The Apprenticeship Levy, introduced in April, has opened up new opportunities for employers who are paying it to address their skills gaps in an affordable way – while changes to the apprenticeship funding system have opened up further opportunities for those who aren’t paying, with more changes to come next year.


We need two million more engineers by 2025. There are numerous conferences and campaigns to tackle the issue, but the new system could be the answer – making training a more attractive investment. Levy payers are now in control of directing their own funding, so can invest strategically to recruit and upskill to plan for future skills needs. They will be able to include small businesses in supply chains from next year, which will help to keep un-spent levy funds paid by engineering firms within the sector.


In the meantime, SMEs with fewer than 50 staff receive 100% funding for training apprentices aged 16 to 18. In addition, non-levy-funded apprenticeships – for both levy-payers and non-payers alike – will be 90% funded by government, so the most an employer will ever contribute to an apprentice’s training will be 10% of the cost.


Government funding can be used for existing employees, no matter what their age and, for the first time, apprenticeships can be funded for those who are training at the same or a lower level than their existing qualifications (so long as those taking them will acquire ‘substantive new skills’) – an important change from the previous system. This provides greater flexibility for employers to upskill their existing workforce through the apprenticeship route – with degree ones and master’s level apprenticeships now ready to use, and doctorate-level apprenticeships a possibility, they really can be used to meet skills needs at every level.


We are already seeing employers using the levy strategically. Savvy companies are carrying out a training needs analysis, using it to predict future requirement, recruit or upskill accordingly and become more internationally competitive.

Ann Watson heads up skills organisation Semta

Andrew Churchill runs levy-paying aerospace manufacturer JJ Churchill Ltd, which employs 129 people. He is passionate about the business benefits of apprenticeships: “I do a lot with smaller businesses and they often ask, ‘Why bother with apprenticeships?’ The answer is apprentices bring new ideas and energy to businesses, are already ‘fluent’ in changing technologies and, if looked after, are loyal employees who deliver an excellent return on investment. Contrary to what some employers think, apprentices are one of the best investments a business will ever make – with or without the levy.”


From next year, levy-paying employers will be able to transfer up to 10% of their levy funds to SMEs in their supply chain, which is a further incentive for smaller businesses to engage in apprenticeships and to start discussions with their levy-paying customers now, to put plans in place.


Built into the new system is a mechanism of competition, with employers able to choose the provider they feel is best suited to meeting their particular training needs. Price is important, but employers are also able to see, through the online Apprenticeship Service, how well their peers rate different providers.


This means training providers are encouraged to compete not just on price, but on other metrics, such as quality and service – and employers will be looking beyond the price tag when selecting the provider they want, and thinking about the added extras. This could be levels of service, the extra training delivered above and beyond the confines of the apprenticeship standard, administrative support to manage levy funds and all the other things that make it simple and rewarding for employers to take on apprentices.


Apprenticeship funding is becoming increasingly relevant to finance directors – how it is being spent and the return on investment it is achieving (research has shown that an engineering apprentice can deliver a return on investment in as little as 12 months). This helps levy-paying employers to be more strategic in their training investment.


One Nottingham-based company has formed a levy committee with finance, personnel and training colleagues working together to agree a levy plan. They have taken a single approach across multiple sites to maximise the benefits of apprenticeships and their levy investment across all areas of the business. The company has carried out a full organisational training needs analysis, both for current skills and future technical needs, and now has a strategic skills plan underpinned by apprenticeships, covering everything from engineering to accounts and administration.


The new levy system allows one lead organisation to deliver all levy-funded training, with subcontracts where there is a need or desire to use more than one provider. This means that employers can bring their strong negotiating power to bear in how and where they want the training delivered, as well as securing additional added value.


A challenge of the new system is the requirement for 20% of funded apprenticeships to be off-the-job. For new engineering recruits, the first year of college training or block release means this may not be difficult. However, for existing employees, it may be harder to design in the required 20% and still ensure they are productive. It is important that employers understand this up-front, so that they can plan in from the beginning of an apprenticeship programme the required off-the-job training element and implement an effective audit trail to evidence that training later.


