5 Engaging employersBarriers
and solutions
Engagement with large businesses
81. The National Apprenticeship
Service told us about its efforts to engage with large businesses:
The National Apprenticeship Service
has a dedicated field force that is critical in stimulating and
growing Apprenticeship demand among employers. Having Employer
Account Managers allows NAS to develop relationships directly
with employers who are not already using Apprenticeships, to engage
with them in understanding their needs and advise them on how
to go about implementing an Apprenticeship programme.
An external review of employer take
up of Apprenticeships identified clear market failure in the 250
to very large size employer market. It was evident that engagement
was far stronger with the SME market and that providers continued
to serve this market well.
In August 2010 NAS refined its employer
strategy and focused more on achieving higher engagement with
250+ employers and set itself an overall ambition of achieving
42,000 Apprenticeship Starts in this area.[119]
82. The Co-operative explained that
it was often perceived that large employers did not need support.
It outlined why this was not the case:
To provide an Apprenticeship that
gives the learner a complete package of training and development,
together with extensive off and on the job training, then the
"contribution" from employers of any size is already
vast. This needs to be acknowledged in the level of funding offered
to each apprenticeship, rather than a one size fits all funding
mechanism and an assumption that Large Employers do not need financial
assistance when paying for an Apprenticeship.[120]
83. We have heard that large employers
may be able to offer wider employment opportunities to their apprentices
because they can involve a wide range of suppliers. The UK Contractors
Group highlighted the example of Carillion and agreed that large
firms needed specific support:
There is good practice on which
to buildfor example Carillion recruits and trains around
1,000 apprentices every year, a large number of whom are placed
within the supply chain. However the additional costs taken-on
by larger firms needs to be recognised, and they need to be able
to access further support.[121]
The Director of Unionlearn (part of
the Trades Union Congress), Tom Wilson, agreed:
Our view is that a very important
route to encouraging SMEs to provide good quality apprenticeships
is to use a supply chain model, engage the mother companies at
the top of the supply chain, get clear agreements with them.[122]
The Minister elaborated on how large
businesses should engage with the apprenticeship scheme. He cited
Jaguar Land Rover as another example of good practice that demonstrated
why the Government should support larger employers:
I think also around the partnerships,
the collaborations between businesses, and [...] large companies
and their supply and distribution chains. This is something, again,
other countries do rather better. The automotive sector is a perfect
example. Jaguar Land Rover [...] has a wonderful apprenticeship
programme. [...] Like all automotive companies, with a very complex
supply chain, one of the things they want to do is to look at
how they can seed skills in their supply chain and increase resilience
amongst those suppliers on whom they are absolutely dependent.[123]
84. The Chief Executive of the Association
of Colleges commended NAS's recent efforts to engage larger employers:
I particularly salute their [NAS's]
efforts at promoting and marketing apprenticeships, perhaps most
effectively to large employers and at the national level.[124]
The Financial Skills Partnership agreed:
The National Apprenticeship Service
(NAS) has been successful in working with large employers in the
sector we represent, particular in terms of engaging them in the
apprenticeship programme.[125]
This was echoed by the Greater Manchester
Local Enterprise Partnership who told us that "NAS has succeeded
in bringing real energy to drive apprenticeships among larger
employers, which is to be commended".[126]
However, it did go on to suggest that this support must not come
at the expense of support for smaller businesses.
85. Others, however, have argued
that the focus on larger employers may have been misplaced. The
Manufacturing Technologies Association told us that it was not
necessary because "larger companies which have a long tradition
of apprenticeships feel relatively little need of direct contact
with NAS".[127]
Skills for Care & Development elaborated on this point, suggesting
that NAS may have targeted large employers simply in order to
meet its targets and that the support for larger employers may
have come at the expense of supporting smaller companies:
Employers still feel as if there
is a lot they have to do in terms of finding appropriate training
providers and this has been compounded recently as NAS is now
only looking at supporting large employers.
This may indicate that the service
is seeking to achieve easy wins through large employers many of
whom have their own Apprenticeship contracts and are generally
already working closely and effectively with their relevant SSC/B's
[Sector Skill councils/Boards]. There are gaps for smaller employers
that are currently being taken up by SSCs, training providers
etc. This gap in support for smaller employers is perhaps as a
result of recent cuts to the service (NAS).[128]
This view was repeated by several witnesses.
For example Improve Ltd and the National Skills Academy expressed
"concern over the implications of focusing on a volume target
from the perspective of neglecting SME's".[129]
While we support the commitment from NAS to support large employers,
it must not come at the expense of the support offered to SMEs.
