Employers confused and concerned over levy

More confusion and concern over the Apprentice Levy. A major new report from the Chartered Institute of Personnel and Development (CIPD) has revealed that two thirds of employers are broadly opposed to the levy, citing cost and bureaucracy as their main concerns.

In terms of knowledge levels and organisations that understand the plans, public sector organisations are most likely to report they will have to pay the levy (41%), followed by private sector employers (31%) and those in the non-profit sector (23%). Just 7% of small organisations expect to pay the levy compared with just over half of large employers.


“The levy is a tax”

For those opposed to the levy, the reasons vary. However, one respondent, described as the head of education and skills at a large international electricity and
gas company summed up many of the concerns, saying “It [the levy] will impose a significant cost on business and will create deadweight activity as all organisations try to recover the cost of the levy. Put simply, the levy is a tax – a way of recycling employers’ money.

“Even after reclaiming allowable costs through the voucher system, the levy is going to create a further cost burden of around £1 million a year for our business, and it could be higher!’ However, despite these misgivings, he believes that ‘it is with us now and we should play our part to help make it work effectively.”

Non-profit organisations are much more likely to support the apprenticeship levy (43%) than public sector (35%) or private sector organisations (34%). There is little difference in the level of support for the levy between the views of SMEs and larger employers.

Critically, the research also shows that almost 30% of employers do not expect to use levy funding to develop or enhance apprenticeship programmes, while 40% don’t know where they stand on it.

For those in favour, the top reason cited by organisations for supporting the apprenticeship levy is that ‘it will benefit young people in the UK’, with eight out of ten respondents identifying this as a reason for their support.


Scepticism over chances of success

But a worrying figure emerges when respondents give their view of the chances of success. Just under a third of organisations that support the levy believe it will have a positive impact upon business in their sector, with only a fifth of employers agreeing the Digital Apprenticeship Service will make it easier to access funding and just 10% think the system will become less bureaucratic.

SMEs are less likely than larger employers to agree that the Digital Apprenticeship Service will make it easier to access funding (10% versus 23%) or that the system will become less bureaucratic (5% versus 13%).

For its part, the CIPD says the research suggests that significant reform of the existing plans may be in order. Peter Cheese, chief executive of the CIPD, said: “We share the government’s ambition to increase the number and quality of apprenticeships in the UK. However, our research suggests while the levy will boost apprenticeship numbers among some employers, the majority of organisations, particularly SMEs, are unlikely to use levy funding to improve apprenticeship provision.


‘A blunt instrument’

Our research also finds that the levy could have damaging, unintended consequences. For example, taking investment away from other equally valuable forms of training and development and causing organisations to effectively re-badge existing training schemes as apprenticeships simply in order to reclaim levy funding. Many large employers, particularly in low margin sectors and the public sector, will have to make significant cuts to their training budgets as a result of the levy, or will simply write it off as a tax.

“These findings highlight that the levy is a blunt instrument providing employers with a ‘one size fits all approach’ to training, forcing many larger employers to make a net contribution to a scheme that our research shows will suit only relatively few. We therefore believe a much broader, more flexible Training Levy should be developed to ensure that the system is genuinely employer-owned and meets the skills requirements of organisations. This would enable employers to draw down levy funding, with appropriate criteria, for a wider range of training activities, as well as for apprenticeships.”

Earlier this month a series of other organisations raised concerns about confusion over the levy.