Apprenticeship levy: five key questions for employers

To coincide with the first wave of apprenticeships funded by the levy starting this month, we look at five questions that levy-paying employers now need to grapple with.

Should we persuade existing staff to become apprentices?

Employers that do not already have an established apprenticeship programme will be considering what changes they need to make to their recruitment and training programmes to make sure that they take full advantage of the funds diverted to their digital account.

One key question is whether it is possible to transfer existing staff into suitable apprenticeship programmes, rather than starting from scratch with new recruits. The answer is that there is no reason why new apprentices cannot be recruited from existing staff if suitable standards exist. However there are a number of issues to consider. These include what will happen to the employee’s existing role during the apprenticeship and whether these recruits will be guaranteed a job when the apprenticeship ends. These can be particularly difficult issues for higher or degree apprenticeships, given their relatively long time frame.

An apprenticeship agreement will also need to make it clear what happens if the apprentice is unable to complete the training, whether this is due to inability to meet the standards expected by the training provider, or for other reasons.

While these issues will arise with all apprenticeships, they can be more difficult to manage with existing staff than with completely new recruits. In most cases, however, it is likely that employers will have a mixture of internal recruits and completely new starters in their post-levy apprenticeship programmes.

How will our relationship with our provider change?

In many cases the impact of the levy will mean that employers are spending much more of their own money on training for apprenticeships, although this may be mitigated to some extent by savings from other budgets. That means that it is likely to make sense to invest more time and energy in developing relationships with external providers. Inevitably the contractual relationship will also come under particular scrutiny.

For training providers the advent of the levy presents considerable opportunities. But with increasing emphasis on higher and degree apprenticeships, the amount of investment in training programmes, and hence the financial risk to which they are exposed while running programmes, is likely to increase. Some providers are forming consortia to spread the risk and to improve the service they are able to offer to levy-paying employers.

One issue that may cause friction between employers and providers is the degree of control they each have over the apprentices, particularly on longer programmes. Employers will wish to retain the right to hire and fire, taking full advantage of fact that apprentices under approved English apprenticeship agreements can be treated in the same way as other employees. However, providers will wish to guard against the loss of funding if apprentices are dismissed and can no longer complete their planned training, especially if this happens unexpectedly.

Conversely if a training provider fails an apprentice or throws them off the course, an employer may have no alternative but to dismiss them.

What about our relationship with the Employment and Skills Funding Agency?

Ultimately the levy is tax payers’ money that needs to be accounted for, despite the fact that in most cases it is likely to be disbursed by employers from their digital accounts. While the new apprenticeship regime is much more employer-led, the ESFA will still have a policing role, with the right in some circumstance to claw back money it believes has been wrongly spent.

This is most likely to occur if the apprentice did not meet the funding requirements in the first place – for example because he or she was not entitled to work in the UK, or had already embarked on a similar training programme with another employer. Employers need to be clear whether it is they or the training provider who is responsible for checking eligibility. A good understanding of the funding rules and the circumstances in which the ESFA is likely to intervene is essential.

Do we need to review our apprenticeship agreements?

The introduction of the levy has not altered the legal status of apprentices. Since the changes introduced by the Apprenticeships, Skills, Children and Learning Act 2009, the old restrictive rules on apprenticeships have been swept away. Since then, subject to very limited formal requirements, English apprentices have had the same employment status as “regular” employees.

What has changed is the way their training has been managed and delivered, particularly with the move away from the old style apprenticeship frameworks to the new employer-led standards, albeit that this transformation is not yet complete. There have also been significant changes to the funding rules to reflect the introduction of the levy. That means that some changes are likely to be required to apprenticeship agreements which are entered into from May 2017 onwards, compared to earlier agreements entered into under the 2009 Act.

How much time do we have left to sort this out?

The final arrangements for the levy were not put in place until March this year, leaving employers with very limited time to make adjustments to reflect the levy. However as a result of a concession made relatively late in the consultation process, credits to digital accounts will now have a shelf life of two years before they cease to be available to employer.

That means that employers still have a fair bit of time to plan and implement changes to their apprenticeship programmes, without losing the ability to spend the funds that will have accumulated in their accounts from May onwards.