86. We were encouraged to hear
about the high level of support that the National Apprenticeship
Service offers large businesses and the apparent success it has
had in this area. We recommend that NAS continues to support large
employers to engage with the apprenticeship programme, and in
particular to use their positions to support local schemes and
encourage connected smaller businesses (for example those in their
supply chains) to become involved in the programme. We also recommend
that the Government actively highlights and celebrates examples
of good quality apprenticeships taking place in large businesses
to extol the benefits to other employers.
Engagement with small and medium sized businesses
87. According to the Geoff Russell,
the Chief Executive of the Skills Funding Agency, "80 per
cent of all the apprentices out there are in SMEs".[130]
However, despite this figure, the Department acknowledged that
SMEs found it harder to engage with the apprenticeship programme.
In evidence, it offered the following reasons:
They may not have a dedicated HR
department to manage the process, or support learning and development;
It may be more difficult for staff
to dedicate time to training and supporting an apprentice;
It can be harder to release someone
for training off the job when there are fewer remaining staff
to cover; or
Small businesses may have more cash
flow constraints and be less prepared to risk an initial investment
to achieve long-term productivity gains.[131]
DIRECT ENGAGEMENT WITH SMES
88. David Way, the Chief Executive
of the National Apprenticeship Service, believed that the most
effective way for NAS to engage with SMES was indirectly through
training companies and colleges, rather than direct support:
The service we are providing to
SMEs is very strong. We need to keep working at information, but
I honestly believe that the best way of supporting SMEs is through
people locally on the ground in training companies and colleges,
not through some sort of centre.[132]
89. Various industry representatives
agreed. For example the Institution of Engineering and Technology
told us that:
We support the service that NAS
provides for large employers but we feel that NAS involvement
with small and medium employers (SME's) and individual learners
has been of questionable value. [...] The role of NAS would be
most effective in supporting training providers who have a wealth
of experience and have built trusted relationships engaging with
appropriate employers.[133]
This sentiment was echoed by Avanta:
As a national body the NAS will
inevitably be less well-equipped to engage with SME and major
local employers, many of which do not advertise apprenticeship
opportunities through regular channels. Avanta believes that most
established skills and employability providers are experienced
in forming these kinds of links with business.[134]
90. The Forum of Private Business
summarised that many businesses choose not to use NAS, they told
us that "government apprenticeships are [...] used by fewer
than half of respondents. Some businesses prefer local training
schemes, while others run their own apprenticeships, which can
be tailored more to the needs of the business".[135]
The Food and Drink Federation told us that NAS's focus on larger
businesses was a misplaced priority and that the Government should
support employers, regardless of size:
We are concerned over the implications
of focusing on a volume target from the perspective of SMEs. It
appears that the focus of NAS is firmly on large organisations
having 250 employees or above. However we believe that a government
funded organisation should provide a support service to all organisations
and in particular address areas of market failure. We believe
NAS should be tasked with raising participation with SMEs as a
first priority rather than with volumes of apprenticeships from
large companies.[136]
91. Despite David Way's statement
that NAS's support for SMES was "very strong", of its
310 employees, only 50 were allocated to supporting small employers
(and the Apprenticeship Vacancy service).[137]
Several industry representatives lamented this apparent the lack
of direct government support for SMEs, including Improve Ltd and
the National Skills Academy: [138]
We have a concern over the implications
of focusing on a volume target from the perspective of Neglecting
SME's
[...] It appears that the focus
of NAS is firmly on large organisations having 250 employees or
above. However, it is our opinion that a government funded organisation
should provide a support service to all organisations and not
focus on the 'big volume' employers.
SME's in comparison generally require
much greater in depth support and this is generally considered
to be an area of market failure as SME's undertake less training
and find it harder to access provision & support.[139]
The Chief Economic Development Officers
Society and the Association of Directors of Environment, Economy,
Planning & Transport told us that SMEs required more than
just financial assistance:
In addition to financial help, SMEs
often require additional support to employ an apprentice such
as advice on specialist employment legislation and HR issues and
by streamlining processes regarding the amount of paperwork and
documentation that needs to be completed.[140]
92. While it may be true that smaller
businesses already have strong links with their training providers,
we do not think that this should replace the role of NAS as the
principal provider of impartial support and information for employers.
