Why aren't employers using their levy funds?

Written on: 26 November 2018
Written by:Freya King

It’s been well over a year since the apprenticeship levy came into effect, yet many employers haven’t even started using their available funds. By now, we’ve all heard horror stories about the levy, but just how little has been used?

According to recent data, less than 14% of apprenticeship levy funds have been spent. That’s only 14% of an available £2.7 billion that could be spent on apprenticeship training. Think about that for a second.

The aim of the levy was to encourage UK businesses to invest in their workforce and bridge the ever growing skills gap. Any unspent funds will start to expire on a monthly rolling basis from April 2019; time is running out for employers to make the most of the levy.

Treating the levy as a tax

With the numerous benefits that come along with apprenticeships, it seems bizarre that so many organisations have chosen to write the levy off as a tax.

In fact, it appears that the levy has done the exact opposite of what it set out to do. According to figures released in October this year, apprenticeship starts for July have actually gone down by 43% compared to the previous year.

This might indicate that employers have been put off by the levy, but Skills Minister Ann Milton remains positive: “Change is never easy but business and the public sector are now embracing the opportunities our new apprenticeship reforms have given them.”

Changes to transfer allowances

In May 2018, the government introduced the opportunity for employers to transfer up to 10% of their levy funds to as many different organisations as they choose.

However, between May and July, less than 1% of all levy funds were transferred to other employers. In response to this, it was recently announced that the transfer limit will be rising to 25% as of April 2019.

According to Ann Milton, the reason that employers have not been making transfers is that the current limit of 10% is too small an amount to make it worthwhile. Whether the increased percentage will make a difference to the amount of transferred funds remains to be seen.

What are they missing out on?

While it may be true for some organisations that they can afford to treat these large amounts of money as a tax, it truly is a missed opportunity. Even for those companies who aren’t interested in hiring new apprentices, there is no reason why these funds can’t be taken advantage of.

There is huge scope for staff training and development within large organisations. With the apprenticeship training completely covered by available levy funds, it seems wasteful to pass up on the opportunity.  

The employers who are wise to this are reaping the benefits. Here is what Sophie Gray from Aviva had to say about how they have been utilising their levy funds:

“The apprenticeship levy has given us a fresh focus on building skills. In the past, we have done some great professional development, but the levy has definitely given us a renewed focus by us identifying a ring-fenced learning and development budget on a scale that we’ve never really seen in the past. I’m very pleased that everyone at Aviva is encouraging of development and therefore we’ve decided to use it rather than lose it.”

Find out more about how you can start making the most of your own levy funds here.

Written on: 26 November 2018
Written by:Freya King