‘Unhelpful’ technicalities putting employers off apprenticeship levy funds

Out-Law News | 11 Feb 2022 | 9:23 am | 2 min. read

Employers are being put off using their apprenticeship levy funds because of “unhelpful” technical legal requirements, according to two specialists.

Amy Hextell, employment expert, and Andrew Church, commercial law expert at Pinsent Masons, said firms that wanted to train apprentices had to contend with “highly technical” laws in order to do so. “The way the legislation has evolved has been unhelpful and employers are often unsure about the legal status of apprentices and the sort of employment documentation that has to be in place,” Hextell said.

It comes after polling suggested that half (48%) of firms had previously returned unspent apprenticeship levy funding to the Treasury, while just 17% think the current apprentice levy system is working well and doesn’t require changes. Challenges in spending the levy mean only half (51%) are currently transferring unspent funds within their supply chain with 24% of businesses reporting that they have been unable to use any levy funding within their own organisation.

According to 28% of respondents, the biggest barrier to transferring levy funding to the supply chain was the complexity of the process. A further 26% said that the inflexibility of the existing rules prevented SMEs in the supply chain from taking up the funding on offer.

Church said: “Many employers may be reluctant to use their apprenticeship levy as they may simply not understand the process of drawing down and using their levy funds. Employers who wish to use the levy must comply with the Education and Skills Funding Agency’s (ESFA) apprenticeship funding rules, and without sufficient knowledge of these, smaller employers that do not have large HR resources may struggle.”

“Employers must also enter into contracts with specialist training providers, which set out the terms and conditions upon which the training will be delivered. This adds another level of complexity and may further deter employers from making use of their levy funds. The impact of Covid may also have resulted in fewer employers using their apprenticeship levy, as historically most training has been delivered in person. However, many training providers now deliver their courses online, making them more accessible to employees,” he added.

A third (35%) of businesses also said that the levy funds could be better used if the deadline for spending them was extended from two to three years, if employers were allowed to use some of the levy to contribute towards the wage costs of new apprentices, and if they were incentivised to convert Kickstart placements into apprenticeships.

Two fifths (41%) of the 500 HR professionals consulted said that an increase in the percentage of levy firms could transfer to the supply chain would make them more likely to do so. Increasing it from 25% to 40% was the most popular option – backed by a third (30%) of respondents – while fewer than one in five (16%) wanted to see the transferrable amount raised to 50%.

Hextell said: “There are still pitfalls, particularly given the different regimes that apply across the UK, but employers should not be put off using levy funds because they consider the employment aspects of the arrangement as being too complicated or limiting. For new apprenticeships now, the position is a lot clearer, and provided that your employment documentation meets certain simple conditions, the historic risks associated with taking on and terminating apprenticeships is much reduced.”

“There is also an opportunity to use apprenticeships alongside lawful positive action to address inequalities, with positive action being something we are seeing much more of in the focus of our clients’ minds,” she added.

Church said: “For employers that do use the levy successfully it can provide a number of benefits for both employees and employers. There are a wide range of courses available - from GCSE up to master’s degree level - provided by specialist training providers, which can upskill employees, and address issues around social mobility and diversity.”