27th March 2017

The imminent levy on large organisations to fund three million new apprenticeships is going to transform the future shape of training and development. Neil Ralph sets out what small businesses need to know to join the revolution.

April 2017 sees the introduction of a new levy on employers with a wage bill of £3 million or more: a 0.5% contribution based on this figure paid into a fund for apprenticeships.

These work-based qualifications, including undergraduate and postgraduate degree apprenticeships, present the opportunity for employees to earn whilst they learn, developing the knowledge, skills and behaviours essential to success in their job. Comprising a mix of face-to-face, digital and work-based learning, degree apprenticeships will up-skill the workforce whilst having immediate, tangible impact in the workplace.

There are just 1,000 funded degree apprenticeship places currently, but the expected levy fund of £3 billion a year is due to take this figure to around 3 million by 2020. Levy paying organisations will be able to fund the development of new and existing staff through this tax by offering apprenticeship programmes. But what’s in it for smaller employers?

Great opportunities to develop workforce skills are available to smaller employers via an innovative approach termed ‘co-investment’. Non-levy paying employers will be able to co-invest in apprenticeships, with the employer making a 10% contribution to the cost of training with the government paying the rest (90%), up to the maximum amount of government funding available for that apprenticeship. Co-investment is also an option for larger employers who wish to spend more than they have in their digital account on apprenticeship training.

Smaller employers may also receive a £1,500 apprenticeship grant if you have less than 50 employees or their apprentice is aged 16 to 24. Employers can claim grant support for up to 5 apprentices.

Some large employers may want to use their levy to support apprenticeship training of other employers. The government is allowing levy-paying employers to spend up to 10% of their levy in this way to create a more highly skilled workforce throughout the supply chain.

Further information on apprenticeship funding and how it will work is available from the Department for Education (DfE).

What is an apprenticeship?

An apprenticeship must be a genuine job with an accompanying skills development programme. The apprentice may be a new employee or an existing member of your team who would benefit from gaining a qualification to underpin their experience. Apprentices will gain the knowledge, skills and behaviours that they need for their current role and future career.

DfE lay out some simple rules governing apprenticeships:

  • the apprentice must be employed in a real job; they may be an existing employee or a new hire

  • the apprentice must work towards achieving an approved apprenticeship standard

  • the apprenticeship training must last at least 12 months

  • the apprentice must spend at least 20% of their time on off-the-job training directly relevant to the apprenticeship standard

The National Apprenticeship Service can provide all the information you need to know to employ an apprentice.

Why is it happening?

In a global market, more comparisons are being made between the UK and competitor nations in terms of the level of higher skills. Strategies for future UK economic success are underpinned by a sophisticated knowledge economy, staffed by a highly skilled, high-tech, innovative workforce. Between 2003 and 2013 the proportion of the adult population in the UK with higher level qualifications increased from 26.8% to 37.5%. In global ranking terms, this put the UK 11th among nations ranked by the OECD in 2015. Reasonable, but not good enough, particularly in a context of the sheer volume of postgraduates in areas like Science, Engineering and Business being produced by the education systems in China and India. The UK also has what’s described as a ‘long tail’ of low skilled workers, putting it below average in the EU and OECD ranking.

The issue for Government then is both about getting more young people into degree study and how people already in work and settled into careers can be motivated to attain higher level skills and capability. Employer-led and funded qualifications, which in turn bring obvious benefits for the employer, make good sense.

Degree apprenticeships have been piloted and tested for the past two years, initially in the IT and engineering sectors where the higher skills gap had been picked out as a priority. The process is wholly driven by employer needs and motivations. Where a specific skills gap is identified, a number of likeminded employers (minimum ten) come together to form a ‘trailblazer’ group to agree the standards required of an employee in a specific role. Trailblazer groups must include at least two small businesses to ensure the standards meet the needs of all employers. The trailblazers work with the Department for Education (following the changes to the remit of the former Department for Business, Innovation and Skills) to develop a ‘standard’ for the specific role in their sector, mapping the necessary knowledge, skills and behaviours. Following approval of the standard and an associated assessment plan the standard is released for employers and providers to develop the required training programme. Standards are defined at a range of levels consistent with the National Qualifications Framework. For example, in the leadership and management area, standards range from level 3 (team leader/supervisor) through level 6 (Chartered Manager Degree Apprenticeship) up to level 7 Postgraduate degree in strategic leadership), providing a clear structure for development up to the highest levels. Employers are free to appoint their preferred institution or training provider as a partner in delivering the apprenticeship.

