The Apprenticeship Levy Study: Financial Services

Transcription

1 1 The Apprenticeship Levy Study: Financial Services February 2017 Research conducted by trendence UK

2 2 3 Contents Introduction Introduction 3 Report context and overview 4 Employer profile 6 How will the financial services sector use the levy? 8 Case study: Santander 10 Will graduate recruitment decrease? 12 Is there any sign of a shift to high-level apprenticeships? 14 Who will have responsibility for apprenticeships? 16 On what terms will apprentices be employed? 20 Is the apprenticeship brand a problem? 22 Financial services firms were among the early adopters when the government began to promote apprenticeships in earnest a few years ago. Now, with the arrival of the levy, they are once again planning strategically, thinking imaginatively and moving fast. As our survey makes clear, employers in the sector are facing some of the biggest annual apprenticeship levies. Almost all intend to use it rather than lose it, almost all will spend it on training existing staff as well as recruiting new talent and almost all are are looking at implementing a streamlined, structured approach. Two other things stand out: employers in financial services will pay their apprentices above market rates; and they are developing high-level apprenticeships with excellent career progression. In other words, and contrary to recent suggestions in the media, they do not see apprenticeships as a cheap, low-skilled alternative to their current talent pool. Of course there will be challenges the levy is new and there will be teething problems as complex programmes bed down internally. But the levy gives business the opportunity to shape, guide and retain a talented workforce on an unprecedented scale. BPP has the experience to help financial services firms do just that. We have been working with our clients to train students in every aspect of banking and insurance for over 40 years. As this survey makes clear, prompted by the levy employers are beginning to rethink fundamentally the way they recruit and develop talent. For those firms prepared to grasp the opportunity apprenticeships have the potential to transform their talent pipeline in ways unforeseen only a year or two ago. Emma O Dell Head of Financial Services, Apprenticeships and Strategic Partnerships

3 4 5 Report context and overview Earlier this month we published a survey of 100 top employers and asked them how they aimed to deal with the Apprenticeship Levy. Were they going to use the levy or lose it, for instance, how did they think it would affect their talent pipeline, what were their recruitment strategies? Their responses were illuminating. Since then, we have been asked by recruiters to provide a breakdown of company responses by sector. This survey is an analysis of the financial services sector s approach to the levy. It does not claim to be a weighted survey of the entire financial services industry. But it is a snapshot of how some of the biggest companies are tackling the opportunities and challenges prompted by its introduction. The findings highlight how financial services firms, which for the purposes of our survey include banking, asset management, investment banking and insurance as well as financial services, plan to handle the levy and implement apprenticeships. It also contrasts how the sector s response varies in some respects from employers elsewhere, particularly in professional services. For instance: Two-fifths of financial services employers aim to recoup most of their levy spend within four years compared to nine in ten in professional services One in five plan to appoint a lead external provider with the ability to manage subcontractors, a far larger proportion than any other sector Three-fifths of employers plan to pay apprentices the going rate for the job and none will pay them the minimum wage Diversity and social mobility are important objectives for many employers Half will place apprentices into direct vacancies and well over two-fifths will fund them from the business and add them to the local team headcount from the start Over half aim to embrace the brand and convince target audiences of the merits of apprenticeships Employers will of course adapt their strategies and implementation once the levy matures and the full implications for their businesses become clearer. However, we hope that these findings will provide an insight into what the sector is thinking now, how it hopes to overcome any challenges and how it plans to maximise any opportunities. Methodology Levy Key Facts Research: conducted jointly by trendence UK and BPP The levy starts on 6 April 2017 Employers with a wage bill greater than 3 million pay 0.5% of the total amount towards the levy Sample: 100 top employers (from the Guardian UK 300) They have 24 months in which to reclaim it on approved apprenticeships Sectors: 12 Method: online questionnaire Apprenticeships must last for at least 12 months Period: December 2016 to January 2017 All apprentices must receive 20% off the job training Authors: David Palmer and Andreea Galin (trendence UK) and Emma O Dell (BPP) The training must be new and relevant to the job

