The Federation of Small Businesses (FSB) has today published what it calls a landmark report that focuses on the possible reforms of the apprenticeship system that could drive increased take-up among SMEs.
The report, ‘Make or Break: Getting apprenticeship reform right for small businesses,’ found that one in four FSB members (24%) already employ an apprentice, but a further quarter (24%) would consider taking one on in the future.
The FSB says that if this reflects the situation of the rest of England’s 4.7 million small firms, ”There is potential to deliver well over a million new apprenticeships with smaller employers.”
However, there are some fundamental issues to resolve before that number is achieved: 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.
The creation of a specific SME-focused web portal to help businesses get information, more involvement of SME owners in shaping apprenticeship policy, greater locally-focused skills support and working to improve transparency of costs are all suggested as possible measures to drive apprenticeship take up in SMEs.
Major barriers to overcome
The FSB pinpointed the most significant barriers:
- The general lack of information about apprenticeships, both in terms of content and navigability of resources, is hindering their growth.
- Only half (50%) of surveyed small businesses were aware of the Apprenticeship Grant for Employers of 16 to 24 year olds (AGE Grant).
- A third of small businesses do not feel apprentices leave school with the appropriate skills for work, with 32 per cent saying that the quality of apprentices is a major challenge.
- A third (31%) worry about day-to-day management of an apprentice alongside other business responsibilities.
- A quarter (26%) say they lack time to devote to train an apprentice.
In addition, there are serious concerns over the cost of apprenticeships. One business owner reflected on that, saying,
“The costs are not supported by funding, at a time when our wages budget is under pressure from auto-enrolment and national living wage legislation. Also, the lack of cross disciplinary apprenticeship courses; like most very small businesses, our staff are not dedicated specialists in one area, and an apprentice could learn a lot, but across a portfolio of skills.”
There are some positives from the report: the FSB found that apprenticeships in two thirds (67%) of small business lead to longer-term employment once training is complete. These finding show smaller businesses are providing a reliable pathway into full time employment for their apprentices.
Cost-effectiveness (37%) was cited as a key reason for taking on an apprentice, but increased financial burden risks many abandoning apprenticeships altogether. FSB’s research also found another key motivator for smaller employers was a commitment to giving young people training opportunities with 61% citing that as an important reason.
One respondent echoed that, saying, ““I have a background in education (I used to be a teacher and educational psychologist) so I have always had an interest in bringing young people on, if you like to look at it that way. I was also very disturbed at the time to see the number of young people out of work and couldn’t find anything to do– so it seemed an interesting thing to try and do.”
The report goes on to say that employers are relying heavily on external training providers for their information, with 48% highlighting that as their main resource. Fewer than 1 in 3, (28%) use the National Apprenticeship Service.
‘Positive trends but much to do’
FSB National Chairman Mike Cherry, said the report points out the positive trends: “Smaller businesses are taking on more apprentices than ever before. What’s more, a quarter of our members say they are considering employing an apprentice in the future. This presents a huge opportunity and is great news for vocational training, which has become an increasingly attractive option for young people put off by the rising cost and uncertain returns of a university degree.
“We are at a make-or-break moment. We need the Government to hit the right balance between incentives and support. While many small firms are committed to apprenticeships, many more continue to be worried about the time and personal commitment required.
“Ministers need to focus on three main areas: more targeted and localised information for businesses with high growth potential, specific and practical guidance on how a smaller company can take on an apprentice, and a more generous package of incentives and support for those which do. Getting this right is key to the successful reform of the apprenticeship system.”
This week is expected to see the publication of details of how the apprentice levy will work, both for those paying it, and for those receiving funds from the central levy pot. There are growing calls for the Levy’s introduction to be delayed
The report sets out a series of recommendations to overcome the barriers and drive greater take up of apprenticeships by smaller businesses.
- Target growing businesses and think locally
- Government should identify businesses which are looking to grow, or are in the process of growing, and equip them with the information and support they need to consider taking on apprentices as a key part of their wider recruitment and skills strategy.
- Apprenticeship growth in small firms should be supported through responsive and flexible local employment and skills strategies. Local Enterprise Partnerships (LEPs) should be encouraged to prioritise the development and implementation of an apprenticeship plan and policymakers should set out how they intend to work with the 39 Growth Hubs in England. No future devolution deals should be agreed without having a prominent place for apprenticeships as part of their broader skills strategies.
- 2. Target growing businesses and think locally
- Tailor communications and support around different types of small businesses according to their growth aspirations rather than the number of staff they employ.
- Create a dedicated area for small business on the National Apprenticeship Service (NAS) website containing practical, step-by-step guidance on recruiting, managing and developing apprentices.
- Introduce an Apprenticeship Investment Calculator to help small businesses work out the cost of training an apprentice, to plan how it will be paid and assess the return on their investment. This should be made available on the Digital Apprenticeship Service (DAS).
- Introduce a specialist Small Business Apprenticeship Helpline to engage with the small business market and help support them transition to the new apprenticeship funding arrangements.
- 3. Widen access to apprenticeships for small businesses and individuals alike
- The move to require small businesses to contribute towards the cost of training their apprentice will result in a reduction in apprenticeships offered. To limit this, we call on the Government to provide a more generous small employer incentive to ensure that extra support is targeted towards the smallest firms that can least afford the extra upfront costs of taking on an apprentice. The payment schedule for the small employer incentive should also be changed, so that payments are received from day one and on a monthly basis, as opposed to 90 days after the apprentice starts.
- Government should prioritise the development of digital infrastructure to allow levy-paying supply chain leaders to spend their digital apprenticeship vouchers on training for apprentices in small businesses in their network.
- With support from FSB, Government should convene and coordinate a group of 100 small businesses (‘FSB100’) to critique and contribute to apprenticeship policy, including Trailblazers, in order to ensure that their interests and requirements are reflected in the new standards.
- The Institute for Apprenticeships should ensure that individuals from small businesses participate in the proposed panels of professionals, convened to advise on the new standards in each of the 15 technical routes outlined in the Post-16 Skills Plan.
- Government should prioritise the publication of its Careers Strategy to improve awareness of apprenticeships among young people, teachers and parents.
- The Careers & Enterprise Company should ensure that its network of Enterprise Advisors has the right guidance to engage small businesses in educating young people about apprenticeships.
- Local authorities and combined authorities should plan bus routes which follow journey to work patterns and are integrated with other services. The Government’s Total Transport pilot should be evaluated and, if found to be successful, expanded to help create a denser transport network in rural communities.