A world without incentives

A world without apprenticeship incentives - business owner ponders future

A world without incentives

How apprenticeships look after system ‘that worked with bells on’ is taken away

A government incentive payments scheme awarding businesses up to £4,000 for investing in apprentices was embraced by employers in the 18 months it was on offer. The scheme encouraged employers who may not have otherwise considered apprenticeships to hire new staff in this innovative, modern way – and the figures certainly backed that up.

But it had to come to an end at some point.

Recently, HomeServe Foundation’s All About Apprenticeships podcast spoke to the new Minister for Apprenticeships and Skills, Alex Burghart MP, and he explained why the payments have been discontinued. With the Minister’s help, here, we take a look at the incentive scheme, how successful it was – and what an incentive-free world will look like for apprenticeships.

Incentives for apprenticeships: a roaring success

The incentive payments scheme did wonders for businesses of all sizes up and down the country – and in Mr Burghart’s own words, “worked with bells on”.

The policy was first announced by the Chancellor in August 2020 by offering businesses cash to take on apprentices aged 16-24. Businesses hiring new apprentices over the age of 25 would receive £3,000, while those taking on an apprentice aged 16-18 or under 25 with an Education, Health and Care plan would receive a £1,000 bonus on top of that under a pre-existing scheme – meaning £4,000 in total.

Then, in his October Budget last year, as part of a £500m jobs support package, he extended the scheme until January 2022. But despite calls for it to be extended further, the scheme was discontinued.

That’s despite the HomeServe Foundation, the charity arm of home repairs and improvements firm HomeServe PLC, having conducted a survey of small UK trades businesses, which found 80% said the apprenticeship incentives had helped their decision to take on an apprentice. It also found 84% of trades firms, including electricians, plasterers, and heating engineers, planned to take on an apprentice to help with increased workloads.

Government figures appear to firmly back up the notion that the incentives payments were a success.

According to its Apprenticeships and Traineeships site, claims for incentives soared in the first quarter of the 2021/22 academic year – the latest period when statistics were made available. A total of 56,500 claims were made for apprenticeships starting between August and October 2021 – that’s almost double the number for the same period the year before – which was 28,600.

Apprenticeship numbers overall soared by 43% during the same period – from 91,000 to over 130,000, also showing how businesses were attracted to the benefits of this type of scheme.

The apprenticeship incentive payments scheme worked – but it’s now ‘time to go back to normal’

Speaking to broadcast journalist Georgie Frost on the All About Apprenticeships podcast, Mr Burghart said:

“The apprenticeship incentive the Chancellor [extended] in October has been really popular and has been a really good offer.

“It’s come to an end because its purpose was to help us through that very difficult time over Christmas when we knew there was going to be a rise in Covid cases.

“We knew it might be a difficult time for business, so we wanted to make sure as many people as possible had the opportunity to take up apprenticeships and that happened.

“[We are] pleased to say that it worked with bells on but now we are seeing the economy grow at a decent rate.

“We have a lot of vacancies in the economy, and we feel it’s time to go back to normal working and see how things react.”

Asked why the scheme was not continuing, Mr Burghart said it was because the cost of doing so “would not be negligible”.

He added:

“There are still challenges in the economy. The incentive was only ever a temporary offer to get us through the worst of the pandemic.

“Touch wood, the worst has passed and now we are moving into a situation where we have removed all restrictions and the government is asking people to go back to work.

“Now is the right time to go back to normal conditions.”

How an incentive-free world looks for apprenticeships

Despite the removal of incentives, Mr Burghart said he was confident UK plc would continue to embrace apprenticeships, with there still being major benefits to launching this type of scheme.

He said:

“We’ve got a high degree of confidence that a lot of people who own businesses want to provide apprentices and there are a lot who want to step in.”

And they would have good reason to.

Apprentices can boost your business

Even without incentive payments, apprenticeships are still a fantastic way to boost your workforce. Not only are they motivated individuals and yours to mould from day one, but they also bring with them no bad habits from previous trade work, in addition to strengthening and growing your workforce. That’s as well as helping narrow the trade skills gap facing the country.

What’s more, according to the Government’s Apprenticeships website, 86% of employers said apprenticeships helped them develop skills relevant to their organisation, while 78% said these schemes helped them improve productivity. And even with incentives having been taken away by the Government, there are still plenty of funding routes available to businesses looking to take one on.

Firstly, the apprenticeship levy, a tax on employers which can be used to fund essential training and development through these programmes, is a fantastic resource for smaller firms.

It means if you’re an employer with a yearly pay bill of more than £3m, you must pay the tax at a rate of 0.5% of the total – but if it’s less than that amount, then you won’t. Those with a bill of less than £3m will pay just 5% towards the cost of training and assessing the apprentice, with the Government transferring the remaining 95% direct to the training provider.

Levy paying firms will receive funds to spend on training and assessing your apprentices, with the Government adding 10%. They expire if the business doesn’t spend them within 24 months – but there’s also good news here.

If you still have levy funds left that are at risk of being lost, then you can transfer them to other organisations. Levy paying businesses can transfer up to 25% of their annual funds to as many employers as they choose, to help others fund apprenticeship training in their business. This is a win-win situation – those larger companies need to offload any levy not spent and in turn can support those businesses who could massively benefit from the extra funding. These are in addition to the £1,000 payment employers get for taking on an apprentice aged 16 to 18, or someone aged 19 to 24 with an education, health and care plan provided by their local authority.

Mr Burghart added:

“A lot of apprentices tell us the quality of attention they get is great.

“They really value it, and we are always looking at ways in which we can make this system work better.”

How do I get started?

If you’re ready to take on an apprentice, you don’t have to do it alone.

We’ve created a hub full of apprenticeship guides, courses, advice and tools to help you navigate through the process of hiring and training an apprentice and if that’s not enough, then our team of advisors are on hand to help with any questions you might have.

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Flexi-job apprenticeship will allow agencies to be the apprentice’s employer for the duration of their apprenticeship while placing the apprentice with other host employers for short term placements. This will enable apprentices to move between businesses as they complete their apprenticeship, while remaining employed throughout by the agency.

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