calculated the cost of the levy say it will force them to reduce investment in other areas of workforce development. This could mean reductions to spend on areas of training, such as leadership and management, which we know from previous studies is one of the key factors weighing on the UK’s productivity record.

And in the fight to improve the country’s skills and productivity growth, apprenticeships cannot be our sole weapon. They cannot meet all the different skills needs that organisations in different industries have. Employers know best what they need, and they should not be restricted in how they decide to invest in their workforce. Without that flexibility, it will be hard to build a productive workforce that can fulfil the skills needs of tomorrow.

At the CIPD we have always been a major advocate for apprenticeships, and we welcome the government’s efforts to achieve parity of esteem between them and the academic route. But we are concerned that the apprenticeship levy is a blunt instrument providing employers with a one-size-fits-all approach to training.

So as part of this research, we’ve outlined a number of key policy recommendations (see p.24 of the report) that we feel the government needs to adopt to achieve its overall policy objective and to improve both the quality and quantity of apprenticeships.

Ben Willmott

Ben Willmott, Head of Policy, CIPD