The Apprenticeship Levy - what does it mean for our industry?

April 2017 will see the biggest single change to apprenticeships under this government, with the introduction of a new levy and whole series of complementary supply-side reforms. So what does this mean for construction? Mace's Paul Gallagher, Operations Director for Community Regeneration tell us:

The sector already supports skills and employment through a number of different routes such as Corporation Tax contributions, internal staff development programmes and Section 106 payments. And as one of only three industries to still have an industry training levy, any additional payments (in an age of increasingly tight margins) will not necessarily be welcomed with open arms.

But the changes to the apprenticeship programme have long been coming. The Conservative Government committed to increase both the quantity and quality of apprenticeships over the lifetime of this parliament, pledging a target of three million new starts by 2020, during the last election campaign.

In the last five years, there has been sustained growth in apprenticeships, with the number of starts for 2014/15 within touching distance of the 500,000 mark. For the government to meets its target in this parliament it will need to average at least 600,000 starts per year, plus make up any shortfall from any previous years, so additional support from industry was always likely.

What does this mean for construction?

Of the half million apprenticeships in 2014 / 15, an estimated 19,000 started a constructions skills framework or alternatively, under four per cent of the total. Given construction accounts for nearly 7% of the UK’s workforce and a forecast 400,000 workers are set to retire and leave the industry over the next five years, the much documented skills challenge looks to be more of a deep rooted threat.

Therefore any initiative to boost apprenticeships in the construction sector should be seized and taken as an impetus for further action.

What’s the difference?

Some will question what difference the new levy will make to construction, given the long history of an existing industry specific levy, but it will have an impact.

The levy will apply to all businesses over a certain size – not just construction – who won’t have had this before, so will be engaging with the new scheme in order to ‘get their money back’ via their new digital account to invest back into apprenticeships. This will include construction clients, who to date have been exempt.

After April 2017 the age restrictions, which had hampered the growth of the apprenticeship programme, will be removed so businesses will have greater influence over who can be trained. Payment incentives will be available from the government to employers who recruit 16 – 18 year olds, along with additional support provided by the government for disadvantaged individuals, additional learning support and funding for English and Maths training to offset any unintended discrimination.

For the construction sector the removal of age restrictions fits with the trend to start people on apprenticeships once they are 18, in recognition of health and safety conditions attached to site insurance.

A further positive change will be to give apprenticeships an equal legal protection to degrees. In the future, only programmes which meet the government’s quality standards can be called an ‘apprenticeship’, which will gradually enhance the value of apprenticeships and safeguard against any training programme being called an apprenticeship. For those looking at a vocational alternative to university, apprenticeships may finally be coming credible choice, resulting in a wider potential recruitment pool for the industry.

Longer term the much vaunted but seldom achieved ambition for placing employers at the heart of the design of standards and programme content will take a step closer. There will be a move away from apprenticeship ‘frameworks’ (e.g. an NVQ, Key / functional skills and technical certificate) towards an apprenticeship standards model (e.g. employment specific skills, competencies and behaviours, assessment plans, end point assessment made up of a range of techniques e.g. interview, exam, test / qualification etc.). For the construction sector this should help make apprenticeships more relevant to the future needs of the site and the workplace, as well as raising the parity of apprenticeships to that of degrees.

How should employers engage?

We need apprenticeships to be valued in the same way as a degree – as is the case in Germany – to encourage not just young people, but also their parents, teachers and careers advisers, to see apprenticeships as a valuable endeavour. Construction employers have much to offer in attracting new entrants to the industry and in selling the many positives of a career in construction.

For construction employers, there is now far greater scope to work with their clients to develop skills solutions, as both will likely be paying the Apprenticeship Levy and both will be shouldering the responsibility for ensuring that new Apprenticeship frameworks reflect the requirements for a 21st century workforce.

Finally, we can’t overlook the key role of CITB and challenge that running two levies will present in the short term. For those construction companies affected by this, it will be critical that they fully engage with CITB and Government to identify practical solutions for how the combined funds can be accessed and utilised after 2017.