In the spring of 2017, the UK government introduced a package of apprenticeship reforms. The most important of these was the introduction of the apprenticeship tax, a new way of financing apprenticeship. Over the past 20 years, there has been a constant change in the learning landscape. There has been a sharp increase in the number of apprentices but also a change in the composition. Today’s apprentices are increasingly existing employees of a large organization that funds their training, over the age of 25 and moving into higher level apprenticeships. In some cases, the reforms of spring 2017 continued these trends. In other cases, they have exacerbated them.
To measure the impact of the 2017 reforms on employer behavior, the Edge Foundation and the Gatsby Foundation commissioned a study from the Employment Research Institute (IER) at the University of Warwick. The main objective was to find out why employers reduced their apprenticeship offer after the introduction of the reforms. The IER analyzed official data on apprenticeship, information from a number of published employer surveys, and interviewed 23 employers (paid and non-paid). This summary shares some of the most compelling findings.
The tax changed the use of apprenticeship in unexpected ways
While research collectively examined the reforms, the introduction of the tax had by far the greatest impact. Interestingly, employers who appear to be the least affected by the introduction of the tax (i.e. small businesses that do not pay tax) have been more likely to reduce the recruitment of apprentices, while that the big tax-paying employers have increased theirs.
It is important to stress that the levy is the key factor here, not the size of the employer. For example, small employers paying levies tended to increase their number of apprentices, while large non-levy payers tended to reduce theirs. The study revealed that direct debit payers were encouraged to convert their existing training offer into apprenticeship, in order to maximize their direct debit spending.
Apprenticeship facilitates the transition of fewer young people into the labor market
A corollary of the above is the reduction of apprenticeship as a support mechanism for young people moving from the education system to the labor market. Traditionally, small employers were more likely to recruit young people through mid-level apprenticeships, thus providing them with a means of making the transition into the labor market. Instead, apprenticeships are increasingly used for the development of the high-level skills of older employees in large organizations.
Hidden costs seem to have an impact on the use of apprenticeships in some sectors
In addition to the tax, the government’s 20% off-the-job training requirement has also had an impact. It is mainly in sectors and professions that require certain personnel: client ratios. This can be in occupations and industries – such as hospitality and retail – where certain levels of staff are required to serve customers (e.g. in a cafe), or in daycare centers where staff: children ratios are required. are a legal requirement.
Having to ‘fill in’ staff while they are in training can add considerable costs to an apprenticeship. Typically, the sectors most affected are those with less skilled workers in lower paying jobs. Potentially, these occupations and sectors are excellent targets for apprenticeships that help low-skilled workers acquire skills and qualifications, often as a basis for advancing their careers. However, the additional financial costs of backfilling prove to be a deterrent for many employers.
The reforms have therefore provided a “double whammy” for young and old alike who use apprenticeship as a first step or progression in the labor market.
Key points to remember
Overall, research suggests that apprenticeship remains an important means by which employers meet their skill needs. However, the reforms – and mainly the tax – have had an impact on the behavior of employers with regard to the number of apprentices recruited, the type, age and level of apprentices they hire.
The reforms have accelerated the tendency for existing employees to undertake higher level apprenticeships. The tax has resulted in a reduction in the recruitment of apprentices by non-payers (usually small businesses) and an increase in participation by tax payers (usually larger ones). In some sectors, there are also additional financial disincentives, such as backfill costs; generally sectors that recruit and employ large proportions of low-skilled and skilled workers.
While apprenticeship is increasingly used to train existing employees of large companies for higher level apprenticeships, consideration needs to be given to how the training needs of young people, small employers and those who wish to take apprenticeships need to be considered. lower level could be encouraged and supported. .
IER owes a huge thank you to the employers who graciously gave of their time to share their apprenticeship hiring practices and how these have been affected by the reforms and the pandemic. We also thank Edge and Gatsby for funding this study. We hope that the efforts devoted to them will contribute equally to their ongoing work.