Navigating the new talent management eraA roadmap to the opportunities and pitfalls of Apprenticeship Levy funding

How to take full advantage of the Apprenticeship Levy - maximise your investment, enrich existing talent and shape new employees from day one.

Learn more at pearsontq.com

Managing the skills shortageA lack of management skills is causing UK businesses to fall behind.

According to Investors in People, poor people management is costing employers £84 billion per annum. Nearly 200,000 new management roles are created each year - but CMI research has found that “seven in 10 employers fail to train their first-time managers”.

Meanwhile, employees are demanding more professional development opportunities to keep pace with the rapidly evolving workplace. Many are questioning the value of accumulating student debt for qualifications which do not adequately prepare them for managerial roles.

Management apprenticeships, funded by the new Apprenticeship Levy, provide the answer.

100% funded management apprenticeships represent an unprecedented opportunity to deliver an immediate bottom line contribution. With standards created by employers, management apprenticeships offer the prospect of a new breed of workforce - trained for the demands of real jobs.

But the new era of Apprenticeship Levy funding isn’t without its challenges - requiring a new model for talent management.

This toolkit will give you the full picture on the Levy, alongside practical strategies and tips to maximise your investment.

The UK will need another two million more managers by 2024Source: UKCES

83% of apprentices say their career prospects have improvedSource: Department for Education

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Contents

01 The Levy explained

02 Making the business case for the Levy

03 Key considerations

04 Barriers to implementation - and how to overcome them

05 Next steps

06 Useful links

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The Levy explainedManagement apprenticeship levels and how they equate

Level 3 A Level

Level 4 1st year undergraduate

Level 5 2nd year undergraduateLevel 6 Degree level

Level 7 Masters

The Apprenticeship Levy came into effect on April 6th 2017. The new government scheme requires employers to take control over selecting their apprenticeship training provider.

Depending on the size of your business, the Apprenticeship Levy will affect you in different ways.

The key points are summarised below:

All employers with a payroll bill of over £3 million will be taxed 0.5% on that bill from 6th April 2017.

The Levy you pay will automatically be determined by HMRC’s Real Time Information and calculated on all employee earnings.

There is a £15,000 funding allowance per year - this applies to all businesses whether you have a payroll of more or less than £3 million.

Employers that do not pay the Levy must contribute 10% of funding towards the cost of their apprenticeship training.

When you pay 10% towards to the cost of apprenticeship training, the government will pay the rest (90%), up to the funding band maximum.

The funding amount will be transferred to a digital account specifically for your business and available from 1st May 2017.

You will have up to 24 months to spend the amount accumulated in your digital account.

Your funding can only be spent on accredited apprenticeship programmes.

Each apprenticeship standard is being led by ‘trailblazers’, employer-led groups that are ensuring the standards are developed to their needs.

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Making the business case for the Levy

> Access significant funding The co-funding principle means employers can pay 10% towards training and the government will pay the rest (90%). This means investing £10m could bring in £90m of additional funding.

> Reduce recruitment costs Apprenticeships can reduce dependence on expensive graduates who are harder to retain. Employers can also train their existing staff - combining on the job experience with sought after skills.

> Recoup your tax You can either write off the Levy or put it to work. Financial Directors will appreciate the tax efficiency at year end.

Long-term benefits> Boost retention Apprenticeships give employees the career development opportunities they desire, helping to create a more highly skilled, loyal workforce.

> Employees earn while they learn Apprenticeships enable learners to pursue professional development and gain valuable practical experience while earning money - and avoiding student debt.

> Enhance your brand Training and development set businesses apart in a competitive market place - enabling them to attract the best talent and give them the edge in close bids.

> Secure long-term revenue Enhanced skills mean higher productivity and better service. Combined with the wider benefits to brand, training places businesses ahead of their competition.

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The Apprenticeship Levy offers both immediate and long-term benefits.

Employers can redeem their contributions and offset existing training costs while meeting an urgent need for management training. In turn, the investment in skills creates a more capable workforce, enhancing service and increasing the bottom line.

Some of the key benefits are listed below:

Immediate benefits Long-term benefits

Despite the clear advantages, making the most of the Levy is not straightforward. Employers should ask themselves the following questions before they dive in:

Checklist: Are managementapprenticeships right for you?

Do you have the right mindset?Apprenticeships ought to be a key element of your recruitment, development and retention strategy (rather than simply about recouping money).

Using Levy funding for existing programmes might not be enough. Employers have to prove they can offer something new - delivering tangible skills with the focus on enrichment and development.

Is your business suitable?Not all businesses will benefit from apprenticeships. For instance, smaller companies with a large wage bill may be eligible for the Levy, but might not necessarily have a requirement for additional qualifications.

