Corporate Stealth-Tax or Clever Investment?

Cynics would claim that the Government Apprenticeship / Training Levy of 0.5% on company salary bills of more than £3million per year was nothing more than a corporate stealth tax. Eternal optimists would claim with equal force that it provides a wise investment opportunity.

In our view at BlackRock Training, there are grounds for cautious optimism - the new levy and accompanying apprenticeship standards could provide a clever investment opportunity for businesses keen to develop talent if they can overcome some of the confusion inevitably created by the changes and scepticism born of experience.

There are three major misconceptions which we need to clear away before we look in more detail at the potential investment value of the opportunity:

  1. Apprenticeships are only for the young (16–24) and for junior employees with no prior qualifications

  2. The scheme only benefits smaller companies who can access funded subsidised government funding

  3. The purpose of the Levy is solely to benefit individuals with improved career prospects

The first misconception comes from our own earlier thinking that Apprenticeships were a time-served route for youngsters to achieve a trade qualification as plumbers, electricians, builders, or hairdressers. Nothing could be further from the truth. Apprenticeships are for all age-groups who are still active in the workplace, for public and private sectors, and for all skills groups. There is no reason at all why people in their mid-career years, workplace returners, or those nearing retirement cannot join the scheme. Whilst it will benefit those who hold no qualifications it can be of equal value to those who already hold professional qualifications, perhaps in a specific discipline. For example, qualified teachers choosing to now work in public sector administration or private sector sales could well benefit from an Apprenticeship programme in their new chosen career. Professionally trained lawyers, University managers, surveyors, or retail managers could gain from a Level 3 or Level 5 qualification in Leadership and Management to improve their own performance and to develop the capabilities of those who work with them and for them.

The second misconception is that the only beneficiaries of the Levy scheme are those smaller companies who will receive a 90% subsidy of the price of the particular apprenticeship standard their learners go through.

An enormous and valuable incentive, but in fact larger organisations who are subject to the 0.5% Training / Apprenticeship Levy can also benefit since they can off-set any payments to the Government if they enrol their own employees on an authorised apprenticeship.

In other words, rather than handing the money into the Levy Scheme as a ‘tax’, they can re-deploy the money into their own organisation.

The third misconception is that the benefit is primarily to the individual who gains qualifications, improves their employability and raises their self-confidence. No scheme deserves to succeed if it cannot bring benefit to the organisation as well as to the individual.

In fact, the scheme is designed to bring visible and measurable benefit to the overall performance of the organisation. That benefit needs to be evidence-based, not merely anecdotal, and around increasing quality, improving revenue and margin, boosting productivity, adopting new technologies and becoming a more resilient and flexible organisation able to withstand difficult times and take advantage of emerging opportunities.

All excellent training programmes are designed with the business performance need very much in mind both in terms of measurable outcomes and of maximising the training impact. Training and development initiatives inside organisations can often be costly financially and, more critically, in the time spent away from the workplace on irrelevant residential and non-residential training events.

Sometimes training programmes themselves are too theoretical or abstracted from the real or day to day organisational issues and performance drivers.

We’ve seen too many programmes where more time was spent on acquisition of knowledge than application of skills.

Reasonably enjoyable and mildly useful was the best such training provided. The cost, however, was lost work-days, expensive travel, accommodation and training venue costs, high consultancy and trainer fees. A poor return on investment.

Under the new apprenticeship standards approach the training provided for Apprentices can be designed to develop skills specific to the needs of the organisation and the individual. Importantly, output measures should look at what impact the Apprenticeship training has on the performance of the individual, on their ability to apply skills in their workplace, and what has been the benefit to the organisation.

Assessment and evaluation is rigorous and focused as much on practice as on theory. The final Gateway Standard Assessment is at arms-length from the training provider to ensure that any final awards have been assessed independently, comprehensively and objectively.

Properly conducted, these modern apprenticeships are as rigorous in content and assessment as degree courses but with far more emphasis on workplace impact and on practical skills-based application.

Those completing the programme will be justified in feeling proud of their achievements: they will also be far more confident and competent in their work. Equally important, organisations using the Levy in such a way will see improved performance and a solid return on their investment.

But it is cautious optimism. The new approach offers a route forward but that requires training providers and employers to really co-create programmes which are relevant, contemporary, easily accessible and purposeful. If it is to be a wise investment, rather than a corporate stealth tax, then organisations will have a large part to play. Wisely invested involves truly taking part in the Apprentice scheme and the development of talent ensuring a healthy return on the investment – productivity and quality improvement, revenue growth and margin enhancement.

Great training requires organisations to be active participants not passive recipients and to be clever buyers and demanding customers. Our next article will explore this is more detail.

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