How analytics can turn the apprentice levy into an opportunity, not a tax

UK businesses have reacted largely negatively to the introduction of the living wage and the announcement in last autumn’s budget of the Apprentice Levy – both due to enter legislation during 2016. Interestingly, we think most have overlooked an opportunity to tighten up their act AND use the proceeds to invest in the future.

The levy and living wage are an opportunity, not a tax

The apprentice scheme levy (0.5% of payroll) has been widely perceived as tax on the eligible UK businesses, already looking to have to deal with the prospect of paying their workforce a ‘living wage’ within the next 2-3 years. We think it is contradictory that so many have decried the levy while simultaneously shouting about the lack of sustainable talent pools in key practical and commercially oriented skills they need.

Similarly, the ‘living wage’ is arguably designed to satisfy Maslow’s basic levels of need: ‘survival’ and ‘security’. Business leaders have an opportunity to not only deliver their ‘duty of care’ to employees, but also to directly improve staff engagement and performance. A pound spent on an employee’s basic needs could yield thousands of pounds in improved productivity.

The levy can be self-funded and cost-neutral.

Few people have responded with a defence of this potentially valuable investment in future young talent for our wider workforce. Fewer still have suggested that with a small amount of analysis and action, the actual cost of the new levy is almost certainly cost neutral to most of the folks who have been quick to voice the damage it will cause their existing workforce (“slashing wages and lost jobs to accommodate this burden”).

Use the apprentice levy as a ready-made business case for future talent investment

In just one example of a number of areas that investment in talent could be examined: do any of these managers and executives know how much budget their business is wasting through early turnover of staff?

Having paid good (“hard earned…”) money to attract, recruit, train and then deploy these new staff, all too often many leave within a few months having contributed little to the business.

We often find that this ‘early attrition’ figure alone is approximately 0.5-1.5% of the payroll bill. Every year. A lot of this is pure waste. Businesses eligible to pay the levy can be in a position to use the data in their organisation to identify areas of early attrition (amongst other insights), and use these to drive improved efficiency in their workforce. There is no reason to continue to waste this money.

In fact, the apprentice levy provides businesses with a real imperative to find the efficiency so that a pro-active choice in attracting the right talent becomes the opportunity – not detrimental to business, but instead a platform for the development of UK plc’s future workforce.

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