The Future of Apprenticeships

Transcription

1 The Future of Apprenticeships A submission from the Association of Colleges: April 2014

2 The Future of Apprenticeships in England: Funding Reform Technical Consultation Funding principles Question 1: Whilst the principles of the new funding system are now firm, please detail any issues relating to their implementation that you believe need to be taken into account and, if so, how? The principles are: Employer is the (pre-eminent) customer Co-investment (to raise quality) No pre-set price for delivery and for assessment Proportion of government funding linked to achievement Recognition of additional costs of smaller business Recognition of additional costs of working with younger apprentices Generally AoC believe that reforms guided by these principles could lead to a rise in the quality and alignment of apprenticeships to the needs of employers and the establishment of employers as the preeminent customer. We do, however, continue to have serious reservations as to how Government intends to implement these changes. We feel that the changes need to be carefully modelled and trialled to determine whether they will indeed support the intent. We recognise that the mechanisms offered are theoretically simple, but we have significant concerns that the approach to be adopted will not be fair and will provide an advantage to larger employers who are already involved in apprenticeships against smaller businesses and those new to the scheme 1. We also believe that the approach is likely to result in a move away from supporting younger apprentices and back to a growth in the number of apprentices aged over Large, direct contract employers have a 25% deduction taken from their current funding, the new system removes this and replaces it with a one off payment per learner for businesses with 50 or fewer employees. 2 The new funding system does not differentiate on age, so the only incentive to take a 16 or 17yr old will be a one off payment. In the current system 19+ apprentices are publically funded at 50% or less of the 16 to 18 year old rate.

3 Whilst we support the idea of the employer as the pre-eminent customer we remain unconvinced that this needs to be demonstrated by routing funding via employers, but accept and support the idea of a genuine, open and independently evaluated pilot of the option(s) to assess the impact on the apprenticeship offer in general, including any unintended consequences. In the interest of ensuring the employer is the pre-eminent customer, we would welcome the option being available for employers to remain with the existing funding system, with more transparency on costs and funding levels. Co-investment should, in theory, drive up standards and employers desire to ensure that the scheme matches their needs, but there are three major concerns we would highlight: This approach is being introduced where there is already a wellestablished custom and practice of not collecting financial contributions from employers, so the notion may well be seen in a negative light by employers despite the intention. The introduction of what might be interpreted as a compulsory payment may well prove to be a bar to new employers considering entering the market, so they will never get to the point of wishing to influence the training. Such payments may well create an over steer with the apprenticeship matching individual employer needs more closely rather than the more general requirements of employers in that sector, thus reducing the transferability of the training and its usefulness to an individual. With no pre-set pricing for apprenticeships we have a number of concerns around the types of unintended behaviours this might encourage amongst both providers and employers. It is difficult to predict precisely how price negotiations will work in practice, but BIS research 3 strongly points to employers being uninformed buyers who have no feel for the value or cost of training. The same research also suggests that apprenticeships will be price sensitive. If this proves to be the case there is a real risk that quality provision will be undercut by the cheapest offer. Even if such behaviour is short lived, it will impact adversely on apprentices and on some high quality providers who may well choose not to remain involved. 3 BIS Research paper No 161, Employer Routed Funding, Employer Responses to Funding Reform, March 2014

4 If price is to be negotiated on an employer by employer basis this will add significantly to the relative cost of working with smaller employers as the time required to negotiate delivery and other costs will not vary significantly whether there is one apprentice or 100. The number of transactions will also increase dramatically in comparison to the current system, with colleges having to invoice (potentially on a monthly basis) all the employers with whom they contract. In the current system, smaller businesses tend to rely heavily on colleges to guide them through a number of activities that need to be resolved before an apprentice can start such as health and safety checks, apprentice selection and employer supervisor induction. None of these will be covered by the government contribution, so presumably they will either not happen (thus creating another risk to quality), or the business will need to pay for these services out of the one off government payment (which only applies to employers with a workforce of less than 50 employees). As we have no indication as to how much this will be, it is not possible to comment on whether it will be sufficient to cover these costs and also provide for any other costs that the smaller employer may need to meet prior to and during apprenticeship delivery. This is another area that could result in increased costs falling on smaller businesses. The current system discounts (i.e. reduces) funding given to larger employers in recognition of the economies of scale that they can realise in the delivery of apprenticeships, this discount is being removed and instead smaller businesses (50 employees or less) will receive a one off payment it seems likely that these two changes will result in a larger proportion of government funding ending up with larger employers (not necessarily associated with an increase in apprenticeship volumes), whilst reducing the amount available for smaller businesses. AoC has no objection to a portion of Government funding being linked to achievement. This appears a sensible approach and is seen in the existing system. We would be interested to know if there will be any insistence that a proportion of this payment be passed on to provider partners, or whether this will all be retained by the employer. Such a payment may well go beyond encouraging employers to see successful completion as a desirable goal in itself, to seeing it as a financial necessity. This could well result in perverse behaviours such as selecting apprentices

