The Apprenticeship Levy, that the Confederation of British Industry labels it as a tax aims to induce employers to take more of these learners on.
All firms with a payroll greater than £3 million will, from next month, have to pay 0.5 per cent of it into a digital account. They’ll only get it back (plus a £15,000 sweetener and a 10 per cent top-up on each £1 paid in) if they use it to buy accredited apprenticeship training. In essence – pay up, and the money is yours again so long as you take on an apprentice.
According to Raconteur, government wants three million apprentices earning and learning by 2020, with 2 per cent of employers (some 22,000 businesses) estimated to be affected.
To ensure the three-million target will be met, earlier this year the government also confirmed that all public-sector bodies employ 2.3 per cent of their workforces as apprentices by 2020. This will add a further 200,000 employees.
New Department for Education figures released in January indicate the three-million target is on track, with 780,000 starts since May 2015, quarterly figures exceeding the 150,000 needed to reach this milestone. These numbers will need to continue though.
The report showed that more than half (58%) of apprentice starts for 2015/16 were at Level 2 (equivalent to five GCSE passes), while just 5 per cent were at higher levels (4 to 7).
Apprentices can be trained how employers want them to be
“There’s still a perception that apprenticeships are low skilled and attract the less academically gifted,” says Sean Allison, managing director at notgoingtouni.co.uk. “But on the other hand,” he argues, “employers are also questioning the value of a degree – and I feel it’s this that is beginning to change things and restore their faith in apprenticeships.”
He adds: “It’s good recruitment after all. Grads often have high expectations, and leave more quickly; apprentices can be trained how employers want them to be – and this is a real positive right now.”
“The data is now clear that those who do a higher or degree-level apprenticeships can earn more money over their lifetime than someone going to a top, non-Russell Group university – £1.5 million compared to £1.4 million,” says Dr Lee Elliot Major, chief executive of social mobility think tank, The Sutton Trust.
“Although teachers are still surprised by this, and there is work to be done to ensure schools don’t just push the university route, this earnings headline is slowly changing people’s perceptions – especially when weighed up against the cost of going to university,” he says.
apprenticeships give YOUNG PEOPLE a different route and for companies to find pockets of talent that might have been discouraged from university.
This is the view of Candida Mottershead, Accenture’s human resources director for UK and Ireland. “We can also focus our training on the skills we actually want, so it’s win-win all round,” she says. “It’s challenging for young people right now; this gives them a different route.”
More enlightened firms are beginning to embrace higher-level apprenticeships.
In September Dentons, the world’s largest law firm, will introduce its first solicitor apprenticeship programme – a six-year training course to Level 7, with learners starting on £18,000 per annum.
“We won’t change perceptions about apprenticeships just by ourselves,” says partner Gurbinder Grewal. “For us though, developing apprenticeships wasn’t even about the Levy – we decided we wanted to do this anyway. We’re all in a fight for talent, so apprenticeships are an investment in our future.”
Are apprentices paid enough?
Apprentices may eventually earn as much as university graduates, but not straight away
Apprentices are entitled to an hourly apprentice rate of £3.40 currently (rising to £3.50 from April) if they are under 19 or aged 19 and over in the first year of learning. They are only entitled to the minimum wage for their age – the relevant bands are 18 to 20, 21 to 24 and over 25 – if they are both 19 or over and have completed the first year of their apprenticeship.
This means a 22 year old can either earn £6.95 (the minimum hourly wage for a 21 to 24 year old) or £3.40 depending on whether they’ve completed their first year or are still on their first year of their apprentice. Both are below the National Living Wage of £7.20 per hour (rising to £7.50 from April) and well below the £9.45 earned in London and £8.45 elsewhere, recommended by the Living Wage Foundation.
While data by Success at School finds average apprentices earn £257 a week, the Department for Business, Innovation and Skills revealed employers pay more for higher skills. It found average pay for higher-level apprentices (Level 4 and 5) was a much healthier £11.63 per hour.
Stefan Stern, visiting Professor in management practice at Cass Business School, says: “The target of three million apprenticeships is properly ambitious, and pay is part of the problem. But so too is management’s reluctance to invest in younger employees.”
The Apprenticeship Levy report
This special report outlines how the new law will impact both young people and employers.
The report outlines how the levy will bring about thousands of new opportunities for young people, ways businesses can adapt and 10 of the best apprenticeships available. Additionally, it includes an infographic tracking the rise of vocational education in England.