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How apprentices can transform your business

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On the face of it, the business case for taking on apprentices is compelling. So why aren’t more small firms doing it? Peter Crush investigates

It may not be as headline-grabbing as attempts to cut spending, fix the NHS or control immigration, but over the past decade the UK Government has been engaged in a project that has enjoyed considerable success: raising the profile of apprenticeships.

In the late 1960s, this option was being derided as providing ‘less training than a properly constituted course lasting only a few months’, and by 1990 apprentice employment had fallen to just 53,000 – down from 243,700 in 1966. But since the 2006 Leitch Review into the skills the UK would need by 2020, they have once more found their place on the educational map.

This Parliament, the ambition is to deliver three million apprenticeship starts. And, judging by statistics for 2014-15 when there were 872,000 workers on funded apprenticeships in England, this target looks likely to be reached. In 2017, the apprenticeship levy will come into effect, too, changing the way training is funded and delivered.

It’s no coincidence that apprenticeship numbers have grown as university tuition fees now leave average graduates £44,000 in debt, while employers such as Ernst & Young, Deloitte and PwC have acknowledged that a degree is no longer a hiring prerequisite. But nothing, it seems, is being left to chance. In 2009, higher apprenticeships (Levels 4 and 5) were launched, followed by degree apprenticeships in 2015 (Levels 6 and 7).

To counter criticism that some apprenticeships weren’t worthy of the name, last year the Government outlined plans to make the term ‘apprentice’ legally protected. Apprenticeships can be labelled as such only if training providers can prove that the course they run gives a career path equal to higher education, and they must feature 30 weeks’ employment each year at the national apprenticeship minimum wage.

This is the good news. However, the Government’s evaluation shows that it’s larger employers that offer the lion’s share of apprentices, with 44 per cent of apprentice-supporting firms having at least 25 staff on site. Indeed, the new apprenticeship levy on employers – to help fund apprentices launching next April – appears to reinforce this pattern. It applies only to those with a payroll of £3 million, or just 2 per cent of all firms.

Bureaucracy, lack of awareness of funding and perceptions about the time and investment needed are all things that reportedly put smaller firms off. But is it time these smaller businesses also started benefiting from having apprenticeships? “This is what we wanted to find out when we researched 2,008 employers earlier this year,” says FSB’s Martin McTague, Policy Director, the results of which survey he shares exclusively here. “We wanted to know what small firms’ engagement with apprenticeships was, and for those who don’t, why not?”

Mixed picture

Encouragingly, one in four small firms say they already have at least one apprentice, and 24 per cent of those that don’t say they want to take one on in the future. The top reason small firms want to support apprentices is overwhelmingly that they feel it’s their duty. “This is good news – but there’s also a strong business case, recognised by half the firms we spoke to,” says Mr McTague.

However, he concedes that, despite all these positives, a significant reason small firms are disengaged is the cost: not in terms of funding but in time and oversight of the apprentice. “While FSB believes in co-investment, it’s often the time needed to take someone on and have them unproductive that is a reason for disengaging,” he says.

For Barbara Jones, Founder of natural building company Straw Works, oversight and management costs will always be an issue. But firms ought to understand that taking on apprentices will pay dividends later, she argues. “A building job with an apprentice might take seven days instead of five if you just did it yourself,” she says. “And you can’t bill the client the seven days because you’re training someone. But looking at it like this would be to ignore the purpose of giving other people a career as well as safeguarding the future of your own business.”

However, it’s clear that having apprenticeships will add costs for small firms – often in areas that Government or further education colleges might not have considered. “We have an apprentice,” says Kim Peatfield, Founder of Hemel Hempstead-based KP Plumbing & Heating. “But while we’re grateful we get the equivalent of 15 weeks’ wages funded, and help with national insurance, it’s cost us more than £3,000 to get our apprentice insured to drive our van.  Things like this are one cost too much.
It means we won’t be able to support taking on another apprentice now.”

On a more positive note, KP Plumbing believes bureaucracy is not the problem other firms may think it is. “We partnered with Oaklands College, and it’s been helpful,” says Mr Peatfield. “The paperwork is fine, and payroll hasn’t been difficult either. Bureaucracy is definitely a misconception, and if that’s what’s holding people back, it shouldn’t.”

Ms Jones will disagree, although in her case she was trying to start an apprentice course. For existing courses, firms shouldn’t be put off by red tape – and this is borne out by the FSB research. “We asked about it, thinking red tape would be an issue,” says Mr McTague. “But most firms said they worked direct with the training provider and were satisfied with the information, support and service they received.

Those that don’t have apprentices were more likely to say red tape was holding them back, so this perception exists, but it isn’t the reality.”

So, should small businesses reconsider their prejudices? Mr McTague certainly thinks they should, and groups such as the CIPD are unequivocal about the benefits that having apprentices gives to businesses. It finds that firms report average increases in productivity of £214 a week from apprentices, with 75 per cent of bosses saying their apprentice programme also reduces recruitment costs.

Devolved differences

However, having an apprentice is a commitment, and while the system is being made simpler, there are UK variations in how apprenticeships are managed and funded.

