Throwing money away? Using the apprenticeship levy is easier than you think.
Introduced back in 2017, the apprenticeship levy was hailed as a way to upskill the working population – for young people at the start of their careers and existing employees. In 2024/25 it is estimated the levy will raise £4 billion, yet a paltry 4% of firms are using their full levy – amounting to an estimated £95 million per month on unspent apprenticeship levy payments.
Yes there are challenges but there is way forward. We will look at those challenges and crucially how they can be addressed.
Why are some larger companies not spending their apprenticeship levy?
The unspent apprenticeship levy flies in the face of everything many successful firms believe in.
Yes, it’s true that for some organisations, there are factors such as a lack of awareness and understanding at play. And some attach a stigma to apprenticeships, perceiving the qualification route as relevant only for manual and low-skilled roles. However, many businesses, despite fully understanding the benefits, have actively chosen not to spend their apprenticeship levy (nor try to do more with it). This is often for at least one of the following reasons:
- Perceived complexity: Navigating the apprenticeship system, developing appropriate training plans, and ensuring compliance with regulations can be daunting for employers, especially smaller businesses with limited resources.
- Financial considerations: Some organisations view the levy as an additional financial burden. They might be concerned about the costs associated with recruiting, training, and supporting apprentices, especially if they are uncertain about the returns on investment.
- Lack of resources and expertise: Small or resource-constrained businesses may struggle to allocate the necessary personnel and infrastructure to successfully manage apprenticeships alongside their regular operations.
- Perceived productivity challenges: Some companies worry about potential disruptions to productivity, fearing that inexperienced individuals could slow down operations or require excessive supervision, particularly during the initial phases of training, plus the time for off the job training.
- Limited mentoring and support: Companies may be uncertain about their capacity to provide appropriate mentoring and guidance. They are concerned that this could impact the overall experience and outcomes for both the apprentices and the organisation.
- Industry-specific challenges: Certain industries face unique challenges when implementing apprenticeship programmes. For example, businesses with highly specialised or rapidly evolving skills may find it challenging to design apprenticeships that adequately address their specific needs. Additionally, companies operating in sectors where apprenticeships are new may encounter resistance or lack clear models to follow.
Yet another challenge – following the apprenticeship levy ‘rulebook’
These concerns are compounded by the unavoidable fact that when it comes to spending the apprenticeship levy, there are numerous rules. For example, the money must be spent on government-approved apprenticeship programmes, 20% of off the job training, and apprenticeships should last a minimum of 12 months.
These restrictions add to a general sense of reticence and contribute to the fact that the number of apprenticeships has declined with almost £3 billion having gone unspent.
What next for the apprenticeship levy?
There’s considerable pressure from trade bodies to widen the apprenticeship levy into a broader skills levy that can be spent on a broader range of accredited courses including shorter, more targeted courses. Kate Nicholls, the chief executive of UK Hospitality, said an overhaul of the system would help bring those who had become economically inactive, including over-50s, back into work to plug skills gaps.
Supporting Kate’s perspective is Julian David, the chief executive of techUK, saying,
“There is a real need to continue to support young people and new entrants into the workforce using apprenticeships, but also to support those in the existing workforce to progress and acquire the skills they need for the future of work. The key to this will be to reform the apprenticeship levy to make it flexible and fit-for-purpose.”
Yet, current indications suggest that these changes may be some way off. So, what should organisations do in the meantime? Continue to ignore the potential that the apprenticeship levy provides? Or find a way to use it?
Enabling you to see apprenticeships and your levy spend in a new light
Taking a step back and reassessing the role of apprenticeships can unearth a number of powerful opportunities. Career returners and more established employees can benefit from apprenticeships as much as graduates and school leavers. By considering apprenticeships not just as a qualification but a tool, to upskill and reskill support cross the workforce (not to mention the improved staff retention), there’s an opportunity to do more with this pot of money.
As with many seemingly complex initiatives, the prospect can be worse than the task itself. Start by talking with other firms who have made a real success of apprenticeships, such organisations as The Apprentice Diversity Champions Network, the Apprentice Ambassadors Network (for apprenticeship for all) and the Institute for Student Employers (with a focus on young people) share extensive best practice and how to address these perceived barriers. With appropriate support, integrating apprenticeships into your organisation need not be the challenge you expect. The result? Not just spending more of your levy but return on that investment, such as:
- Upskilled and reskilled employees (using money you already spent!)
- Improved career satisfaction across your workforce and thus better retention
- Greater engagement and support from career returners
- An improvement in goods and services
- Multi-generational teams that support and learn from one another
- Evidence of a net positive return on investment for each apprentice [CIPD].
- Strengthening your supply chain and local communities, through levy transfer
Creating an apprenticeship strategy that’s tailored to your organisation
The team at Connectr Talent Acquisition have the knowledge and skills to create an apprenticeship strategy that supports your broader organisational goals.
With a focus on unexplored, multigenerational and diverse talent, apprenticeships can be an important way to develop your organisation on multiple levels.
With over 100 combined years of talent acquisition experience and a track record with more than 70 leading UK and global partners, we’re perfectly equipped to help you create an apprenticeship strategy that:
- Is manageable
- Meets your organisational goals
- Delivers a diverse new hires
- Takes an innovative approach
- Delivers ROI from your apprenticeship levy.
Ready to learn more? Contact Simon@connectr.com