4 6 7 Employer profile The vast majority of financial services employers (86%) are looking at an annual levy of over 1 million, with almost two-fifths (38%) paying over 5 million and a minority (14%) expecting to pay more than 8 million. Financial services employers will on average pay a significantly higher levy than businesses in other sectors. In our general survey, only twothirds of employers (64%) reported that they would pay an annual levy of over 1 million. Almost all employers (95%) are planning to use the levy. However, when asked personally if they were in favour of the levy, more than two-fifths (4%) of recruiters said they were and a third said they were not (33%). Both percentages were marginally higher than in our general survey, where 43% of recruiters were in favour and 29% were against. Across all sectors, support for the levy is strongest among professional services recruiters, of whom 69% are in favour with only 23% against. Analysis: As financial services employers are on average facing substantial annual levies it isn t surprising that almost all intend to use them. Equally, the substantial sums involved may have concentrated minds among recruiters over whether the levy is a good or bad idea, with a relatively small proportion in financial services expressing no view on the subject. Not all employers paying the levy plan to reclaim the tax through the deployment of apprenticeships. Will you use at least some of it or lose it? Lose it 5% Use it 95% Approximately how much will the Apprenticeship Levy cost your company? 8million+ 14% 5-8million 24% 3-5million 5% 1-3million 43% 500k- 1 million 14% 250k- 500k 0% Less than 250k 0%

5 8 9 How will employers use the levy? Diversity initiative CSR initiative - support local communities/supply chain partners to develop talent Reasons to capitalise on the levy? 38% 38% Professionalising and training existing workforce 81% Maximising L&D spend 67% Support workforce planning 57% Most recruiters in financial services see the levy as an opportunity to earmark funds to train existing staff as well as to bring in new talent. Four-fifths (81%) will use it to train existing staff and an even higher proportion (86%) will use it to hire and develop more talent. These percentages are higher than those in the general survey, which were 75% and 74% respectively. Most employers in financial services are planning to implement apprenticeship programmes more gradually than other sectors. Two-fifths aim to recoup most of the levy within four years compared to three-fifths (60%) of all employers. Only a quarter (25%) think they will manage to use it fully in the allotted 24 months compared to a third of all employers (32%). Talent development initiative Lateral recruitment initiative Social mobility initiative Government youth unemployment initiative 38% 38% 43% 86% Diversity and inclusion are key objectives for many employers in financial services, with 38% citing diversity, CSR, and government initiatives, and 43% social mobility programmes as reasons to capitalise on the levy. They are more important considerations in financial services than other sectors, with the exception of law. Two-fifths of financial services employers (39%) plan to adopt a UK-wide approach to the apprenticeship levy, with a large minority (28%) deploying them in England only. Just over one in ten (11%) will deploy specific programmes in the devolved nations and the same number (11%) has yet to settle on a strategy. Over half of all employers in financial services are targeting the under 25s, with 53% aiming for year olds and 58% year olds. Both proportions are slightly above the all-sector averages. Analysis: Most employers in financial services will spend large sums on existing staff as well as recruiting new talent, which given the size of their levy pots isn t surprising. Perhaps more surprising is that most are planning a slower roll out of levy programmes than other sectors. Only 42% of financial services employers plan to spend most of the levy within four years compared to 88% of professional services firms, for instance. 11% Devolved nations approach 28% Deploy programmes in England only Deploy programmes in the devolved nations Year-on-year predicted Levy usage 75%-100% 42% 11% 11% Deploy programmes nationwide regardless of the Apprenticeship Levy No presence in the devolved nations 32% Not sure 25% 39% 15% Year 1 Year 2 Year 3 Year 4