Image by Angela Ithyle

How will the Levy address your current and future skills challenge?Identify any existing skills gaps in your organisation. Management apprenticeships are already approved for funding, but many employers are also looking at STEM skills and cyber security.

Even if you don’t have a current requirement, remember that the marketplace is always evolving. What will your business need in five years to keep pace with the competition?

Do you have the infrastructure and support system for a rapid scale up?Beware simply scaling up. Expansion could bring in 100s of new apprentices - is your business ready to manage the influx, with appropriate mentoring and pastoral care, without putting too much strain on existing staff?

How will you provide training?Some employers are large enough to become certified training providers in their own right. Most, though, will need to seek an external provider who is on the register of approved apprenticeship providers. Choose a provider that can guide you through the process and develop a training programme that is tailored to your organisation.

Who will administer End Point Assessment (EPA)?By law, apprentices must be assessed by a separate body to the employer and the training provider. Establish up front who will be providing this service.

Pearson TQ is unique in the marketplace for providing EPA via a fully independent body. We work with you to ensure learners are ready, then pass them to the Pearson End Point Assessment Organisation, a completely independent service approved by the Skills Funding Agency to conduct the EPA.

How will you make the business case to internal stakeholders?Individuals responsible for human resources and learning and development naturally recognise the benefits of the Apprenticeship Levy. However, they often need to persuade internal stakeholders to invest in the scheme. An experienced training provider can help you make a persuasive business case for the Levy. It’s also a good idea to anticipate objections so you can make a compelling argument…

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It’s true - the government could have made the Apprenticeship Levy more straightforward.

Even many businesses with dedicated training and apprenticeship programmes are not fully prepared to get the most out of the funding.

Choose a provider who understands how to navigate the complexities and ensure you get the most value for money.

20% ‘off the job’ training is a key stipulation for apprenticeships. This can take a variety of forms - from workshops to research, online learning and specific assignments - as long as it’s not being spent on the day job.

There’s no way around it. Employers will have to invest working hours into training. So it’s important to take the long view.

Apprenticeships are about investing in the long-term skills of your workforce - and their value will be felt through enhanced service and productivity. Ultimately, most businesses will feel the benefit on the bottom line.

70% of employers say apprenticeships have improved product quality and service.

Apprenticeships provide a typical return of £26-28 for every £1 of government investment in apprenticeships at Levels 2 and 3.

Source: Department for Education

“Businesses disputing the need for a Levy should realise that the true tax on jobs is the low productivity of managers already in the workplace, costing £84bn per year according to research by Investors in People. Investment to upskill and bring on the next generation of managers through higher level and degree apprenticeships will be more than repaid by the productivity gains they deliver.” Petra Wilton, CMI director of strategy and external affairs

Also, consider the alternative. If you don’t invest in training you risk competitors gaining an edge in service and efficiency, while losing employees to rivals offering more professional development.

It depends on the job, though. The level of complexity and requirement for soft skills should guide your decision.

It’s easier to justify management training for employees working in professional services, for instance, as opposed to upskilling call centre staff - where 20% off the day job will have a significant impact on productivity.

The barriers to implementation - and how to overcome themThere’s still a lack of clarity surrounding apprenticeships. Confusion, concerns over cost and general issues of perception are holding back some employers from taking full advantage. Here’s how to tackle some of the most common objections within your organisation:

‘The legislation is too complex. How do I know I’m getting the best deal?’

‘The economic climate is tough - can I afford the time out of the business?’

Apprenticeships offer opportunities throughout careers - from providing the first step up to management, to enabling employees to retrain and keep pace with the changing workplace.

‘Aren’t apprenticeships for younger people?’

If your business is already recruiting and training numerous graduates, apprenticeships offer a cost-effective alternative to increase retention and keep wage bills down.

Bear in mind that there is a maximum bandwidth of contributions. Some particularly large organisations won’t be able to bring in enough new apprentices to recoup all their contributions. For instance, the NHS is eligible for many thousands of apprentices - which simply isn’t practical.

In these cases, it’s best to use the Levy to enhance your current training for existing staff.

Level 6 apprenticeships are legally equivalent to degrees. But the issue here is really a broader one of perception.

Apprenticeships are designed by employers and could be argued to offer more relevant experience and qualifications than full-time education routes.

Ultimately, the adaptability and capability of the new breed of apprentices will overturn outmoded attitudes.

Organisations have the opportunity to be at the forefront of this change, helping future employees to realise that University is not the only pathway to higher learning.

In the meantime, there is an opportunity to rebrand apprenticeships to differentiate them in a new era. Many organisations are calling apprentices ‘participants’ and referring to training as ‘leadership programmes’ or similar.

The Apprenticeship Levy offers a highly efficient way to invest in training. But you will still need to invest to make it a success. Strategy, time, infrastructure and wages all need to be factored in.

