04Challenge 2: the costs of training and wages discourage employers from taking on apprentices
The Employer Perspectives Survey 2014 found that 8 per cent of employers who do not currently offer apprenticeships are discouraged by the cost of taking on an apprentice.30 And even for employers who do take on apprentices, the cost of wages and training remain a problem – one study found that some employers who do take on apprentices are unable to afford additional contributions towards their training, limiting the amount of off-the-job training provided and holding back the quality of apprenticeships.31 This is despite the existence of national subsidies for training – which the Skills Funding Agency covers in full for 16-18 year olds, and in part for over 19s – and for wages, which are currently supported by the Apprenticeship Grant for Employers for apprentices under 25.
To overcome the financial barriers faced by employers in taking on apprentices, local partners have found additional ways of flexing or supplementing funding for training and wages.
Case study 3: Greater Manchester: local control of the Apprenticeship Grant for Employers
The national Apprenticeship Grant for Employers (AGE) has existed since 2012 and provides an additional financial incentive for employers to take on apprentices. As part of the Greater Manchester Devolution Agreement in November 2014, the Greater Manchester Combined Authority received local control of the AGE, which is managed by the Greater Manchester Apprenticeship Hub.32 As a result Greater Manchester has flexed the funding eligibility to better respond to the requirements of the local area.
Nationally, the £1,500 grant is available to workplaces with up to 50 employees. In Greater Manchester, in order to cater to the needs of its medium-sized businesses, the grant is available for business with up to 250 employees. This is supplemented with additional grants of £1,000 for employers that progress an apprentice from a Traineeship to an Apprenticeship, or employ an Advanced or Higher apprentice. During 2015-16, there were also additional grants for training providers in Greater Manchester who support the development of a Trailblazer standard.33
Greater Manchester’s ability to flex the amount and type of funding in order to fit local skills needs has been well received in the city.34 The devolved AGE is currently being evaluated by New Economy to inform the programme for 2016/17.35
Case study 4: Glasgow Guarantee: locally funded wage subsidies for employers
The Glasgow Guarantee began in 2008 as the Commonwealth Apprenticeship Initiative, a legacy programme which sought to ensure that Glasgow school leavers would benefit from jobs and apprenticeships in construction associated with the 2014 Glasgow Commonwealth Games. In 2009, following the recession and the threat of youth unemployment in the city, the scheme was extended to cover all types of work, offering a commitment to assisting every Glasgow school leaver into employment or training. The scheme was then further extended to support young people already out of school. In 2015 the programme was rebranded to become the Glasgow Guarantee.36
Apprenticeships make up a substantial part of this pledge, and to encourage employers to take on young apprentices, the city council introduced a subsidy of 50 per cent of employers’ wages for 12 months (or 24 months for a four year apprenticeship), as long as the apprentice remains in employment for two years.37
Apprenticeships in Glasgow had declined between 2005/6 and 2008/9, but between 2008/9 and 2009/10 the number of apprenticeship starts in the city more than doubled, and while growth slowed in the following years, there were more than 4,500 apprenticeships by 2012/13.38
This sharp increase in the number of apprenticeship starts occurred across a range of sectors as many employers shifted away from recruiting graduates, towards recruiting apprentices. Post-recession, some of these sectors have reverted back to recruiting graduates – for technicians, for example – but other sectors, such as accountancy, have continued to recruit apprentices.39 The experience in Glasgow shows that wage subsidies can act as a catalyst to draw employers into the apprenticeship system, which enables employers to experience the benefits they can provide to their business.
Case study 5: Birmingham Young Talent for Business: enhancing national programmes
Young Talent for Business (YTFB) was established in 2013 as part of the Birmingham Youth Promise, which pledges that all young people aged 14-25 will be able to access employment, education and training opportunities within four months of leaving school, college or employment. The scheme overall seeks to tackle Birmingham’s youth unemployment challenge through jobs, apprenticeships and traineeships.
The scheme is funded by the city council via the Birmingham Jobs Fund, which also funded Local Exemplar Initiatives to provide employability skills and coaching support to help young people into employment. Young Talent for Business is a partnership between the City Council, the National Apprenticeship Service, the Department for Work and Pensions (DWP) including JobCentre Plus, and Marketing Birmingham.
Until 2014, the DWP provided wage incentive grants of £2,275 for employers hiring long-term unemployed (at least 6 months) young people across the UK. Young Talent for Business was able to match this with an additional grant for young people within Birmingham local authority, paid once the young person had been employed for 13 weeks. This supplemented the DWP grant which was paid once the person had been in work for 26 weeks For employers hiring young people as an apprentice, YTFB was able to match the contribution made by the national Apprenticeship Grant for Employers, meaning that employers could receive grants up to a maximum of £3,000 from the Birmingham Jobs Fund.40
Since the withdrawal of the DWP grants, YTFB have retained the additional subsidy and extended the grant payment threshold to 26 weeks into employment. Applications are made by employers or by training providers on their behalf, and grants are made following review by the partnership members. The partnership also offers recruitment support for employers looking to recruit young people via Jobcentre Plus.41 The grants are mainly targeted at and accessed by SMEs, and since its introduction, the Fund has helped around 3,300 people into employment and apprenticeships.42
Whilst the direct impact that wage subsidies have on apprenticeship numbers, and the labour market more generally, is unclear, the examples demonstrate how financial subsidies can supplement and support national schemes, increasing the incentive for employers to engage with the system.