6 10 11 Case study: Santander Iain Gallagher, Head of Emerging Talent, and Fiona Hay, Emerging Talent Manager, explain what Santander is looking for in its apprenticeship programmes. What are your main business objectives when it comes to the levy and apprenticeships? Firstly, to raise our skill set to meet the organisation s needs in the future, secondly, to tap into new talent streams and use the levy to develop that talent, and finally, to attract a more diverse workforce. Our customer base is changing and embracing technology rapidly, so we need to be on the front foot. We re also aware that our peers are thinking along the same lines, so we re keen to ensure we have programmes that attract the best candidates. Has your talent management changed as a result of the levy? The new apprenticeship model has been an opportunity for us to review our talent management strategy to ensure that we are providing the best opportunities to people and that we are sourcing the bank s need in the best possible way. A prime example is the technology and operations part of the business, where we have increased the number of apprenticeships we are recruiting. We are going further and growing our digital Degree Apprenticeships so that people are provided with the adequate digital skills. Are you recruiting people regardless of age? We re keen on using apprenticeships to help people who want to change careers. Certainly, we see apprenticeships as being open to anyone of any age. A bigger issue is geography. It is straightforward if you live in England, less so in Scotland, Northern Ireland or Wales. We are a UK-wide organisation and we want to ensure that the apprenticeship programmes are simple, personal and fair, which can be challenging with four different apprenticeship frameworks How many apprenticeship roles do you anticipate filling in 2017/18? We are still working on our numbers however we will be offering apprenticeships at various levels. Level 3 apprenticeships in the branch network are primarily aimed at new joiners and recent recruits, while we have level 2s are in our contact centre. There are the Degree Apprenticeships in technology and new level 5 apprenticeships in HR this year. We re also looking at apprenticeship programmes in finance and level 3 management programmes for new line managers. How have you managed the requirement to give apprentices sufficient time to study? The apprentices who are completing a Digital Technology Solutions degree apprenticeship work Monday to Thursday having their Fridays free to study, and it s working really well. It s more challenging at the branch and retail level where the business is very lean and every minute counts. So we use one-to-ones, coaching sessions, monthly webinars, and regular feedback meetings to ensure they meet the 20 per cent requirement away from the job. But honestly, many of our trainees learn on the job. Knowing how to engage with customers is one of the most important skills at Santander and you learn this by being in touch directly with the customers, not in a classroom. What role has BPP played? They have been very proactive putting together our Degree Apprenticeships and very flexible setting up webinars, arranging the completion of relevant the paperwork and helping us understand who is and isn t eligible to be an apprentice. They have also worked with us to develop study programmes that can engage students of different ages with different levels of prior academic studies. Their online platform has also been key as it allows apprentices to access learning wherever they are in the UK. What advice would you give to organisations still working on their apprenticeship plans? Make sure you get buy-in at the very top and that it filters down across the organisation, because you will encounter barriers as plans are implemented. You also need to be open and honest with your training provider about your company s culture and what you want to achieve, particularly if you want a bespoke programme tailored to your organisation s needs.

7 12 13 Will graduate recruitment decrease? Are you planning to reduce the number of graduates you recruit? Not sure 14% Yes, drastically 14% No 43% Over two-fifths of financial services employers (43%) say they are planning to reduce the number of graduates as a result of apprenticeships. Although most (29%) are contemplating only a slight reduction, a few (14%) are planning drastic reductions. The same proportion (43%) is ruling out any change, and 14% are unsure of their strategy. Slightly more than two-fifths (41%) say they will convert graduate into apprenticeship programmes, with over a third (35%) doing the same for sponsored degrees. A significant minority (29%) say they will also convert management and leadership programmes to apprenticeships. Analysis: A handful of financial services employers are planning to cut graduate recruitment drastically. They were the only ones in any sector to say so. Employers in other sectors plan slight cuts, but none envisage severe reductions. Two-fifths of financial services firms do plan to convert graduate programmes into graduate-level apprenticeships but that compares to over half of all employers (53%) and an overwhelming 88% of professional services employers. Yes, slightly 29% Will you convert any of your current talent programmes to apprenticeships? Graduate programme 41% School leaver programme 41% Sponsored degree programme Management and Leadership programme No 29% 35% 35% Work experience programme 12%

8 14 15 Apprenticeship type Is there any sign of a shift to high-level apprenticeships? Advanced (level 4 apprenticeships) 89% Higher (level 5/6/7 non Degree Apprenticeships) Intermediate (level 3 apprenticeships) Degree Apprenticeships Foundation (level 2 apprenticeships) Traineeships (feeder programme to foundation apprenticeships) 16% 16% 58% 58% 74% Almost three-fifths of financial services employers (58%) are planning to offer Degree Apprenticeships and the same proportion (58%) is considering higher level 5, 6 and 7 apprenticeships that do not involve a degree. But these percentages are lower than the average across all sectors, where the proportions were 65% and 78% respectively. Employers in financial services, however, are also planning to offer far fewer foundation level 2 apprenticeships: 16% of them plan to do so compared to an all-sector average of 37%. Level 4 apprenticeships are the most popular with 89% of financial services employers planning to offer them. Financial services firms are planning to offer apprenticeships across a broad range of disciplines and in greater proportions than other sectors. The most popular (with all-sector averages in brackets) are financial services 95% (41%), technology 74% (54%), management and business 68% (61%), accounting 68% (57%), HR 58% (43%), and legal 26% (23%). Two-fifths of financial services employers (41%) will cap the number of programmes they offer between 4 and 6. Less than a fifth (18%) will offer between 7 and 9 programmes and the same proportion (18%) will provide three or fewer. Analysis: Although currently financial services firms plan to offer fewer level 5 and higher apprenticeships than other employers, they are also providing proportionately fewer foundation level ones, too. The focus for much of the sector appears to be the 18-yearold school-leaver market, with a level 4 providing an entry point for A-level recruits and a stepping stone for more advanced apprenticeships. Disciplines Management and Business 68% Accounting and Tax 68% Digital and Technology 74% HR 58% Financial Services 95% Legal 26% Actuarial 21% Engineering 0% Do you intend to cap the number of programmes you offer? Not sure 18% 10+ programmes 6% 7-9 programmes 18% 4-6 programmes 41% 1-3 programmes 18%