5 who will not find the training overly challenging or seeking to influence the independent assessment. We have touched upon some of the additional costs for smaller businesses above. Without having an indication of the amount of the proposed one off payment, it is not possible to ascertain whether it will be sufficient to take all potential increases into account. There are many contributing factors that make delivery to smaller businesses more expensive. A lot of these relate to the lack of scale in delivery, particularly where costs are fixed and independent of the volume of apprentices, for example travel time. Smaller businesses are also less likely to have inhouse expertise or capacity to take on all the processes involved, the most notable being the recruitment of an apprentice. The Richard Review rightly proposed putting employers in the driving seat for apprenticeship development, but it is less likely that smaller businesses will be confident in this role from the start and will look to their college or other provider to aid them in creating a quality apprenticeship. A number of smaller businesses do not completely cover the content of the broader industry job role and it will normally fall to the provider to devise a delivery approach to ensure that the apprentice covers all the required elements. There is a greater degree of risk inherent in working with very small, quite new and as yet untested businesses as there is always the possibility that the business will not thrive. If this occurs, it falls to the provider to try and find an alternative placement for the apprentice. It is helpful that there is recognition that there are also additional costs in working with younger apprentices. Whilst there is additional cost, there is also additional risk and a payment may well go some way towards altering an employers perception of that risk. The risks for small businesses are proportionately larger and are unlikely to be overcome by a one off payment. We believe that whilst the cash incentive is potentially helpful, the issue is more about risk mitigation and, in some cases myth busting where employers have an inaccurate idea of the risk involved. In most cases, it is the college who advocates for the young apprentice and encourages and supports the employer to consider taking them on and who provides the support that these young, inexperienced apprentices need to help them succeed. There is no incentive in the new system for this advocacy to continue. We remain unclear as to how Government will ensure a credible mix of apprenticeships across sectors and ensure that their funding commitment

6 is not exceeded. With either funding mechanism there appears to be no discernable way to influence or manage employer demand. For example if retail employers display significant levels of demand and engineering employers do not, there will be no way of redressing this potential imbalance. If the Government s total investment is to stay at 1.5 billion per year and there is no mechanism in place to influence demand other than a first come, first served approach, it is difficult to see how unexpected trends in employer demand can be managed, and with the PAYE model, how the government contribution will be capped at the current level. In summary, there are significant differences in working with large and smaller employers that are recognised to some extent in the existing and proposed systems. We believe that the unit delivery cost to smaller businesses will be significantly higher than those to larger businesses, and that the new system will require those smaller businesses to fully pay for the additional costs and services which are necessary to the successful running of a quality apprenticeship programme. In the current system the unit delivery cost is also higher, but the provider can use their budget to spread the cost of these services across all the employers they work with without differentiating, they will not be able to do this in the new system. Whilst the proposed system is conceptually simple, the inherent perverse incentives and the need for quality and audit checks could make it at least as complicated as the current system, which is also conceptually simple. Question 2: Please comment on how, or to what extent, the new funding principles and mechanism can be applied in practice to ATAs, authorised non-employed apprentices and the Armed Forces. Apprenticeship Training Agencies (ATAs) can be an effective way to support smaller businesses to engage with apprenticeships. They can also help to address some of the concerns expressed by employers new to apprenticeships. Quality of ATAs should be determined primarily by the needs of the apprentice rather than the employer. In some instances it would be possible to identify a lead employer for each apprentice, but following the funding principles within this consultation, we would support the ATA being the employer for funding purposes. ATAs use a range of models to ensure their apprentices can fulfil the demands of their apprenticeship, and this would make any other funding route complicated. Whilst such