There is a risk, if NAS takes a passive role with SMEs, that businesses
would place too much reliance on their training providers (who
are not accountable to Government or Parliament). In early 2012,
the Government commissioned Jason Holt (CEO of Holts Group of
Companies) to advise on "what further measures can be taken
to give SME employers more control in the system and make it more
responsive to SME needs".[141]
The final report of this review recommended that the Government
"establish the NAS role as the lead of all communication
relating to apprenticeships".[142]
93. While 80% of apprentices
are employed in the SME sector, the major growth in apprentices
is in the retail sector. The SME sector in the UK represents a
huge untapped potential market for apprenticeships but unlocking
it requires far greater focus and resources. Whilst there are
already strong links between training providers and SMEs it does
not go far enough, and does not engage SMEs which are harder to
reach. We therefore recommend that NAS engages local bodies such
as LEPs and local Chambers of Commerce to target those companies.
Equally, the Department must recognise that NAS will require some
additional funding for this to be successful. We will monitor
this area of activity closely and will expect NAS to publish quarterly
reports on the number of new SMEs it has brought into the apprenticeship
programme.
REDUCING BUREAUCRACY
94. Industry representatives told
us that bureaucracy prevented many SMEs from considering hiring
an apprentice in the first place. For example the Herefordshire,
Worcestershire and Shropshire Training Providers Association told
us that firms responded to "tax incentives or reduced bureaucracy
to convince SMEs to take on apprentices".[143]
This problem was recognised by the Department
which outlined its recent efforts to reduce the bureaucracy facing
potential and current employers:
We are reducing bureaucracy, and
streamlining and speeding up processes, with significant progress
made already. For large employers (5,000+ employees) that directly
contract with the Skills Funding Agency; the latter is currently
running an Employer Outcome Payment Pilot. This will test a new
approach to making payments based on Apprenticeship framework
completions enabling a significant reduction in the paperwork
and reporting requirements. We are also introducing more proportionate
audit, inspection and monitoring arrangements and a single certification
service.
To address the concerns of small
employers, we are working to streamline processes so that it takes
just a month for an employer to advertise for an apprentice, through
from first enquiry to agreeing a training package. The Skills
Funding Agency has removed health and safety requirements on providers
and, where relevant, employers, that go beyond regulatory requirements.
We are working with training providers to develop new service
standards for supporting SMEs to be included in all new contracts
for Apprenticeships delivery.[144]
95. The Forum of Private Businesses
supported these recent announcements by the Department:
[The announcements] are welcome
and may encourage more businesses to use the service. In particular,
the commitment to advertise a vacancy within a month and to remove
any health and safety requirements that go beyond national standards
are welcome steps and will help small businesses who often need
vacancies filled quickly with minimal disruption to the business.[145]
96. The British Retail Consortium
(BRC), however, told us that more needed to be done:
Although the BRC welcomes recent
activity to identify ways in which red tape and bureaucracy can
be removed from the system, changes must be delivered quickly
and more work must be done to ensure employers' concerns are addressed.[146]
97. Others told us that bureaucracy
had not been reduced for employers or training providers but had
simply been displaced. JTL Training argued that NAS's matching
service had actually increased the bureaucratic burden which,
it said, had:
Forced additional bureaucracy onto
training providers who have also had to cope with both the simultaneous
pressures of their income being cut, via funding reductions and
of reduced Apprenticeship demand.[147]
The National Institute of Adult Continuing
Education pointed out that "most employers do not take on
apprentices and claim to be put-off by perceived levels of bureaucracy
and regulation".[148]
98. The Department has recently
announced changes to make the process of hiring and training an
apprentice easier. When we asked the Chief Executive of NAS, David
Way, what the principle barriers were against hiring apprenticeships
he told us that "bureaucracy is in the first five"[149]
and assured us that NAS and the SFA were "both committed
to reducing bureaucracy wherever we find it".[150]
99. We note the recent announcements
by the Department of measures to reduce bureaucracy, particularly
for large businesses. However, we have heard that this has not
been matched with action. Businesses still consider bureaucracy
and the perception of 'red-tape' to be a major barrier to employing
an apprentice. We recommend that more work is done. Specifically,
we recommend that the attitudes and perception of employers, in
terms of bureaucracy, are closely monitored by the Department.
NAS must engage with businesses of all sizes specifically to hear
how they could more easily engage with the scheme. It should report
its findings as a matter of urgency.
Alternative models to support SMEs
100. In this inquiry we have had
a particular interest in alternative models of delivery, specifically
designed to address the needs of smaller employers. We took evidence
from representatives of Group Training Associations (GTAs) and
Apprenticeship Training Agencies (ATAs), both of which are aimed
at improving the engagement of small and medium sized employers:
Group Training Associations (GTAs)
Group Training Associations were
originally set up in the 1960s to train on behalf of groups of
employers, using funds contributed by them through a statutory
training levy and with assistance from the relevant Industry Training
Boards (ITBs) to purchase capital and equipment.
