CIPD among groups calling for clarity on costs and quality as National Apprenticeship Week kicks off

National Apprenticeship Week risks being overshadowed by concerns around the apprenticeship levy, which will use a tax on payrolls to create opportunities for entry-level employees. Employers and industry experts are calling for clarity around logistics, affordability and the quality of apprenticeships it will create.

Draft legislation has now been published confirming that employers with wage bills of more than £3 million will pay a 0.5 per cent levy to help fund apprenticeships from April 2017. Further details may emerge in this week’s budget.

But employers and representative bodies, such as the Institute of Directors (IoD), have raised concerns about the levy, including how it will be implemented and the government's target of creating three million apprenticeships by 2020.

In research by City & Guilds, undertaken at its recent Making Apprenticeships Work conference, more than 90 per cent of attendees said they think the three million target is arbitrary, while 84 per cent want the levy to be linked to sectors experiencing the biggest skills shortages.

Further figures from the IoD show that only nine per cent of all business leaders believe the levy will encourage them to recruit more apprentices. And more than one third of IoD members affected by the levy said they will be forced to pass on the costs by paying their employees less, raising prices or finding savings elsewhere, with one in five stating that they will be forced to hire fewer people or make redundancies.

Kirstie Donnelly, managing director of City & Guilds, said: “If the new apprenticeship system is to work it must be universally understood within the business community, it must be easy to navigate and it must truly meet their needs.

"During the conference, it was clear that there is a relatively low understanding among businesses of how the changes will affect their business. Thirty-five per cent stated that their understating was low and 33 per cent said it was only average – and these were businesses that are already interested and engaged enough to attend a conference about apprenticeships. Very worryingly, more than half of the employers said they won’t be encouraged to take on apprentices despite paying the levy."

Some employers have also highlighted concerns over how they will afford the levy, which will be collected through Pay As You Earn. One such employer is Police Scotland, which warned in a paper submitted to the Scottish Police Authority that finding the extra cash – its bill could be around £4.5 million a year – will be "virtually impossible".

Ben Willmott, head of public policy at the CIPD, said: "We support the government's aim to increase the number and quality of apprenticeships, but there needs to be some further thinking about how the levy will drive quality as well as numbers."

He said that understanding the impact on employers' existing training budgets also needed to be explored, and that there should be a focus on increasing the number of apprenticeships at level three and above.

"If we see the quality – the number of apprenticeships at level three and above – increasing at the same time that we reach three million then that will be a success. If the quality does not increase, hitting the three million target will be a false victory because we will not have parity between the apprenticeship brand and the university route."

Willmott said that because level two apprenticeships tended to be much less expensive, employers could be tempted to invest in them, rather than opt for level three and above.

"The CIPD has suggested that the level funding could be weighted to level three and above as a way of nudging quality improvements," he added.

Government data for apprenticeships shows that in 2014-15 the highest number of apprenticeship starts was for intermediate apprenticeships (level two) with 298,300 starts, followed by 181,800 advanced (level three) and 19,800 higher (level four and above) apprenticeships. Higher apprenticeships represented only four per cent of all starts.

Seamus Nevin, head of employment and skills policy at the IoD, said it shared the same concerns as the CIPD. "The biggest concern is making sure that the quality of apprenticeships meet what we need – this can't just be a box-ticking exercise. First of all, the three million target is around starters, not finishers, and we know that 40 per cent of apprenticeships that were started under the government's last term of office weren't completed.

"Employers are very supportive of apprenticeships in principle and have no qualms about contributing to paying for those apprenticeships. The question is whether we can get it right."