The Apprenticeship Levy – one year on

Following a year of the Apprenticeship Levy, the government initiative to fund three million places for apprentices by 2020, Jill Whittaker, managing director at HIT Training, reflects on its impact, what the future holds for apprenticeships in the UK and what opportunities this opens for the hospitality sector

“For some hospitality businesses, the perceived paperwork and admin involved with the Government’s Apprenticeship Levy may well have, at times, felt a little overwhelming. As a result, some would say the one-year anniversary has been far from a celebration of its success.

“While this has caused some to write off the scheme as a failure, here at HIT Training we believe this is a short-sighted view. The reality is, that as with anything new, there have been teething problems and some confusion around the Levy itself. As such, it’s hardly surprising that, according to a report by the Open University, £1.3bn of the cash paid into the fund is yet to be claimed.

“But this figure is much less dramatic than it first appears; businesses actually have 24 months to use Levy payments so understandably they are taking time to get to grips with the scheme first. This is certainly what we are seeing at HIT Training. In the hospitality sector, May 2017 saw apprenticeships starts at just 25% of the same month in 2016. But by the end of 2017 that figure had increased to 80% year-on year. Far from writing a scheme off in its infancy, we need time to allow a new piece of complicated legislation to bed down.”

Reflecting on 12 months of the Levy

“As a reminder, the Levy itself requires all companies with a pay bill of more than £3m to contribute 0.5% of their payroll costs to the scheme, which they then claim back for training. This amount is then topped up by 10% from the government. Businesses with pay bills below £3m don’t have to pay into the fund but they still have access to government subsidies of 90% of the cost of the apprenticeship, with the employers co-paying the additional 10%.

“A recent survey from People 1st showed nearly two thirds of employers in the hospitality, travel, tourism and aviation sectors are either confident or very confident they will see a return on investment from their Levy contribution. Better staff retention rates, improved skills and personal development have all been singled out as business-critical benefits by nearly three quarters (72%) of respondents. And as the firm grip of the skills shortage continues to pose a risk to the industry, it’s now more important than ever that hospitality businesses maximise the advantages available from apprenticeships.

“Our hospitality clients continue to laud apprenticeships as an excellent way to upskill staff whilst also recruiting and retaining top talent. The last few years have seen the introduction of the new apprenticeship standards, making training even more relevant and rigorous, with benefits to the business more obvious. As expected, we are seeing apprentices lead on to successful, long term careers in hospitality. Additionally, the numbers doing higher level apprenticeships has also increased. There is no doubt that those businesses that do their homework and choose the right apprenticeship provider are reaping the rewards.”

What the legislation looks like now

“May also saw a new evolution to the Levy as, for the first time, large employers can now transfer 10% of Levy payments to other organisations. Up to now, businesses could only spend the money on their own apprenticeship training but since May they can now pass it on to another organisation registered on the apprenticeship service. This means that Levy-paying employers can work with another employer to help them take on apprentices, increasing the skills base in their supply chain, sector, charity or local area – helping to professionalise the industry as a whole.

“Equally, if you are in a group of companies connected for the purposes of paying the Levy, your group is able to collect funds together into one account. This is done by registering the group’s PAYE schemes to a single account.”

The future of hospitality apprenticeships

“The future is certainly bright for apprenticeships and we encourage all employers to take advantage of the Levy. Setting up a programme with a trusted provider will encourage staff to stay in the industry by enabling workers to train for valuable career pathways. Apprenticeships should not just be considered for new staff, they can be useful for updating the skill set of existing employees too – from junior right up to senior level.

“The benefits speak for themselves; 70% of apprentices stay with their employer after completing their qualification – something even more important as we head towards Brexit. Then there is the boost to morale; 92% of businesses find that having an apprenticeship programme has led to a more motivated and satisfied team.

“So as the Levy starts its second year we encourage more businesses to utilise and maximise their payments. There is no doubt apprenticeships are the go-to solution for employers looking to attract, retain and develop talent, from new starters right through to senior level employees.”

by Jill Whittaker, managing director at HIT Training

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