9 16 17 Who will be responsible for training your new apprentices? Who will have responsibility for apprenticeships? A training provider who can deliver all of your apprenticeship needs 28% Multiple specialist training providers 39% Appoint a lead provider with the ability to manage subcontractors Enlist the support of your organisational wide Managed Service Provider 0% Become an employer training provider yourself 6% 22% Very few financial services employers (6%) are planning to train apprentices internally. The majority will rely on multiple (39%) or single (28%) external providers. Over a fifth (22%), a far larger proportion than in any other sector, will appoint a lead provider with the ability to manage subcontractors. Of those who will opt for external training providers, the most important considerations are a broad range of apprenticeships (93%), national coverage (80%), a bespoke offering (80%), endto-end consultation (80%), industry experience (73%), and complementary offerings (73%). Two-fifths (42%) say their apprenticeship programme is driven at top executive level, which is a higher proportion than the all-sector average (35%). While early careers are seen as more important drivers in financial services than elsewhere (63% compared to 42%) L&D is less so (37% compared to 51%). Nearly half (47%) will manage apprentice recruitment in house, though a quarter (26%) plan to rely on a mixture of outsourcing and inhouse strategies. Over a fifth of financial services employers (21%) plan to source a training provider who has a recruitment offering, a far higher proportion than in most other sectors. Two-fifths of financial services employers (42%) say early careers will manage their apprenticeship programmes, a higher percentage than the all-sector average (30%). A third nominate L&D (32%) and a quarter each (26%) say talent and apprenticeship specific teams. Only a few financial services employers (13%) say that finance will manage the Digital Apprenticeship Service account rather than HR (56%). This is less than half the all-sector average: 27% of all employers said finance would manage the DAS. Analysis: The large proportions of employers saying their apprenticeship programmes are driven at executive level and by early careers suggest that strategies are being decided at group level rather than diffused throughout the business. Their preference for lead and single external providers who can manage a large volume of programmes nationally also indicates that financial services firms tend to favour a streamlined approach to implementation. Graduate /Early Career 42% Apprenticeship specific team Overcoming levy challenges Driven conversations via the Talent function 42% Driven conversations via the Resourcing function 42% Driven conversations via the L&D function 37% Driven conversations via the Graduate/ Early Career function Responsibility for managing apprentices The business HR 11% Talent 26% L&D 32% Driven conversations via the HR function 53% 21% 26% 63% Created a levy project team with representatives from around the business 47% Created/or referred to an Executive Steering Committee 42%

10 18 19 Who internally will be responsible for managing your online Digital Apprenticeship Service (DAS) account and resulting levy cash flow? Services provided by a training providers Other 0% Business 31% End to end consultation 80% Broad range of apprenticeship Standards 93% HR function 56% Complementary offerings (e.g. PQ/Degrees) 73% Finance function 13% National coverage (including devolved nations) Ability to bespoke 80% 80% Variety of delivery modes 0% Industry experience 73% Strong client portfolio 40%