Apprenticeship Training Agencies
(ATAs)
The apprentices are employed by
the Training Association and "hired out" as a flexible
workforce to other employers, known as "host companies"
for the work-based element of their apprenticeship. Host companies
pay the Training Association a fee for the hire of the apprentice,
which comprises their salary plus a service charge which covers
the management costs of employing and supporting the apprentice.
The Training Agency takes on most
of the administration, dealing with the payroll, support and supervision
of the apprentice and being their legal employer. [151]
GROUP TRAINING ASSOCIATIONS (GTAS)
101. Neil Bates, the Chief Executive
of Prospects Learning Foundation (a GTA), told us:
The GTA model is a demand-led model,
because it is about employers determining what the skills requirements
are for their businesses, and then the GTA providing that provision
to meet the skills needs.[152]
The Federation of Small Businesses agreed
with this description and argued that the GTA model helped smaller
businesses to engage with the programme:
GTAs provide an effective route
for small employers to work collectively on training apprentices
and existing staff. These systems allow for the sharing some of
the burden and responsibility while benefitting from the advantages
of working on a larger scale.[153]
102. The Trades Union Congress (TUC)
supported the GTA model and argued that it allowed businesses
to pool resources and collaborate on training apprentices:
The TUC recognises that many small
and medium-enterprises (SMEs) feel they lack the capacity to take
on apprentices. The TUC believes that a potential answer to this
is through collaboration and the Group Training Association (GTA)
model. In this model the employer directly employs the apprentice
but the training is pooled within the GTA. The GTA model offers
a good vehicle for supporting groups of employers to come together,
often with union support, to develop high-quality apprenticeships.[154]
103. The overwhelming majority of
evidence received supported the principle of GTAs, but Pearson
International offered a differing view. It argued that that GTAs
were, in fact, run by larger employers and did not necessarily
meet the needs of SMEs:
It should also be noted that GTAs
tend to be led by the largest employers and therefore may not
adequately meet all the needs of small or medium sized businesses.[155]
104. The Department left no room
for doubt that it supported the GTA model and would continue to
do so in the future:
Employer-led Group Training Agencies
(GTAs) can play a pivotal role in meeting the particular training
requirements of SME apprentices and supporting their employers'
participation in the programme. We strongly support this model
and have encouraged the expansion of the GTA network via the National
Apprenticeship Service funding of GTA England and its activity
in this area.[156]
105. The Edge Foundation told us
that GTAs provided opportunities and should be supported, but
cautioned that funding remained a problem:
Previous attempts to develop GTAs
in other sectors of industry have failed because financial support
for running costs has been withdrawn too soon. GTAs take a long
time to get going and need much more support than they have been
offered in the past.[157]
APPRENTICESHIP TRAINING AGENCIES (ATAS)
106. The Apprenticeship Training
Agency (ATA) model has a different approach, but also aims to
improve the engagement of small and medium sized employers. The
Federation of Small Businesses told us that the main advantage
of the ATA model was that it removed the risk of recruiting an
employee:
The ability of ATAs to employ the
apprentice and deal with administrative and insurance issues and
take some risk away from the employer would be a significant attraction
to many smaller firms.[158]
107. The Chief Executive of the
Association of Colleges, Martin Doel, agreed and told us that
he supported the use of ATAs to improve SME engagement:
I think ATAs have a strong role
to play with SMEs. [...] You had a number of people that would
be interested in taking on apprentices, but not wanting to take
that risk, so there was an element of de-risking the process.
There was also [...] the issue about the bureaucracy attending
an apprenticeship, necessary reporting, and all the back-office
functions that a college or another provider could meet.[159]
The Edge Foundation pointed out that
the ATA model not only reduced the risk to employers, but also
provided the new apprentice with some assurance that the full
apprenticeship framework would be delivered. It essentially reduced
the risk to the apprentice of being employed by a smaller business:
In this model, the ATA acts as the
apprentice's employer and places them with a host employer, in
return for a fee. This provides extra flexibility for apprentices
and employers alike. If an apprenticeship cannot be delivered
entirely by one employer, the ATA makes sure the apprentice gets
experience with another. This helps increase the availability
of apprenticeships in sectors dominated by small businesses.[160]
108. However, several witnesses
cautioned that the ATA model did not encourage genuine employment.
