Making apprenticeships work for you

Written by Phil Howard on 26 October 2018 in Features
Features

Phil Howard looks at the commercial side of apprenticeships.

The first three quarters of 2017/18 saw 119,500 people start on apprenticeships – according to government figures – more than ten times higher than in the same period the previous year. 

While this sounds like a lot, the Government sees room for improvement. Indeed, Chancellor Philip Hammond’s recent changes to the apprenticeship levy are aimed at providing flexibility for businesses so they can take full advantage of the benefits of employing apprentices.

So how do apprenticeship programmes currently work? 

Apprenticeships are aimed at new or current employees aged 16 or over, and combine working with studying to gain skills and knowledge in a specific job. They last for up to five years depending on the level the apprentice is studying, during which time apprentices must be paid at least minimum wage.

Employers can get government funding to cover some of the cost of training and assessing an apprentice. The funding system for apprenticeships was revised in April 2017, and the apprenticeship levy was introduced.

Research shows that apprentices have more affinity to their employer because they are being trained while they earn for a long period - and they are more likely to be promoted because they’ve had this investment made in them by the business.

This required all UK employers with a wage bill of over £3m per year to invest 0.5% of the value of their pay bill, minus an apprenticeship levy allowance of £15,000 per financial year, into their apprenticeship service account. The Government then applies a 10% top-up to the funds available, and employers can put this money towards apprenticeship training within the company. 

Smaller companies do not have to pay the levy but are expected to pay 10% of the cost of training an apprentice with the Government making up the remaining 90%.

At the beginning of October, the Chancellor announced an extra £90m of government funding to enable employers to invest a quarter of their apprenticeship funds on people working for businesses in their supply chain – up from 10% previously – plus another £5m for the Institute for Apprenticeships (IFA) to introduce new standards and updating existing ones so that more courses can be offered. 

What are the benefits? 

According to the IFA, apprenticeships help to close the skills gap for employers and deliver a skilled workforce, with 87% of employers satisfied with their apprentices’ training and 75% noting an improved product or service as a result of the training.

And of course, it’s not just businesses that benefit from apprenticeships.

The IFA says apprenticeships are an important driver for social mobility, with the lifetime benefits associated with the acquisition of apprenticeships standing at between £48,000 and £74,000 for Level 2 and between £77,000 and £117,000 for Level 3 apprenticeships, and significantly greater financial returns over a working life (up to £150,000 more) on average for someone completing a Level 4+ apprenticeship . 

Research shows that apprentices have more affinity to their employer because they are being trained while they earn for a long period - and they are more likely to be promoted because they’ve had this investment made in them by the business.

What’s more, apprenticeships are losing the stigma they once had as purely an entry into skills-based work, because they now cover a spectrum of white collar, digital and social job roles. 

How much does an apprentice cost a business?

Apprenticeship costs vary, depending on the level of complexity, cost of delivery and other associated fees. Businesses agree a total price for each apprenticeship with their chosen training provider, which includes the costs of training plus the end-point assessment by the apprentice assessment organisation.



Apprenticeship levy payers can access the funds from their apprenticeship service account, and non-levy payers only have to pay 10% of the cost. 

How long until this outlay can be recouped?

The cost of apprenticeship training has been shown to pay for itself within one or two years of completion through the increased productivity of the former apprentice, although the new apprenticeship ‘standards’ require learning to be demonstrable in the apprentice’s day-to-day role from day one. 

So, you can expect return on investment (ROI) on those apprentices to be shorter than those coming in with academic qualifications.

Employers should take a longer term view on the ROI they’ll get from an apprentice. Otherwise, it’ll become a boom-bust scenario of spending money on apprenticeships but seeing the completion rates go down if they are not entered into with the right amount of thought and consideration.

How can more businesses be encouraged to set up apprenticeships?

There is still a huge gap in employers’ understanding of apprenticeships and what they can give back to the business. While some companies embrace apprenticeships as a credible alternative to traditional recruitment, many remain sceptical about what they see as a government mandate imposed on larger organisations.

Sometimes the unknown is frightening because you don’t know where to turn. If you think that offering apprenticeships is an option for you, do your research, and contact recognised and qualitative training providers for guidance and advice.

Also, don’t be put off by some of the titles of the apprenticeships as they can cover a multitude of applicable job roles that suit your needs, and the right providers will offer the right schemes for you. 

Ultimately, my advice is ‘don’t get left behind’. There are more and more companies realising that apprenticeships are a high-quality alternative method of further education, and they are getting ahead of the game by offering them to staff as a viable route for nurturing emerging talent and future managers.

 

About the author

Phil Howard is head of sales at Intequal

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