7 routing will require a flexible view across the funding principles, we do not believe that this will fundamentally conflict with the intent of the policy change. For ATAs, of the two mechanism options, the credit system would present fewer challenges. Payment mechanism options eligibility and registration Question 3: What sort of information would you need at the outset from a new employer website for Apprenticeship registration and funding, to give you the certainty to employ an apprentice? AoC expect employers will need information before apprenticeship registration in order to make an informed decision about whether apprenticeships are right for them. The information currently on the SME area of the apprenticeships website would be reflected in a more generic employer website. Employers would need to be able to consider the training opportunities that they can supply against the apprenticeship standard in its more detailed form. Prior to taking on an apprentice currently, colleges and other providers will undertake some testing and checking to ensure that a prospective apprentice is capable of meeting the requirements of the apprenticeship, and is eligible for funding and at what level. Any registration/funding website would also need to be able to gauge these factors. It would probably be at this stage that an employer would expect to have a good indication of the likely level of government subsidy that each apprentice would attract, either as a percentage of the overall cost, or as a cash amount. This might well be a subsidy calculator device. Question 4: When, relative to recruiting an apprentice, would you want to know how much funding you would be eligible for? When making any purchasing decision, the level of investment relative to return should be considered. There is a level of uncertainty in purchasing already for an employer taking on an apprentice, as the apprentice is, almost by definition, untested and therefore represents an unknown return. To be unclear as to the level of investment to be made at the point of decision must add to the uncertainty. For this reason we would

8 anticipate employers wishing to know the government funding contribution level prior to making a commitment. As the government contribution is calculated as a percentage of the negotiated cost of delivery, this may well result in employers undertaking negotiations with a range of providers to seek best value. On the surface, this appears sensible, but again mainly for smaller businesses, may well prove to be another barrier to market entry as this will represent a significant time commitment from organisations who tell us time is their most precious commodity. As with other commercial sales environments, providers will need to build in the costs associated with unsuccessful negotiations into their fees. Again, this raises the comparative cost to businesses taking on smaller numbers of apprentices. Question 5: How can data collection requirements be minimised in the reformed funding system? Currently apprentice information is collected and stored on the Individualised Learner Record (ILR). This information is used in a variety of ways to ensure activity undertaken by the apprentice is logged against them as well as ensuring that they are eligible for funding, etc. The ILR has been reviewed regularly to ensure that only information that is needed is collected. In short, if providers need to collect it now, then employers will need to collect it in the future. Much work has already been undertaken to reduce the amount of data collected and, perhaps more importantly, to allow data to be collected once and used multiple times. For example, basic apprentice information (name, address, etc) that is collected at, or even prior to enrolment, is automatically migrated to populate the ILR. Such systems have been developed over many years and are an integral part of the support infrastructure that every college has in place to manage the vast amounts of data they process; as such, they are complex and would not be cheap to replicate. In the same way that smaller businesses outsource payroll, it would seem a sensible option to outsource the collection of data/information relating to apprentices.

9 Question 11: Are there any other issues you would like to raise in connection with the PAYE model more generally? If so, please provide details. AoC has chosen not to respond to the detailed questions on PAYE because we are a small business which has taken on apprentices this response has been presented in our role as the representative organisation for colleges. It is our belief that the proposed PAYE system is unlikely to suit all types of employer even those with well-established apprenticeship schemes, and so a plan B funding system has to sit alongside it, which introduces a level of complexity, without a related increase in fairness. Colleges report that the employers they work with would be content for the funding system to remain as it is. If this is a genuinely employer led system, then employers should be free to adopt any one of the systems on offer, including remaining within the existing mechanism. Phase One Trailblazer employer groups are currently attempting to establish an indicative cost for their delivery. It would be helpful to pilot how this cost could be used as the basis for funding using the existing mechanism. The principle of co-investment could be easily accommodated and price could be seen to be negotiated at a collective, rather than individual, level for those employers who would prefer not to undertake such negotiation directly. Question 17: Are there any other issues you would like to raise in connection with the Apprenticeship Credit model in particular? If so, please provide details. AoC members tell us that, if pressed to make a change to current arrangements, the employers with whom they work express a general preference for the credit model. We would make the same general comments about the credit system as we have of the PAYE system (question 11). Following the lead of employers that we have consulted, AoC also favours the credit system, not least because we can envisage how this might be applied to some, but not all, employers through a pilot scheme without prohibitive expense. It can also be applied to all employers regardless of the status of their tax returns, if trials show it to be an effective way of using funding to support the principles and intent of the change.

10 Assurance Question 18: What factors need to be taken into account in the development of an approved register? It is likely that there will be more providers seeking to provide apprenticeships. Some will already be doing so, but may not already be on the Register as they do not hold contracts in excess of 100,000 (the current minimum contract value for the Register). Others may be established in response to the system change, this might be by employers who wish to develop their own delivery arm, or new market entrants seeking access for a variety of reasons. AoC would like the Register to be more robust in terms of assessing the quality of the provision and in establishing a track record in apprenticeships and training. We would anticipate that the current financial health assessment would continue. We propose that a probation period be applied to new market entrants who cannot demonstrate a track record of successful, high quality provision. We would expect the system to require providers to explain their relationships or links with any directly funded employer in order for the system to be seen as transparent. Question 19: How can burdens on employers be minimised whilst providing assurance for the funding systems and enabling good budget management? The administrative burdens, that allow the Government to demonstrate good budget management, currently sit with colleges. AoC expects smaller businesses would continue to look to colleges to provide them with these services, but with employer routed funding colleges would need to charge for such a service separate from training delivery. Quality assurance can continue to sit with colleges, but this will drive up the unit cost, particularly for smaller businesses. When funding is negotiated with each employer, this will mean that larger businesses with internal capacity to support the burden will be in a position to negotiate a lower unit cost than businesses which must look to the college to help them. If such burdens are removed, or even minimised, it is likely that the quality of provision will drop in order to keep costs as low as possible.

