Are apprenticeships affordable for SMEs?

young apprentice learning to operate a mechanical sawAt the start of 2016 the Federation of Small Businesses (FSB) calculated that of the 5.5 million businesses in the UK an estimated 99.3% of them were SMEs, employing around 15.7 million people and accounting for 60% of UK employment.

Of these SMEs, which have increased by 59% since 2000, 95% fall into the Microbusiness category of those employing fewer than 10 people.

Representing just about every industry sector, SMEs are clearly a crucial part of the UK economy and, like their larger compatriots, many complain of skills shortages particularly in key sectors such as construction, engineering and catering.

No surprise then, that SMEs could be a fruitful location for apprenticeships and in August 2016 the FSB produced a report on the potential barriers to increasing their involvement.

While they found that a quarter of SMEs that currently have no apprentices would consider getting involved the FSB concluded that “more information and financial support are needed to help SMEs understand how apprenticeships work, what the costs are, what the benefits might be, and how to go about finding the right talent to help their business.”

Are grants enough to make apprenticeships affordable for SMEs?

Employers can receive up to 90% towards apprenticeship costs under the new Government scheme to be launched this May, one month after the apprenticeship levy on larger businesses begins on April 1.

The Government has also said that “Businesses with under 50 employees won’t pay anything if they employ apprentices under the age of 19, and will receive a £1,000 payment with an additional £1,000 payment to the training provider.”  In the recent budget, there was also a pledge to overhaul by 2020 the system of post-16 educational qualifications in areas such as engineering, design and construction, to just 15 so-called T-levels.

However, the smaller SMEs are often time and cash poor and it is debatable whether there is the spare capacity, regardless of the help towards the training costs, especially given the time and resources needed to train and administer new staff, let alone apprentices.

Concerns about the literacy and numeracy levels of school leavers could also add to the costs of taking on an apprentice and it must be remembered that apprentices are also employees so there will be additional costs such as NI contributions.

The Government issued a large collection of guidance notes earlier this month on the 15 funding bands, how the scheme will work, guides for employers, parents, approved training agencies, standards for specific industries including everything from fence installers to banking relationship managers reportedly with more to follow. This may help with the FSB’s concerns from last August.

But do SMEs, whose employees tend to be multi-disciplinary and fully occupied, have the time and capacity to also do all this additional online research as well as providing the in-house day-to-day management of schemes and the compliance rules that must be met?

The FSB analysis, perhaps not surprisingly, showed that numbers of SMEs are higher in Southern England relative to the resident population.

So, a warning this week from the Institute for Public Policy Research (IPPR) is particularly timely. It suggests that the apprenticeship levy, will raise less money and have a smaller impact in the areas that need it most, those that have been hit by deindustrialisation and suffer from low levels of qualifications, low productivity and low pay.

The new focus on upskilling young people to join the work force without a university education so that they do not end up in the cul de sac of unstable “gig” economy jobs and have some hope for future career progression is to be welcomed.

But there are plainly many questions about the costs in time and money before SMEs can feel confident that taking on apprentices is for them.

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