Apprenticeships reform: Good news for SMEs

“For the past 18 months the Apprenticeship Levy has been firmly in the spotlight. While larger business with a pay bill over £3m now pay monthly into their levy pots, SMEs have been hit by new requirements to pay a 10% contribution to their apprenticeships, where previously they received the training fully funded. However Philip Hammond has lit a beacon of light for SMEs with the announcement that he plans to increase the amount of apprenticeship funding that can be transferred from levy payers to smaller operators.

Decrease in SME apprenticeships

“In the days before the Apprenticeship Levy was introduced, SME’s were by and large the employers of the majority of England’s apprentices. However, since the levy came into play, apprentice numbers in SME’s have fallen off a cliff because they cannot afford the 10% contribution they now have to pay towards the training.

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“This has had a huge effect on SME caterers, which historically have relied on apprentices to form a large part of their workforce, increase their staff retention and improve the skills across their business. When you consider that the government is sitting on £1.28bn of unspent levy and the number of new apprenticeships in the UK fell 28% to 341,700 in the year to June, it’s clear to see that vital changes to the system are needed.

Transferrable funds and skills

“Currently, levy-paying employers can transfer 10% of their levy pot to SMEs or charities in their supply chain or sector – but this is something which is relatively unknown, and an opportunity largely underutilised. Furthermore, 10% really doesn’t go far enough.

“It’s with all this in mind, that Phillip Hammond’s proposed new plans to increase the amount available for businesses to transfer from 10% up to 25% have been welcomed.

“This is a move which can only be seen as a positive. Not only has it put the transfer of funds firmly on businesses radar but raising the value will help to improve work-based training, provide increased career opportunities and build transferrable skills which will ultimately help the wider UK economy.

“Currently for SME’s the cost of apprenticeships is proving prohibitive and as a result, caterers are being forced to limit their training investment to focus just on the skills needed in their business today rather than considering both what’s needed now and in the future. This has the potential to dramatically affect the future of the sector as a whole, as employees will not have the skills to work for other businesses, to innovate and adapt to the changing market. Ultimately, this will see employees losing their enthusiasm and leaving the industry. For the hospitality sector, which is tackling a chronic skills shortage, the situation is only going to get worse once the UK leaves the EU, it’s therefore essential that businesses which aren’t using their levy, look to transfer it to those in the sector who can.

Attracting the next generation

“Furthermore, it’s predicted that over the coming years nearly half (49%) of all vacancies in the hospitality industry will be in entry-level positions. Yet, this is also where there is the greatest concentration of casual workers and where staff turnover is high. Since the introduction of the Apprenticeship Levy, the number of Level 2 apprenticeships in these positions has greatly decreased, causing a barrier to social mobility.

“If we look at chef positions as an example, projections suggest the industry will need an additional 11,000 chefs in the next five years. However, businesses are still struggling to fill vacancies even though there were 28,390 chef students in 2015/16 alone. This raises a number of questions; where are these students going and why aren’t they continuing their learning and development in the sector?

The value of apprenticeships

“Ofqual’s latest research revealed that 91% of employers value vocational and technical qualifications such as apprenticeships – and yet only 8% of Apprenticeship Levy funds have been used. Furthermore, the survey also showed that eight in ten employers think qualifications like apprenticeships equip learners with relevant skills and 78% consider them essential when recruiting for skilled and supervisory roles. It strikes me that if we’re all agreed vocational training is vital, then we need to make sure this dedicated funding is unlocked, maximised and shared to help protect our vibrant sector now and in the future by creating positions for the younger generation. If we know that there is a pot of funding available in the sector that can only be used to train and upskill employees, then we would be foolish not to use this and to use it well.”

By Jill Whittaker, managing director of hospitality training provider, HIT Training

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