The Director of Unionlearn (part of the Trades Union Congress),
Tom Wilson, summarised the 'employment' argument against ATAs:
Fundamentally [...] it is not a
genuine employment relationship. It is a device that is being
used to create the impression of an employment relationship. That
is, frankly, in our view, something that is antithetical to the
fundamental idea of what an apprenticeship is all about, which
is that you work for an employer, not a group of employers or
people getting together, and that that employer, when you have
completed the apprenticeship ideally takes you on, and gives you
a full-time job.[161]
The TUC also expressed concerns over
quality of the ATAs:
Increasingly ATAs are running low-paid,
poor-quality schemes with little progression or career development.[162]
109. Professor Alison Fuller and
Professor Lorna Unwin agreed that those employed by ATAs had limited
options at the end of their training:
An increasing number of 16-24 year
old apprentices are now employed by an Apprentice Training Agency
(ATA), which hires them out to local "host" employers
for a minimum of 16 hours per week [...] and with limited prospects
of a job at the end of the programme.[163]
The National Union of Rail, Maritime
and Transport Workers agreed that the employment status and prospects
for apprentices employed by an ATA was questionable:
The major risk for people who take
apprenticeships is that there is no job at the end of it. We believe
that the government needs to ensure that schemes provided through
the Apprenticeship Training Association (ATA) are not employing
apprentices through an employment agency. The RMT believes apprentices
should be employed by the employer, in all cases.[164]
110. We asked the Chief Executive
of an ATA (Logistics Apprenticeship Training Academy), Paul
Coxhead, whether apprentices were able to build a long term relationship
with their employer under the ATA model. He told us that, in his
experience, it gave apprentices the opportunity to excel and be
noticed by employers. He told us that, of the 20-30 people employed
by an employer through an agency:
They will generally, from that group,
take the ones who excel in what they are doing and look to recruit
them into their main work force anyway. What we are trying to
do is get them to replace that with the apprentices. It is changing
hearts and minds.[165]
111. NAS described the main benefits
of the ATA model as being:
[To] offer a unique approach to
the recruitment of apprentices. They are specifically designed
to support small and medium sized employers who wish to take on
an apprentice but are unable to take the risk in the current economic
climate. They support the sharing of employees among employers,
whilst ensuring the quality of the Apprenticeships experience.[166]
NAS specifically addressed the arguments
that ATAs did not represent genuine employment. It drew our attention
to the new 'ATA Framework' which it intended to use to ensure
consistency and quality training for apprentices:
The ATA is not a 'temporary work'
business but rather a means to manage and give real flexibility
to the delivery of a high quality Apprenticeship. This flexibility
also applies where employers may not be able to offer all aspects
of a framework but linking them with other host employers allows
the full range to be covered.
As the government body with responsibility
for Apprenticeships in England the National Apprenticeship Service
(NAS) is keen to ensure that all Apprenticeship Training Agencies)
ATAs deliver high quality Apprenticeship programmes and operate
in accordance with the ATA Framework. Apprentices and stakeholders
need to feel both confident and assured that the service they
receive from ATAs is first class.[167]
112. NAS went on to tell us that
any ATA must now fulfil four headline features to be recognised
under the new framework by the Service:
An ATA is a business whose core
function is the employment and development of apprentices. Under
the model the apprentice will be hired out to host employers who
provide employment key to the Apprenticeship. Training will be
delivered by a Skills Funding Agency (the Agency) contracted training
provider.
An ATA will always aim to contribute
to a high quality Apprenticeship experience. To ensure this they
will make the quality of apprentices' working and learning experience
central to all they do.
An ATA will focus on the creation
of the new Apprenticeship opportunities with employers who wish
to benefit from using the ATA model to engage an apprentice(s).
They should complement not displace directly employed Apprenticeships.
An ATA will agree clear terms with
all the employers, providers and apprentices that they work with.
These terms should reflect best practice in the delivery of an
Apprenticeship.[168]
113. Finally we heard that, while
the ATA and GTA models are fundamentally different, they are not
mutually exclusive. The Group Chief Executive of a GTA (Prospects
Learning Foundation), Neil Bates, agreed that GTAs do not address
the issue of employment risk to companies as directly as ATAs.
He told us how the models could be combined, while warning against
using ATAs to simply supply labour:
That is actually why some GTAs,
my own included, have an ATA within our structure. GTAs do some
of the features of an ATA model, and I am not critical of an ATA
model. I think it has a place, provided it does not fall into
becoming a labour supply agency. I think they are an important
part of the framework. So, yes, in circumstances where, for example,
in the construction sector there are breaks in employment, because
apprentices are with a company that loses a contract or has not
got work, we will take the apprentice back and employ them for
a period of time until we can re-place them into another employment,
which is a feature of an ATA model.[169]
114. The Office of the Mayor of
London warned us that NAS needed to monitor the quality of both
ATAs and GTAs:
Employers indicate that the quality,
breadth and expertise of ATA/GTA models are mixed. NAS should
work to ensure that provision meets minimum standards and seek
to promote a more competitive market.[170]
115. We have heard that a significant
number of small and medium sized employers have struggled to engage
with the apprenticeship programme. We are encouraged to hear about
innovative delivery models designed to rectify this. We recommend
that both Group Training Associations and Apprenticeship Training
Agencies continue to be supported by NAS. However, care must be
taken to ensure that the quality of learning experience is not
jeopardised. We support NAS's recent initiative to set up a Recognition
process and National Register for ATAs and recommend that NAS
is given formal responsibility for promoting ATAs. It is important
that all alternative delivery models are actively monitored and
NAS should assess the success of such models not only by the level
of employer engagement but also by the quality of the apprentices'
actual learning and the subsequent conversion rate from such apprenticeships
to full-time employment.
