With businesses facing the imminent increase to National Living Wage levels, Gi Group UK’s Managing Director Corporate Accounts, Rob Ball calls on the government to adapt the current Apprenticeship Levy to become a more flexible Training & Reskilling programme to better equip UK businesses for an ever evolving and more challenging marketplace.

 

Businesses that have already battled through a truly tumultuous period in recent years now face the introduction of the National Living wage increase from £8.91 to £9.50 per hour and the knock-on effects that change will have. Inevitably it will lead to increased costs from suppliers – themselves impacted by higher payrolls – as well as snowballing ramifications across the business’s own pay structure as individuals see the pay bracket below move closer and subsequently demand their own increase.

Coupled with the National Insurance contributions increase of 1.25% from April 2022, the ongoing salary inflation as employers battle to attract and retain staff, and the threat of ‘The Great Resignation’ as 1 in 4 UK workers are considering leaving their jobs[1] – it is easy to see why businesses are struggling to cope.

At Gi Group UK, along with many business leaders, we understand the necessity of the increase to the National Living Wage as the cost of living for their employees continues to soar, and fully endorse the changes. However, the reality is that there will be an impact to businesses, so they need an appropriate response from the government if it is to be implemented successfully and not be to their detriment.

At a time when government-backed funding schemes to the tune of £56 million have been introduced specifically designed to boost productivity[2] – the now rising cost of lower skilled labour could well mark a tipping point which expedites the inevitable move to automation. While that does not necessarily mean fewer jobs, it will undoubtedly mean different jobs.

Indeed, while potentially rendering some traditional positions obsolete, it will bring the advent of many new opportunities – as more automated manufacturing requires roles such as system operators, maintenance engineers, software programmers and efficiency analysts to name but a few.

If removing some roles yet creating new ones, surely it makes sense to retrain the workforce you already have wherever possible? Could your production operative today be your software engineer of tomorrow? As ever, it pays to minimise the seen and unseen costs of recruitment by retaining and developing your existing employees.

Re-skilling and redeploying the existing workforce is certainly logical but is it that simple? Existing government funding for upskilling employees comes primarily in the form of apprenticeships and the Apprenticeship Levy. While this has worked well for some of those businesses that have fully embraced it, the existing apprenticeship structure is no longer fit for purpose when it comes to the rapidly growing and evolving re-skilling needs of UK PLC in a post-Covid, post-Brexit environment.

In fact, apprenticeship starts have plummeted by a fifth in a year[3] with the government’s Kickstart Scheme missing its 250,000 target by 150,000, only creating opportunities for 100,000 young people to date.[4]

 

As experts in the delivery of apprenticeships and supporting multiple clients with administration of the Apprenticeship Levy, we are aware of the barriers to adoption and limitations of the current programme.

A key factor rendering the Apprenticeship Levy incompatible with the pressing demands of today’s businesses is the condition that dictates 20% of training must be ‘off the job’ which brings cost and productivity challenges at a time when they can least afford them and also makes it impossible to utilise for temporary workers.

We already see huge swathes of the available funding not taken up and the nature of available learning, while wider than many realise, is still too limited in offering, too long-term a commitment and all too inflexible for the needs of businesses in 2022 and beyond. Nor does it necessarily train individuals at the levels where skills shortages lie. 12 or 18 months is a long time in business.

Instead, why don’t we let those businesses at the front line – that need to be agile and meet the needs of the marketplace – be the ones to determine the specific training and development necessary for them to succeed?

That is why we propose a more versatile Training & Re-skilling Levy to replace the existing, largely untapped Apprenticeship one. A system where organisations that pay in can draw down exactly what they need and best corresponds to the skills required to face the specific business challenges faced at the time. We believe the introduction of the increased National Living Wage should be the catalyst for its introduction.

 

Last year Neil Carberry, Chief Executive of the Recruitment & Employment Confederation (REC) gave evidence to the Business, Energy & Industrial Strategy (BEIS) Committee, telling MPs that government must overhaul the skills system in order to solve current and future labour shortage issues. “We need a revolution on how we offer training for work” if the UK is to fully recover from the pandemic and prosper in the coming months and years.

In a follow up letter, Carberry expanded: “We also need to address long-standing business concerns about the effectiveness of the Apprenticeship Levy as a system for improving the skills base. It is long past time for government and business to work together to redesign the scheme, and each year of delay simply puts the brakes on our ability to boost productivity and support rising wages.”

He added: “If we are to fully recover from the pandemic, compete on a global scale, boost

productivity, and make the UK a great place to live and work, then we have to invest in

our workforce, both in the short- and longer-term…

“…From digital technology, to skills, to management practices, to more effective

automation – businesses need to get their cash working to boost the competitiveness of

their firm and the wider UK economy. But with taxes on business rising, material costs

rising and labour costs rising this is increasingly difficult for businesses to do…

“…Government should consider broadening its training platforms, so that the level of qualification that is funded is less rigidly controlled by the state.”

 

We wholeheartedly support Neil’s stance.

The government has also stated its goal to develop a higher skilled economy, but to fulfil that objective, again you need more training. Indeed, more effective and accessible training could be the solution to so many of the challenges currently facing the labour market. IT could help address the transition to more skilled roles and in tackling the current candidate shortage brought about by many factors, including the reduction of migrant labour since Brexit.

Equally critical is the societal impact. As the economic and business landscape changes, it is crucial that we find ways to bring society with us – not leaving groups or communities behind as has happened before when certain industries evolved.

If the widespread automation of our manufacturing processes is imminent, how do we ensure those in manual jobs are not side-lined? And how do we harness the more practically minded employees of the future when their traditional career paths may no longer exist?

Training holds the key. It is crucial that re-skilling opportunities are visible and fit for purpose, and that we future-proof UK PLC with a platform for developing skills that can always be aligned with what businesses need.

The market has shifted and will continue to at a rapid pace. To react, organisations must be agile and so must their training provision. Our vision is for a more flexible Training & Re-skilling Levy and the time to develop it is now. When British business needs it more than ever before.

 

[1] https://www.theguardian.com/money/2021/nov/01/the-great-resignation-almost-one-in-four-workers-planning-job-change

[2] https://www.gov.uk/government/news/56-million-to-boost-business-productivity

[3] https://www.peoplemanagement.co.uk/news/articles/apprenticeship-starts-plummet-by-a-fifth-since-last-year#gref

[4] https://www.hrreview.co.uk/hpm/editors-pick/govts-apprenticeship-scheme-misses-250000-target/139126