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The apprenticeship levy is coming – what it means for universities

Greg Wade

Greg Wade

Programme Manager
Universities UK
Talking at a work station

As our recent report the future growth of degree apprenticeships shows – in a relatively short space of time – a large number of universities have become involved with the new degree apprenticeships that are part of the government’s apprenticeship drive.

From a standing start – just over a year and a half ago – we now have seventy universities registered with the Skills Funding Agency (SFA) as training organisations that can deliver degree apprenticeships.

The next apprenticeship-related consideration for universities will be how they deal with the government’s proposed apprenticeship levy.

The purpose of the apprenticeship levy – announced by the government in the Summer Budget 2015 – is to fund an increase in the number and quality of apprenticeships. The levy (to be introduced in April 2017) will apply to all UK employers – both private and public – with an annual pay bill of more than £3 million. This will mean it covers most universities.

With an estimated £2-3 billion likely to be raised by the levy across the UK – money which could be spent on degree apprenticeships – it represents a huge opportunity for universities. However, alongside the potential income to universities, as large employers, universities will themselves be paying the levy. Some estimates put the levy for the sector as a whole at around £60 million per year.

There have been concerns in the university sector about the cost of the levy alongside other costs such as the immigration skills levy, pensions and national insurance increases. There have also been concerns about how the apprenticeship model can be applied to an already highly qualified workforce in higher education. At the moment it looks like there is very little scope for any flexibility with the levy. It is a straightforward tax, with an exemption for higher education very unlikely.

So how should universities prepare themselves to ensure that they can invest every penny in the development of their staff?

Universities will need to consider a number of questions:

  • What is the balance going to be between spending the levy on recruiting new staff and developing existing staff?
  • Which parts of their workforce would be best suited to apprenticeships and at what level?
  • A crucial question is whether there are enough apprenticeship standards in place or in development to cover the staff they want to develop?
  • Whether there are suitable providers for the apprenticeship standards they want to spend their levy on?
  • Whether the university or a group of universities could provide some of their own apprenticeship training?
  • Whether the strategy adds up to the total levy amount including the 10% top up announced recently in the budget?
  • And finally, how much universities are willing to collaborate to address some of these issues?

Having enough suitable standards (the agreement between employers about the occupation and level of the apprenticeship, and approved by the SFA) is a key issue for universities. Some existing standards might suffice, for example in leadership and management. If there are gaps, however, then the sector needs to be addressing these now. The average length of time to develop a standard, let alone identify a provider, is nine months, which makes the April 2017 start date for the levy system look decidedly close.

Trailblazers for new standards need to involve a sector coming together to identify standards, so collaboration will be essential. This points to a role Universities UK might play in collaboration with organisations such as the Universities and Colleges Employers Association (UCEA) who have been discussing the levy with their members and university directors of human resources (and held a conference on the issue yesterday).

Might it be better to wait and see how the levy system develops? We know some other employers are considering this. While there are still some unanswered questions about which standards can be applied to a workforce that is already highly qualified and how, there are some good reasons to act now.

If many employers wait and see, there could be a rush in demand for trailblazers and new standards from the estimated 17,000 levy-paying employers, so the nine month timescale could lengthen. This will also come at a time when the SFA will have been restructured and the Institute for Apprenticeships newly set up. Systems, processes and requirements could be in flux. Wait and see is certainly an option, it is not one I would recommend to any employer that wants to make the most of their apprenticeship levy.


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