Apprenticeships - Business, Innovation and Skills Committee Contents

5  Engaging employers—Barriers 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 build—for 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]


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.


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]


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]


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.


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 models—either 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'.


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]


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.


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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141   Jason Holt, Making apprenticeships more accessible to small and medium-sized enterprises, May 2012, page 4 Back

142   Jason Holt, Making apprenticeships more accessible to small and medium-sized enterprises, May 2012, page 6 Back

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151   National Apprenticeship Service, Testing Alternative Delivery Models: Group training Associations and Apprenticeship Training Agencies, 2009 [extract] Back

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176   Department for Business, Innovation and Skills website, Employer Ownership Pilot [accessed 6 July 2012] Back

177   Ev w289 Back

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© Parliamentary copyright 2012
Prepared 6 November 2012