11 Colleges are used to dealing with these burdens as part of their core business. Such responsibility can continue, but comes at a cost and that cost will fall particularly on smaller businesses. AoC is pleased to note that funding for maths and English delivered within an apprenticeship will come directly to the identified provider. We would be happy to work with Government to develop a suitable mechanism to move funding from the overall apprenticeship government contribution fund to providers without any burden to employers (other than perhaps identifying a preferred supplier). Question 20: What support should government provide to help employers manage the relationship with their training providers to protect their investment and that of the government? When funding is routed via the employer, the college becomes another part of the employer s supply chain. Buying training is a complex purchasing decision and employers may need some help to understand it. Government may feel that there is a need to help employers understand more about what it is that they are seeking to buy and how they might develop an effective ongoing relationship with their college. This might include something on how to effectively articulate the training need in the first place, particularly the difference between perceived and actual need. The most effective training will come from well-established partnerships where college, employer and apprentice share mutual responsibility for successful delivery. Testing the funding principles with Trailblazers Question 21: What information or support needs to be provided by government and its agencies to employers so that the funding principles can be tested via the first standard-based Apprenticeships? We do not believe that it will be practical to expect the initial Phase One Trailblazers to provide a pilot that fully reflects the range of the existing apprenticeship market. It seems likely that such a trial will be dominated by employers who have been involved in the Trailblazer process directly and thus have significantly greater depth of knowledge of the requirements of the new standards and their potential value. It seems likely also that only providers who have been involved in the process so far will be in a position to deliver

12 the training that will be needed. This in turn will mean that the funding pilot is likely to be atypical of the existing market for apprenticeship frameworks. There is currently no detailed information for employers or providers on the content that would need to be delivered, nor the assessment(s) that would need to be passed, if employers/providers currently outside Phase One wish to be involved in the pilot starting in September 2014, then this information is needed now. We recognise the need to pilot the funding mechanism, but we believe it is important to recognise that a pilot based around the Phase One Trailblazer Standards will be atypical. Helping employers, providers and other stakeholders prepare for full implementation Question 22: What needs to be included in a sector readiness programme for all employers, providers and other stakeholders to support full implementation of reformed Apprenticeships? As this is an entirely new approach a sector readiness programme is needed. Government might consider supporting development activities across the current stakeholder boundaries, providing funding for a group of stakeholders (employers, colleges and awarding organisations for example) to work together to support preparation, thus encouraging partnership working. Such an approach could be themed by activity such as designing delivery content. Areas that may require specific development activity aimed at colleges might include: Key changes in apprenticeships post Richard Review. Moving away from a sub-contracted model of apprenticeship delivery. Restructuring provision to support new apprenticeship standard delivery. Negotiating delivery price. Establishing sustainable collaborative partnerships with employers. Introducing technology into apprenticeship delivery.

13 This list is not exhaustive. Transition from frameworks to standards Question 23: Please detail any particular funding issues or concerns that you believe need to be taken into account during the transition period. Whilst fully supporting the intention to continue to drive up standards in apprenticeships and to promote greater employer ownership via coinvestment, we are unconvinced that the proposed changes will realise these intentions. For this reason we would argue for effective and comprehensive modelling of the proposed changes, to be followed by careful and progressive piloting. We are keen to ensure continuity of provision for employers and apprentices during transition, which we feel is easiest achieved through some element of dual running until such time as the new approach has proven to be an improvement on the existing offer and process in the eyes of employers and apprentices. It will be significantly easier to consider this question once some of the Phase One pilot activity has taken place. We would expect all pilot and transition activity to be evaluated to check whether it is better than the existing system. Without such an evaluation this will amount to a significant amount of change and expense for very little (if any) gain over the current arrangements. The English skills system has been subject to frequent and disruptive changes over the past 50 years, resulting in a lack of understanding between the various partners involved in apprenticeship provision. The change programme presaged by the proposed revised funding system should be built to last which requires that it be adequately resourced in terms expert staff, carefully monitored for effect and delivered over a realistic timescale.