April 26th 2017

Co-Investment – busting some myths

In a few days the first apprentices funded through the Apprenticeship Levy will start their programmes. This is a very positive and significant point in time for the Apprenticeship sector as we now have a sustainable long term funding system. So it feels like this part of the market is stable – at least for now anyway until the tinkering starts with co-funding for those spending in excess of their levy and when some of the employer providers convert their levy from a cost centre to a profit centre.

But the non levy system remains less than stable. Let’s ignore the allocations made yesterday for today’s discussion – a bit of transparency would have been good but as I have said again the ESFA just don’t have enough people in my view to do the job properly – they are doing their best, but it’s just not good enough for a Government top 10 agenda item – let’s see if Apprenticeships continues to hit the mark in a few weeks time when the Manifesto’s appear.

There is lots of noise and confusion about part of the non levy system; that is the 10% co-investment that most employers have to make. We all need to embrace this part of the system because it signals real employer commitment to the programme and to their Apprentices. We’ve seen a lot of articles in the press about the difficulties that the 10% contribution will bring but in my view there are many myths as well and people complicating the rules.

For me, it’s about focus, and no different to those of us delivering standards in the past 18 months. We were hopeless in the early months collecting the 1/3 contribution from the employer – resulting in a massive reduction in our monthly claims from the SFA and our cash flow. We quickly realized we needed to get serious about this and appointed a credit controller, online payment and credit card facilities and surprise, surprise we have been collecting over £200,000 a month every month – large employers I hear you cry – actually not, most of these are small owner managed employers operating in local towns or cities but when it’s explained to them see the value and are ‘happy’ to make their payments.

So 10% is a welcome relief to us – typically £500 per Apprentice, it’s not that much to ask.

In the ‘old’ system there was always an expectation that employers would make a contribution. The funding was only 50% of the agreed ‘rate’ and although no-one expected the employer to pay the other 50% many providers did get significant contributions from their employers. Most of those providers will tell you that these employers were the most committed and created the best apprenticeships so getting a contribution from an employer is good and 10% looks pretty good value if the government is putting in 90%. Clearly there will be some employers that will not want to make that contribution however small but are they the sort of employers we need to be working with?

I also hear that the 10% co-investment will hurt particular sectors but again if there is a general objection in a sector to paying just 10% of the training costs then maybe those sectors need a different solution to filling those skills gaps.
We need real employer commitment and this is one way of signaling that commitment. For very small employers with less than 50 employees recruiting 16 – 18 year olds, there will not be an any requirement for co-investment which keeps that incentive to take younger recruits and with the additional £1,000 to the employer and provider (although not enough !) it does help. That’s is where we should be focusing any funding support.

I have also read articles that the co-investment will be difficult. If we embrace and focus on the issue then I believe employers will be prepared to pay and we can minimize any issue around collection.

Many employers will want to avoid multiple invoices and the rules allow some flexibility about when and how it is collected. Some employers will pay their 10% up front to signal their commitment. Either way the ESFA has given providers more flexibility.

For those sub-contracting, who should collect the 10% – for me, does it really matter as long as it is actually collected. The ESFA are concerned with the cash collection and ultimately as a PRIME I have responsibility to prove it is being collected. So, if I put the responsibility onto my sub-contractor, they need to agree to that, collect the money, demonstrate to me it is collected and then I can claim the appropriate funding through my monthly returns. Is that really that difficult a position to be in ? Surely it is a simple audit process that as a PRIME I would be doing anyway ? But this doesn’t mean I simply take an additional 10% off the sub contractor until they can demonstrate the cash has been collected. The whole purpose of this is to show commitment from the employer of the Apprentice.

Clearly, this is something that has to be managed but managed in the right way it can emphasise the partnership approach to delivery between a provider and employer and can drive the employer ownership for those employers that understand the value that getting 90% of the cost of delivery from the government.

Peter Marples

Peter Marples is Joint Owner of 3aaa Apprenticeships, the only independent training provider to achieve Ofsted Grade 1 Outstanding in all areas on first inspection.