Employers need to weigh up extra costs, while remembering it’s ‘use it or lose it’. From May 2017, funds that you don’t use will expire 24 months after they enter your account. For more info see: FUNDING RULES

‘Can we really afford to bring on that many apprentices?’

‘Do apprenticeships really compare to other higher learning?’

‘The Levy doesn’t cover everything. Have you considered other costs?’

Management apprenticeships vs graduate trainees

the benefits of nurturing talent in houseEmployers invest at least £82 million on graduate recruitment, according

to the AGR 2016 Annual Survey. The process becomes even more expensive when additional training is factored in.

After investing all this money in their future talent, employers have a hard time holding on to it. Graduates are notoriously difficult to retain - often using

their first role as a springboard to another business.

If you’re already spending a considerable amount on management training for each graduate, it makes sense to switch to apprenticeships and use the Levy

to pay for them.

Alternatively, rather than pay a premium for graduates - and then more on training them - you can train up new (or existing) employees on apprenticeships straight away.

Ready to take full advantage of the Apprenticeship Levy?Pearson TQ works closely with employers to take full advantage of the Apprenticeship Levy - maximising their investment, enriching existing management talent and shaping their future leaders.

Our managed apprenticeship service is tailored to the specific needs and corporate strategy of each business. We’re able to provide a blended learning approach, designed to suit both the learner and the commercial environment.

Next StepsThe Apprenticeship Levy is here to stay. The management skills shortage doesn’t have to.Employers have three choices:

Do nothing - pay the tax.

Some businesses will choose to write off the Levy. Just remember it’s not often you get an opportunity to fund up to 90% of your training.

Engage fully as an employer provider.

There may be compelling efficiencies for the largest employers - provided they’re ready to take on the responsibility of end-to-end training.

Seek external assistance.

By working with an experienced provider, employers can ensure they engage with expertise and maximise their investment.

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workplaces in England alone offer

Apprenticeships

We deliver and assess over 25 apprenticeship frameworks, including functional skills, to learners across the UK.

We have improved timely success rates on one of our newest apprenticeship contracts by 26% in under 8 months.

In our work with the British Army, we have so far designed and delivered apprenticeship training schemes for over 4,700 soldiers.

of employers consider traineeships to be an

effective way of increasing young people’s chances of finding paid jobs and

apprenticeships

of apprentices stay

after finishing theirapprenticeship

of employers sayapprentices make

their business

of advancedapprentices go on to

businesses are nowinvolved in designing

the new apprenticeship standards

The world’s learning companyPearson is the world’s learning company, with expertise in educational courseware and assessment, and a range of teaching and learning services powered by technology. Our mission is to help people make progress through access to better learning. We believe that learning opens up opportunities, creating fulfilling careers and better lives.

Levy guidance https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work

FUNDING RULES---- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The standards https://www.gov.uk/government/collections/apprenticeship-standards- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Employer provider guide https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/562755/Employer-provider_guide_Oct_16.pdf--- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Pearson TQ https://uk.pearson.com/web/pearsontq/our-training-services/apprenticeships.html- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Pearson College https://www.pearsoncollegelondon.ac.uk/ Useful Links

Sources: ICM Employers research, 2013; Evaluation of Apprenticeships: Employer survey BIS, December 2014; BIS (2015) Traineeships: First year process evaluation; London: BIS

workplaces in England alone offer

Apprenticeships

We deliver and assess over 25 apprenticeship frameworks, including functional skills, to learners across the UK.

We have improved timely success rates on one of our newest apprenticeship contracts by 26% in under 8 months.

In our work with the British Army, we have so far designed and delivered apprenticeship training schemes for over 4,700 soldiers.

of employers consider traineeships to be an

effective way of increasing young people’s chances of finding paid jobs and

apprenticeships

of apprentices stay

after finishing theirapprenticeship

of employers sayapprentices make

their business

of advancedapprentices go on to

businesses are nowinvolved in designing

the new apprenticeship standards

workplaces in England alone offer

Apprenticeships

We deliver and assess over 25 apprenticeship frameworks, including functional skills, to learners across the UK.

We have improved timely success rates on one of our newest apprenticeship contracts by 26% in under 8 months.

In our work with the British Army, we have so far designed and delivered apprenticeship training schemes for over 4,700 soldiers.

of employers consider traineeships to be an

effective way of increasing young people’s chances of finding paid jobs and

apprenticeships

of apprentices stay

after finishing theirapprenticeship

of employers sayapprentices make

their business

of advancedapprentices go on to

businesses are nowinvolved in designing

the new apprenticeship standards

For further information and support or to find out more about apprenticeships, please feel free to contact us on tqenquiries@pearson.com

Learn more at www.pearsontq.com