Autumn Statement should rethink Apprenticeship Levy for SMEs

Employers urgently need real incentives to address skills shortages within their industries and drive economic growth, according to independent training provider, The S&A Academy.

Since its introduction in 2017, the Apprenticeship Levy has undergone a series of changes, which has led to confusion about the training opportunities it provides for large employers with a pay bill of more than £3 million a year. While most SMEs fall outside of the scheme, business owners often don’t realise that they could still be eligible for Government subsidies – i.e. if they launch a qualifying  programme, leading to a recognised standard, they only pay 5% of the cost of training each apprentice, as the Government pays the rest.

According to The S&A Academy, which designs and delivers bespoke apprenticeship programmes for employers and recruits talented learners, it’s time to rethink incentives for skills development. Rachel Thomas, director of The S&A Academy, said, “There are 700 different apprenticeship standards in existence and multiple delivery models, and employers can’t see the wood for the trees. They need to invest in skills development to fulfil their growth plans. They urgently need business analysts and workers skilled in data science, software and digital technologies. However, they may not realise that apprenticeship programmes can be built-to-suit and that they can choose the most appropriate delivery model.

“Many businesses are put off by the idea of paying the levy and an apprentice’s salary – they see it as a lose/lose rather than a scheme that could lead to sustainable growth and deliver a net benefit.

“Many larger employers don’t realise that if they don’t spend their levy funds each year, it’s effectively money wasted. They also may not know that whilst apprentices must be paid a salary, they aren’t liable for Employer National Insurance Contributions. As such, the levy is misunderstood and undervalued.”

Data sourced recently by FE Week as part of a freedom of information (FoI) request shows that levy payers are spending less on Level 2 apprenticeship participation – spending in this area dropped from £622 million in 2017/18 to £421 million in 2021/22. However, they are spending more on higher level apprenticeships.

Thomas added, “Some larger employers have responded to the ‘use it or lose it’ message, but many SMEs are flummoxed by apprenticeship training provision and don’t know where to go for information or how to take advantage of it,” added Rachel Thomas.

The S&A Academy is calling for Chancellor Jeremy Hunt to introduce greater clarity and  a real incentive for employers to invest in skills development by transforming the Apprenticeship Levy into a fiscal benefit, with opportunities for corporation tax relief.  The scheme should also be made available to all employers, regardless of size.

“The system should be simplified and deliver a tangible incentive for employers that are willing to invest in reskilling and launching their own apprenticeship programmes. Employers that do this are showing their commitment by giving learners access to rewarding career paths and mentoring them through the process.”