THE SUPPLY CHAIN MODEL
116. We heard evidence suggesting
that larger employers should take a more active role in engaging
smaller businesses with the apprenticeship programme. The UK
Contractors Group told us that this was particularly pertinent
to the construction sector:
There remains significant untapped
potential to increase apprentice provision in the industry, particularly
amongst SMEs. Construction is therefore a prime sector for the
extension of collaborative apprenticeship modelseither
through large firms supporting SMEs in their supply chain by training
more apprentices than they need; or SMEs accessing training through
Apprenticeship Training Agencies or Group Training Associations.[171]
The Director
and General Manager of Carillion Training Services, Ray Wilson,
explained how the 'supply chain model' worked in practice:
What we will do is work with Carillion
and its full supply chain to place apprentices to give them opportunities.
We will rotate them; so they may get a bit of experience, for
example if they are a carpenter, in hanging some doors with one
organisation, and then they may need some roofing experience,
which that organisation may not be doing. So we will rotate them
through our supply chain and other organisations with which we
work to give them a fully rounded experience. Not only does it
give them the technical skills, but experience and exposure to
other organisations, and I think, therefore, their apprenticeship
is fully rounded.[172]
He went on to tell us that "there
are absolutely huge benefits. Primarily this is about us as an
organisation supporting young people into training with the relevant
skills for the industry. That then supports the supply chain in
that industry, which then goes on to support us within Carillion
itself".[173]
117. ADS Group (the trade organisation
advancing the UK Aerospace, Defence, Security and Space industries)
told us that this model had benefits in other sectors as well:
Major companies in the aerospace
industry aim to train apprentices on behalf of their supply chain
companies, benefiting smaller companies in a number of ways: firstly
they gain from highly skilled apprentices, trained to a high standard
on machines that they may not be able to provide themselves; additionally,
they benefit from likely future contracts with their customer
because the larger company knows that the work produced will be
to a high standard, having trained their staff.[174]
The UK Commission for Employment and
Skills agreed. They told us that firms benefit from this model
regardless of sector:
Large companies have an interest
in developing the skills of their suppliers. Large and small employers
in supply chains could work together to develop Apprenticeship
programmes and places.[175]
118. We are encouraged to hear
that private industry is introducing new models of training. Specifically,
we have heard about the practice of large employers utilising
and supporting their supply-chain to supplement their apprenticeship
programmes. NAS has told us of its support and contact with large
businesses and we recommend that, in its dealings with such businesses,
it promotes the benefits of this model by encouraging large employers
to support SMEs in their supply chain using apprenticeships.
Government initiatives
119. The Government has introduced
initiatives to increase employer engagement. While most of these
are in their early stages, we have received evidence on the 'Employer
Ownership Pilot' and 'SME incentive payments'.
THE EMPLOYER OWNERSHIP PILOT
120. The Employer Ownership Pilot
has enabled businesses (as opposed to training providers) to bid
directly for public funding. The Department's website outlined
the scheme:
The Employer Ownership pilot offers
all employers in England direct access to up to £250 million
of public investment over the next two years to design and deliver
their own training solutions. The pilot is jointly overseen by
the Department for Business, Innovation and Skills, the Department
for Education and the UK Commission for Employment and Skills.[176]
The pilot is administered through the
UK Commission for Employment and Skills, in whose evidence was
a summary of the reasoning behind it:
The UK Commission's view is that
employers need the space to take more ownership over Apprenticeships,
with government stepping back. We need to create the right conditions
for employers to step up, to work with key partners in their sectors,
local areas and supply chains to develop the skills they really
need. To this end, we value the opportunity to test out new ways
of working through the Employer Ownership pilots.[177]
121. The pilot was launched in February
2012, and it is too early to judge the success of this scheme.
While the bulk of evidence we received supported the principles
underlining the scheme, several witnesses sounded a note of caution.
