Recruiting apprentices is perceived to be costly in money, time and commitment, not the seamless process the Government promised it would be when they introduced the levy in 2017 and funding for SMEs.

The Co-operative Group (report 2023) revealed that the levy and process is too complex, and many businesses are not utilising it with a staggering £600 million being returned to the Treasury last year because businesses were unable to meet the restrictive requirements.

Professional bodies such as the British Retail Consortium, UK Hospitality, tech UK and the Association of Employment and Learning Providers want the government to overhaul the apprenticeship levy to simplify the system, providing more support to make SMEs more aware of what funding and services are available and to put in place advisors to guide and support them through the process and mitigate any incorrect perceptions of apprenticeships. 

Read our ‘top tips’ to understand what is available and to help you navigate the challenges and the process.

Make the Unknown Known

There are several reasons why the apprenticeship government scheme isn’t a success with SMEs, one is because awareness is low with 44% of SMEs (Vodafone 2023) unaware of the various apprenticeships funding options available to them from the government and the transfer funds from large companies who don’t use their levy within the 24 months.

Reduction in Apprenticeships

CIPD reported that the number of apprentices starting in small businesses has decreased since the introduction of the Apprenticeship Levy in 2017, with123,800 apprenticeship starts in SMEs in England in 2020/21, compared to 241,000 in 2016/17, resulting in a fall of 49%. The report also states how training for existing employees has declined by 19% since 2011 from £2,191 to £1,778 equating to around half of the EU average. 

This is detrimental to the economy, and if we don’t invest in recruiting new and existing apprenticeships and training existing employees then it will add to the skills shortages and gap, reduce productivity, lead to higher employment levels, hamper innovation and economic growth.  

It is essential that SMEs understand the services and funding available so they can benefit, invest, and grow their talent, their business and contribute to the overall growth of the economy especially as SMEs make up 99.9% of the businesses in the UK.

What is the Levy?

The levy is for employers with an annual wage bill of more than £3 million to pay 0.5% of their payroll costs into a fund for training. For all other companies the government funds 95% of the apprenticeship training and 100% for companies with less than 50 employees and if the apprentice is 16-18 or 19-24 with an education, health and care plan provided by the local authority.

Levy Transfer

A lot of large companies do not use their levy funding and if not used within 24 months they lose it. In 2018 the government announced that they could transfer the funds to charities or SMEs who have registered on the apprenticeship service.

This is a huge benefit to SMEs because it means that the government will pay 95% of the funding for the apprentice funding and training and the 5% can be paid by a transfer fund therefore costing the SME nothing! A win win all round.

Changing Perceptions

Apprenticeships are still regarded by some solely for school leavers who want to train to be tradesman. This is far from the truth as apprenticeships today can be from a level 2 (GCSE) right the way up to a level 7 (MBA). They are not just for school leavers and are a fantastic opportunity to use the funding to up skill your existing employees to grow, nurture and develop talent.

Challenges in Recruitment

SMEs must not be put off by recruiting apprentices because recruiting an external hire does take time and effort and the pay off with an apprentice can be more than a new employee.

HR Solutions reported from their survey that companies found the following recruitment issues a challenge - 43% of employees were facing a kills shortage followed by a candidate shortage (24%) and 89% of respondents said they were struggling finding the right skill set, the time it takes to hire (15%), increasing demands from candidates for hybrid working (11%) and cost per hire (7%). By recruiting apprentices, you mitigate these challenges.

Upskilling Existing Employees

SMEs can use the apprenticeship scheme to upskill and develop existing employees. The HR Solutions survey revealed that less than 30% of employers offer any training to first time team leaders and now 83% of job roles now require softer skills such as interpersonal, management and communication skills so it is vital we develop these. This is prevalent in today’s workplace with the advancement and proliferation of AI and automation technology where many jobs are being replaced by technology therefore making the ‘soft skills’ that only humans can provide more important than ever.

Keeping it Simple

There has been much criticism that the levy and the apprenticeship programme is too complex with over 600 occupational standards set by the Institute for Apprenticeships and Technical Education (tFATE) on the system. There has also been comments that many of the courses are unsuitable and too long presenting barriers to SMEs planning to use it.

Time and Commitment

The apprenticeship levy and programme states that the learning must take 20% of apprentice’s time within working hours and for an SME this is a big commitment. For existing employees who are apprentices this means that someone else will have to do their job for 20% of the time or they will be behind on their work.

To take on an apprentice the company needs to commit time and resources to mentor and train the apprentice. For some this is a commitment that they feel they cannot take on and it is too much of a sacrifice.

Home Grown Talent

Apprenticeships need to be viewed as a long-term investment; the benefit is that you can grow, nurture, and cultivate them your way to have the skills that are bespoke to your business.  

New apprenticeships are fresh talent who are loyal and often stay with the company, you have invested in them and if you continue to develop them in turn you will receive a dedicated and skilled employee who is enthused, engaged and will be more productive and proficient than employees who are not trained.

Return on Investment & Much More

Apprenticeships are a very cost-effective way to build a skilled workforce that is bespoke to your businesses needs and requirements where you can offset the costs of training.

Sounds great - what do I need to do?

1. Evaluate what skills gaps you have in your business and look to close them with an apprenticeship and training for new and existing employees. Ensuring they are aligned with your overall business objectives and strategy.

2. Register at the Governments ‘find an apprenticeship’ training website which will enable you to select the course you require.  

3. Select a local or national training provider who will deliver the 20% ‘off the job’ training either online or at your workplace. They are extremely useful in helping to guide you and manage the process.

4. You will need a compulsory apprenticeship service account to enable you to manage the apprentice. This is a must to access and manage funding, receive a transfer of funds, advertise vacancies etc.

5. Time to recruit using a non-bias fair process. To save time your training provider can do this for you.

6. The legalities – ensure you have an approved English Apprenticeship Agreement – providing the apprentice with standard legal working rights and conditions.

Watch Them Bloom

Be patient with your apprentices, like new seedlings they need nurturing and take time to grow and deliver the commitment and mentoring you promised and before you know it your return on investment will have more than paid off.

You can watch them bloom into a loyal, enthusiastic, dynamic, competent employees who will become an invaluable member of your team. Look after your people and they will look after you.