Employers and HR bodies have called for urgent reform of the Apprenticeship Levy. Some critics say the current system is inflexible and inaccessible, while others complain it benefits people that are already in management positions.

Tesco’s Chief Executive Ken Murphy has been particularly scathing of the scheme, which affects all large employers - including umbrella companies. 

He thinks that thousands of staff are missing out on training because of restrictions on the scheme. He said that Britain’s biggest supermarket now offers fewer apprenticeships than it did before the levy.

The Chartered Institute of Personnel and Development, meanwhile, said the Apprenticeship Levy benefited existing managers at the expense of younger people who are most in need of on-the-job training.

Since the Apprenticeship Levy was introduced, the number of people participating in just four popular management apprenticeship courses has grown tenfold.

In the same period, overall apprenticeship starts fell by more than a third, with the biggest decline amongst school leavers.

The Apprenticeship Levy was introduced in April 2017 and requires large organisations with a wage bill in excess of £3 million to set aside 0.5% of their payroll for apprenticeships. 

Under the current system, firms can only use funds on specific types of training, such as on courses that are longer than one year.

This means that some employers can’t use the full amount that they pay into the scheme. If Apprenticeship Levy funds aren’t used up they are returned to the Treasury after two years.

A study from the Co-op found that £600 million was handed back to the Treasury in the last year - money which they say could fund up to 60,000 apprentices.

Tesco boss Ken Murphy said that his company has only been able to use 14% of the £100 million it has paid into the scheme since 2017.

He said the government “needs to fix this levy and prioritise entry-level apprenticeships”

Miles Grady, Director of Umbrella.co.uk said: “The Apprenticeship Levy isn’t working for many employers and employees. Flexible employees that work through umbrella companies have to pay for the levy, but they can’t usually benefit from apprenticeship training.”

For more information about Umbrella’s employment services for independent workers, please speak to a member of the team. Call: 01625 544 460.