For example the Association of Employment and Learning Providers
warned that the pilot could jeopardise the current drive for higher
quality apprenticeships:
The "Employer Ownership"
proposals must not be allowed to devalue the Apprenticeship brand
by providing government funding for employers' own apprenticeships
that do not meet, or exceed, the current requirements of Apprenticeships
in England.[178]
The Association of Colleges agreed that
quality was at stake if the employer ownership was not monitored
and that regulators must be closely involved:
The recent plan to give employers
more control of Government skills funds may result in money going
to organisations without relevant experience in training. We recognise
the importance of gaining greater employer ownership of skills,
but we believe that the Employer Ownership Pilots should involve
partnerships with approved providers, Ofsted must be able to inspect
quality and relevant data must be collected to assess performance.[179]
122. When we asked the Minister
how he would tackle these issues he told us:
There are rigorous value for money
criteria in the bid appraisal process which will minimise deadweight.
Only the bids showing the best value for the public purse and
the highest quality will be supported and robust quality assurance
will be built into the monitoring and management of those bids
that are successful. We are developing a comprehensive evaluation
process, with short, medium and longer-term measures of success,
to assess value for money. All successful bids will undergo due
diligence checks before projects begin.[180]
SME INCENTIVE PAYMENTS
123. The Department has introduced
the SME incentive payment to help small businesses to overcome
the initial costs of supporting an apprentice:
In November 2011, we announced 40,000
incentive payments of £1,500 to encourage small businesses
not currently engaged in the Apprenticeship programme to offer
more opportunities for young people aged 16-24. [...]
Targeting such employers with this
new incentive will maximise the impact of the additional funding
and further grow the Apprenticeship brand. In promoting the scheme,
the National Apprenticeship Service will also seek the greatest
value for the taxpayer by concentrating on the occupational sectors
which generate the greatest levels of return. [...]
The first £750 instalment of
the incentive payment equates to two months wages at the Apprenticeship
rate of the National Minimum Wage, helping small businesses to
overcome the initial costs of supporting an apprentice while they
settle in and start becoming productive.[181]
124. Most witnesses supported the
principle of incentivising SMEs to take on apprentices. Among
others, the West Berkshire Training Consortium[182],
Mimosa Healthcare Group[183],
Learndirect[184] and
the Construction Skills Certification Scheme (CSCS)[185]
made the point that SMEs struggled with the cost of hiring and
training apprentices.
125. That said, a number of submissions
argued that a single cash payment might not be the most efficient
way to engage SMEs. For example, People 1st told us
that financial incentives should be coupled with more support
and guidance:
This fund could be used to provide
one to one support for small businesses and simplify the system
to make apprenticeships more accessible. This could also be used
to provide peer to peer advice and guidance from employers already
successfully implementing apprenticeships throughout their business.[186]
Aspire Achieve Advance Ltd argued that
"apprenticeship bonuses may encourage the involvement of
small and medium sized businesses but clearly the process needs
to be bureaucracy light and achieve the desired outcomes".[187]
126. We have also heard that the
level of the bonus (£1,500) may not be appropriate. The National
Skills Academy for Nuclear told us that "this is insufficient",
but went on to say that applying the bonus to Skills Academies
to work more closely with employers would be more effective in
engaging SMEs.[188]
The Federation of Master Builders (FMB) supported the scheme but
agreed that the level was not sufficient to alter employers' recruitment
plans:
The FMB welcomes the Government's
proposal of an incentive payment of £1,500, payable in two
stages, to help businesses employ a new apprentice. When asked
what would make them more likely to hire an apprentice, FMB members
ranked an incentive payment at the top of a list of possible incentives.
However, in the same survey only
18% of firms suggested that the Government's £1,500 Apprenticeship
Grant would make them reconsider hiring a new apprentice. 30%
of the firms that felt £1,500 wasn't sufficient said an incentive
payment of £3,000-£4,999 would be enough to change their
mind.[189]
127. We also heard that the method
of delivering this bonus had affected the behaviour of the employer.
Skills for Justice explained that there was a risk that the Government
would be subsidising short-term jobs with no long-term employment:
We would urge caution when considering
whether to introduce a bonus scheme. It is imperative that Apprenticeships
provide real opportunities to obtain employment if they are to
be seen as credible. Bonuses may encourage organisations to offer
Apprenticeships where there is little or no chance of a job at
the end.[190]
Microsoft UK agreed, and suggested that
incentive payments should only be paid at the end of the apprenticeship:
It would be important to ensure
that any apprenticeship bonus scheme only rewarded those businesses
that saw the programme through. This could be achieved through
the inclusion of a terminal bonus.[191]
We note this concern but are mindful
that the purpose of this scheme was to encourage SMEs to recruit
by assisting with the cost of recruitment, this could be undermined
if firms do not benefit from the payment until at least 12 months
after the initial cost.
