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How the apprenticeships levy affects student recruitment

2015-11-27 breaks down the implications that the introduction of the apprenticeships levy will have for business in their student recruitment efforts.

This week saw the government renew its commitment to apprenticeships with the announcement of an apprenticeship levy during the Autumn Spending Review.

The levy, to be introduced in April 2017, has been created with the aim of delivering three million apprenticeships by the end of parliament in 2020. Employers with a wage bill over £3m will be expected to pay 0.5% of their payroll, with the government predicting the levy to raise £3bn by 2019-20.

But how does this affect business?

It’s easy to see this as a tax on the private sector – while only 2% of business fall within the parameters of the levy, these businesses employ almost two thirds of the private sector workforce.

Clearly, the levy acts as a forced incentive for big businesses to develop apprenticeship schemes. Businesses having to pay the levy will receive £15,000 added to their apprenticeship accounts if they provide apprenticeship training.

But there can be genuine upsides for businesses embracing the scheme. With the minimum wage for apprentices aged 16-19 sitting below half of the standard minimum wage, apprenticeships are an easy way to create well trained future employees for a relatively low cost that are likely to stick with their employers.

However, off-the-job training is currently only funded for apprentices below the age of 19. With 77% of people in apprenticeships last year aged 19 or over, employers must demand that funds generated from the levy be extended to all apprentices. [1]

While the onus is firmly on employers to provide valuable on-the-job training, companies are right to demand higher standards from external training agencies. Under the government’s ‘Apprenticeship Trailblazers’ scheme, employers have been tasked with evaluating the quality of training providers and have been granted a significant say in apprenticeship training policy. With almost half of the apprenticeships that started in 2014-15 working at an ‘intermediate apprenticeship level’ – the equivalent of GCSEs – believes that employers must demand that the increasing quantity of apprenticeships is met with a leap forward in quality of training.

For the 98% of businesses that won’t have to pay, the apprenticeship levy presents an opportunity, not an obligation. The key for the majority of these businesses is ensuring that they only undertake apprenticeship schemes that provide worthwhile skills and act as a genuine alternative to higher education. Ofsted chief inspector Sir Michael Wilshaw recently attacked companies that are simply using apprenticeships as a form of cheap labour, providing a qualification “for performing a job that workers already do.”

For businesses working in sectors with clear shortages in skills- particularly STEM subjects- there is both a clear opportunity to take an active role in creating a workforce with the skills they need, and an obligation to ensure that the funds generated translate into an effective and cost-efficient training programme.

While there is no doubt that the apprenticeship system has it flaws, businesses must act on their newfound responsibility in delivering workers with the skills that our industries need- whether we asked for it not.