While the pilots and the creation of hundreds of standards for specific job roles have demonstrated employer interest, it’s the levy and funding that is going to make degree apprenticeships a must-have.

Design your own degree

The main benefit from the model is the level of employer control; the ability to leverage higher-level study directly related to an employee’s day job. This isn’t days out for training, ticking the box and then back to the usual routine, but a way of ensuring learning is applied immediately for maximum impact in the organisation.

Getting involved with creating standards means employers can ensure the focus and content are relevant for their organisation and its current and future challenges – it’s also a good opportunity for networking and collaboration across sectors. The same intellectual knowledge base for a degree is there but constantly linked to daily realities and getting the best results. The academic foundation is supplemented by work-based activities and projects. This close partnership between employer and provider ensures that opportunities are created to apply learning, develop understanding and share good practice. By harnessing the power of digital and work-based learning our programmes will enable employees to develop the knowledge, skills and behaviours that are key to their role whilst maximising the time spent applying their learning in the workplace.

The role of an experienced institution like Lancaster University Management School (LUMS) is to contribute to trailblazer groups in the development of standards, giving advice and helping to shape standards to a stage where they are ready to be delivered. They can play a useful part in bringing together employers within and between sectors, and rallying the involvement of professional bodies to provide links with accreditation.

2017 will see the launch of LUMS’ first postgraduate degree apprenticeships in strategic leadership. The flexibility of the programme will allow people from different sectors to come together to share learning and experiences for the core elements, and then follow a pathway tailored to their sector and job, with routes planned so far for health, manufacturing, public sector and SME’s where there are real benefits for staff facing similar challenges to work more closely together. Routes onto the school’s highly ranked executive MBA are also being developed.

Degree apprenticeships in accounting & finance at undergraduate and postgraduate levels are being developed in partnership with Fitch Learning providing opportunity to gain professional accreditation whilst completing an apprenticeship.

A degree apprenticeship is being prepared for Accounting and Finance based on discussions with key employers in the sector to deliver level 6 (undergraduate) and level 7 (postgraduate) qualification which will include professional exams – meaning students qualify as a professional accountant at the same time as doing the postgraduate qualification.

What to do now?

  1. Start thinking now about the impact of the levy from April 2017. Assess the potential benefits of co-investing in the workforce, particularly degree apprenticeships for existing employees who will benefit from the opportunity to study towards a higher qualification to underpin their experience.

  2. Look at skills gaps in the organisation and the specific roles where higher-level capability will make a difference to organisational performance. Get to know what is available from training providers and how they can help with new starters, mid-career improvers up to senior executives, helping them realise their own potential and their business impact.

  3. Explore the list of existing standards to see what’s already established and relevant.

  4. Become part of a trailblazer group to see how you can influence and shape standards to best suit your organisation.

  5. Talk to us about your current learning and development needs and how we can help your organisation benefit.


  • An apprenticeship levy comes in from April 2017 for employers with a wage bill of £3 million or more (a 0.5% contribution) to fund a planned three million apprenticeships in the UK by 2020.

  • The levy provides the opportunity for small businesses who don’t pay the levy to co-invest with the government in developing new and existing employees through apprenticeships.

  • Work-based degree apprenticeships develop employees with the knowledge, skills and behaviours to deliver real impact in your business.

  • The levy puts employers in the driving seat in defining apprenticeship standards and shaping degree programmes that will deliver the skills they need.

  • Now’s the time to start assessing the impact and opportunity of the degree apprenticeship levy for your organisation, and LUMS can help you work through and plan to meet your development needs.

Neil Ralph is a Senior Teaching Fellow in the Department of Organisation, Work and Technology, and is the academic lead for degree apprenticeships at Lancaster University Management School (LUMS). Email: neil.ralph@lancaster.ac.uk