128. We discussed the SME incentive
scheme with the Minister. He told us that, while it was too early
to judge success, he was optimistic:
We took the view that in addition
to making the system simpler we should incentivise small businesses
with a £1,500 bonus. It is early days, as you know; it is
just at the beginning of the process. But yes, we are making progress.
[...] I am confident that we will reach our target.[192]
The Minister went on to tell us that
he had designed the scheme deliberately to increase the number
of young apprentices in work:
It is something I have long believed
in, the apprenticeship bonus concept, for those SMEs that are
currently not apprenticeship providers. [...] I have said it has
got to be a young apprentice and an employer that has not had
an apprentice previously. We are cutting new ground. This is not
about existing people or existing businesses. This is about new
businesses and new apprenticeships.[193]
129. We support recent efforts
by the Government to increase employer engagement through the
'Employer Ownership Pilot' and the 'SME Incentive Bonus'. These
initiatives are in their infancy and we do not wish to tinker
with the content of either policy at this stage. However, over
time they will need to prove higher levels of employer engagement
and value-for-money. We recommend that clear criteria for success
are published so that they may be objectively scrutinised and
that full value-for-money reviews are conducted into both of these
schemes after 18 months.
PUBLIC PROCUREMENT PRACTICES
130. We have heard that the Government
could have done more to encourage SME engagement with the apprenticeship
scheme through its own procurement practices. When JTL outlined
its proposal to use public procurement obligations, it said that
such a scheme would be as effective as SME incentive bonuses:
What is more likely to assist small
and medium sized businesses involvement in Apprenticeships is
via a legal obligation to do so within the awarding of public
sector procurement contracts. These should specify a specific
number of intermediate and advanced apprentices, each contributing
at least 35 hours per week, to the delivery of that contract,
irrespective of whether or not they are employed by the main contractor
or a subcontractor.
Further, employers who do not have
apprentices should be excluded from public sector procurement.
This would have just as much effect as apprenticeship bonuses,
whilst also supporting the employers who train only to have their
skilled staff "poached" for their efforts.[194]
Several witnesses agreed. The Chief
Executive of the West Northamptonshire Development Corporation,
Peter Mawson, told us that this would work across many sectors:
Of course it does not have to be
construction-related. It could be the procurement of an ICT contract
or social care or whatever it may be. Wherever the public sector
is procuring, there could be an embedded policy to require the
provision of apprenticeships within that particular programme.[195]
131. The Trades Union Congress also
made a specific suggestion for the delivery of this scheme. It
told us that this had already happened in some parts of the construction
sector and told us that it should be extended to a wider number
of sectors:
Even during a time of government
spending cuts, the public sector spends a colossal amount of money
procuring goods and services. [...] For example, in parts of the
construction sector where procurement is being used in this way,
there is a rule of thumb that one apprentice should be employed
for every £1 million of contract value. This approach should
be embedded and extended to other sectors.[196]
132. When we raised this with
the Minister he was supportive of the principle, but appeared
hesitant to implement such a scheme because of competition law
concerns:
I am a great enthusiast for using
public procurement. There are issues around competition law, including
law from the European Union, but I think we can, within those
constraints, be more creative about the use of procurement.[197]
He did, however, tell us that he was
"determined to push this as far as we can go within the constraints
within which we are working".[198]
133. We recommend that the Government
encourages the employment of apprentices in its procurement contracts.
While we concede that some flexibility is required (for example
around the sector and nature of the work contracted), we recommend
that Central Government, Local Government and other publicly funded
bodies should seek to achieve at least one additional apprenticeship
for every £1m awarded through public procurement as a benchmark.
We have been told by the TUC that this is current policy in some
construction procurement arrangements. Furthermore, we recommend
that the current recruitment practices of prospective contractors
(in terms of apprentices) is a factor which is taken in to positive
consideration when the Government is considering bids for any
public contract.
134. In terms of using public
procurement to incentivise apprenticeships, the Minister told
us that he was determined to push this as far as possible "within
the constraints of the law". We recommend that in its response
the Department sets out how it proposes to resolve any legal issues
preventing the Government from attaching requirements for apprentices
in major public procurement projects commissioned by itself, local
government and publicly-funded bodies.
119 Ev 193 Back
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Jason Holt, Making apprenticeships more accessible to small
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National Apprenticeship Service, Testing Alternative Delivery
Models: Group training Associations and Apprenticeship Training
Agencies, 2009 [extract] Back
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Department for Business, Innovation and Skills website, Employer
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