In Scotland, most apprentices are still called ‘modern apprentices’, and the syllabuses are still called ‘frameworks’ – developed with input from employers and Sector Skills Councils – while in England and Wales, from April 2017, all apprenticeships will replace frameworks with ‘standards’, designed by groups of employers called Trailblazers.

All apprenticeships in England will have to follow one of 300 official standards, but in Scotland employers will still be free to deliver their own customised training programmes. Skills Development Scotland also contributes to some training costs for apprentices aged 16 to 24. In England, under the new employer levy-based system, the Skills Funding Agency will now fund two-thirds of all apprenticeship training costs for apprentices of all ages.

In Wales, responsibility for skills falls to the Welsh Government, and Wales has its own apprenticeships system. There is considerable support for the training option, and the incoming Welsh Labour Government has committed to creating 100,000 all-age apprenticeships.

Apprenticeships in Wales are offered approved training providers, and can be taken in either English or Welsh. An online service helps employers locate suitable apprentices for their business.

Northern Ireland also has a separate system. “Northern Ireland is following the ‘Securing our Success’ strategy that will launch in September,” says Carolyn Brown, FSB Policy Manager, Northern Ireland. “There will be a Government body to handle the administration, and funding and incentives for small firms to support apprentices will come. There are plans to have much more employer-led apprenticeships rather than college-led ones, so businesses are free to design apprenticeships to match skills needs, while still meeting strong standards.”

Ongoing uncertainty

The apprenticeship levy will come into force in April 2017, although small firms will not be able to use the proceeds to fund training until at least 2018. But one last area of potential confusion is what happens until the new employer levy comes into effect. “The Government hasn’t yet clarified whether large firms can share their digital vouchers (what the levy turns into, for firms to spend on training apprenticeships), with smaller suppliers  that they work with,” says Mr McTague.

What is certain is that apprentices shouldn’t be seen as solely belonging to big business any more. All sizes of businesses are being encouraged to get involved and feel the benefits. “Retention rates for apprentices are cracking,” says Mr McTague. “Small businesses just want people to work for them. Giving someone an apprenticeship qualification will be rewarded with loyal service.”

Leading by example

FSB is practising what it preaches, with 18-year-old Samuel Yates about to start studying for a human resources management apprenticeship at Blackburn College while also working full-time with the organisation.

“If I’d gone to university, I’d have found myself in the same boat as lots of other leavers, trying to find work, so this is an opportunity to study and start my career earlier,” he says. “I’ll be studying one day a week, and working on the other four.

“I’m meeting new people, and I’ve already been to Parliament. I’m looking forward to starting my career.”

Craft builder opts for DIY

For Barbara Jones, Founder of Straw Works – which builds using traditional straw-bale methods dating back to the Middle Ages – red tape has been such an issue that she decided to launch her own training academy.

“We wanted to develop our own people, and apprenticeships seemed the right way. But despite numerous meetings with Construction Skills – our industry sector skills council – they’ve simply not been sympathetic to us about developing our own apprenticeship,” she says, adding that she had also tried to partner with further education colleges but had lost patience.

Construction is normally one of the worst sectors for gender balance, but 62 per cent of students on Ms Jones’s course are women. Learners fund the course themselves, which they do around their day-jobs or other commitments. Training takes between 18 months and two years.

Certification is a challenge, she says. “We’re trying to work with CERTA – a National Awarding Organisation based in Wakefield – but it’s chicken-and-egg. They say they need greater numbers, but we won’t get the numbers if the training isn’t certified.”

Ms Jones says she gets students on the strength of her company’s reputation, but believes creating apprenticeships should be easier. “It can be mind-boggling,” she says. “Construction seems to support the big boys, but when we try to do something, we’re not supported. It’s very frustrating.”

Help with funding: the levy scheme

On 6 April 2017, the Government will introduce an apprenticeship levy to help fund apprenticeships in England. The scheme is expected to raise £2.5 billion.

The levy will apply to employers operating in the UK with a pay bill of more than £3 million each year, and will be charged at 0.5 per cent. Each employer will have an allowance of £15,000 per year to offset against the levy they pay.

The levy allowance will operate on a monthly basis and will accumulate through the year. Once employers have paid the levy, they will be able to access funding for apprenticeships through a new Digital Apprenticeship Service (DAS), to pay for training and assessment for apprentices in England.

Employers that do not have to pay the levy, expected to be around 98 per cent of businesses in England – will have 90 per cent of the costs of training paid for by Government.

Extra support – worth £2,000 per trainee – will also be available for employers and training providers that take on 16- to 18-year-old apprentices or young care leavers. Employers with fewer than 50 employees will also have 100 per cent of training costs paid for by Government if they take on these apprentices.

To fund apprenticeships in small firms, the Government will use funds that levy-payers have not used. Payments will be negotiated, and paid directly to their chosen training provider.

Employers that do not pay the levy will not be able to use the DAS to pay for training and assessment until at least 2018. The Government is considering whether firms that pay the levy can use the funds they accrue in the DAS to fund training for other businesses, such as smaller firms in their supply chain.

Peter Crush is a freelance business journalist