11 20 21 How are you planning to compensate apprentices? On what terms will apprentices be employed? Bonus at the end of the programme only 5% National minimum wage 0% Annual performance based bonus Salary increase at end of programme only Annual salary increase whilst on programme Salary reflective of business line they are... 26% 26% 16% 21% Salary reflective of level of programme 37% Location specific salary 11% No financial services employers will pay apprentices the minimum wage. Three-fifths (58%) plan to pay them the going rate for the job, 11% will pay them the higher living wage and a quarter will also pay them annual bonuses (26%). Almost half of apprentices will be employed on bespoke contracts (47%) with just over twofifths (42%) on fixed-term contracts for the duration of the programme. A quarter (26%) will be on permanent contracts and a third (32%) will retain their contracts (where existing staff become apprentices). Half of employers (50%) will place apprentices into direct vacancies and well over two-fifths (44%) will fund them from the business and add them to the local team headcount from the start. The vast proportion of financial services employers (89%) will recruit apprentices through graduate or school-leaver assessments, three-fifths (61%) plan to use bespoke processes and a third (33%) lateral hires. Analysis: Fixed-term contracts will arguably give employers more flexibility but they won t help with retention. However, the fact that financial services employers aim to pay wages that reflect the role and are assigning headcount locally at the start rather than creating positions on completion suggests there will be genuine jobs at the end of the process. National salary Going rate for the role they are carrying out Living wage 0% Funded by the business/local team headcount from the start Centrally funded headcount whilst on programme and permanently placed /apply for formal roles at the end of the scheme Amix of existing or new FTE Created new roles (additional FTE) 11% Will your apprentices be... 0% 6% 58% 38% 44% Placed into direct vacancies (additional FTE) 50% What type of contract will your apprentices be offered? Bespoke apprenticeship contract 47% Contract for the role 11% How will you recruit/select apprentices? Permanent contract 26% Bespoke apprenticeships assessment process 61% Fixed term for the duration of the programme 42% Early Career (Graduate or School Leaver assessment process) 89% Retain existing contract (where existing staff become apprentices) 32% Lateral hire assessment process 33%

12 22 23 Is the apprenticeship brand a problem? Do you think that the apprenticeship brand will affect your employee value proposition when using it for graduates and internal staff? No 32% Yes 68% SFA guidelines. Providing 20% off the job training. Do you see this as a challenge at your organisation? Not sure 47% Yes 53% Over two-thirds of financial services employers (68%) say it will affect their employee proposition with slightly less than a third (32%) saying it won t. Half of respondents (53%) say the requirement to provide apprentices with 20% off-the-job training is a challenge to their business, a slightly higher percentage than the all-sector average (46%). No 0% Despite that, over half (54%) aim to embrace the brand and convince target audiences of the merits of apprenticeships compared to slightly over a third (36%) of all-sector employers. Less than one in ten (8%) financial services employers will avoid the term compared to almost a fifth (18%) of all-sector and half of professional services employers (50%). Almost two-fifths (38%) of employers will rename programmes internally, which is near the all-sector average (40%). However, all respondents (100%) say that gaining management buy-in would mitigate that challenge and almost as many (95%) say the prospect of improved retention and reduced attrition would be a significant ROI. Analysis: Although financial services employers are aware of some issues around the apprenticeship brand they are clearly confident that they can change perceptions for an external audience. However, like employers in other sectors they want to avoid confusion for existing staff by being more judicious about what programmes they brand as apprenticeships. Openly use the term in attraction educating audience on the differences and positives of apprenticeships Avoid using the term in attraction campaigns 8% Overcoming the apprenticeship brand Rename programme internally 38% 54% What parameters will you put in place to help mitigate these challenges and enable apprentices the required time to study? Gaining management by in that off the job learning will be given 100% Building in relevant internal training that is linked to the standard 70% Staggering study time so not all apprentices are off the job at the same time 60% Increasing contract hours to factor in off the job learning 0%

13 BPP Professional Education is one of Europe s leading specialist providers of professional education and delivers a range of industry-leading professional qualifications, professional apprenticeships, professional development programmes and learning media. We enjoy a trusted advisor status for many of our clients and institutes and offer professionals opportunities to progress through a variety of qualifications in actuarial, accountancy and tax, banking and finance, business, management and leadership, HR and technology. If you have been tasked with considering your businesses strategy for apprenticeships, or advice is needed on the operationalisation of your programmes across the full apprenticeship lifecycle, then we can help. We can support you by reviewing your whole business talent strategy (graduates, apprentices and internal talent/development schemes) with a view to designing new, interconnected propositions. Contact us on: corporate@bpp.com employers.bpp.com For more information about apprenticeships, follow us on or like us on Facebook: For more information about trendence UK Research, contact: David Palmer, UK Research Manager trendence UK David.Palmer@trendence.com Call: +44 (0) Web: BPP University Limited 2017 BPP Professional Education Limited