Funding guidelines say off-the-job training can include ‘practical training, shadowing, mentoring, industry visits and attendance at competitions’ (including WorldSkills), which gives scope for learning that does not have to be classroom-based. However, there has been some debate about what qualifies as ‘mentoring’ and ‘shadowing’; bodies such as the Association of Education and Learning Providers have issued calls for clarification, while providing examples of good practice. My advice is to ensure this is clearly specified in the training plan, with a good audit trail to verify it.


In Telford, another manufacturer takes on more than 20 apprentices every year and has made a commercial decision to become an employer provider and deliver its own apprenticeship training. The money paid into its levy fund will come back to this employer and not to an external provider. The company has been approved on the government’s Register of Apprenticeship Training Providers (RoATP) and accredited by the awarding organisation EAL to deliver the qualifications specified in the apprenticeship standard and assessment plan.


Although much of the focus is at present on those employers who are paying the levy, it is crucial to engineering that we have a system that meets the needs of smaller employers who don’t pay it.


In the last 18 months, Semta (http://semta.org.uk) has helped to develop 48 new apprenticeship standards. For new standards to be signed off, they have to be approved by small businesses too – and apprentices who successfully complete them must be able to do the job with any employer, large or small. So all the new standards have been designed by employers for employers, of every size, and are relevant to what businesses need.


This sea-change in the apprenticeship landscape puts the employer firmly in the driving seat. There have always been excellent examples of apprenticeship practice and I hope that the levy helps this to increasingly become the norm. With employers designing the standards that underpin apprenticeship programmes, and with those standards all based on job roles where there’s a demand for new recruits, we have an opportunity to get to a place where all apprentices have clear job descriptions, are given opportunities to progress and receive the offer of a permanent job role upon completion of their programmes.


Employers are now in control – they have the power to design the apprenticeship standards they need and can direct funding to the areas where they have skills needs. Large employers should already be using levy funds or putting plans in place to use them, as they risk losing them two years after payment. Small businesses can already take on apprentices at 100% funding for training; next year there will be opportunities for levy payers to transfer funds and the government is consulting on supply chain apprenticeships.
All companies should make it their business to capitalise on the new system and train to deliver the workforce industry needs.

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Box item 1 - Impact of the levy, four months on

EAL, Semta Group’s awarding organisation, carried out research with 400 colleges and training providers specialising in engineering to understand the impact of the levy four months on. While many said employers are still not sure how they will use it or the impact, nearly half said they expect the levy to increase engineering apprenticeship demand.

Nearly 70% of employers are using levy funds to recruit new apprentices but 58% are also using funds to upskill existing employees. Most training providers (93%) expect increased demand to be at Level 3, with 75% expecting Level 2. Just over half expect an increase at degree level or above.

Box item 2 - Ten tips to maximise the levy

1. Decide what you/the company are trying to achieve


2. Carry out an organisational training needs analysis to identify: current skills gaps; future needs to five years, include emerging technologies and readiness for the Fourth Industrial Revolution (Industry 4.0)

3. Set up a committee to agree decision-making and how the levy can be spent to best add value to the business


4. Be imaginative about the skills you need and how they can be delivered through the levy – there are apprenticeships covering lots of non-engineering roles, so if you don’t need to bring in enough engineers to spend the full amount you can spend it on other skills needs your business may have


5. Decide which qualifications/standards will deliver the skills you need


6. Identify the skill levels you need – from Level 2 to degree and master’s level (and doctorate-level apprenticeships are a possibility) – there’s great scope for upskilling existing employees as well as new entrants


7. You can keep existing elements of training within an apprenticeship (for example a short course) but you can’t pay for these with levy funds


8. Have a plan for the 20% off-the-job training – this can include ‘practical training, shadowing, mentoring, industry visits and attendance at competitions’. Ensure you have an audit trail for these


9. Look for a training provider who can help you manage the whole levy process – they need to be on the RoATP, the government Register of Apprenticeship Training Providers


10. Find an End-Point Assessment (EPA) partner – they must be on the government Register of Apprentice Assessment Organisations RoAAO and independent from the training delivery

You can contact Semta on 0845 643 9001, or email customerservices@semta.org.uk

First published in Machinery, December 2017