The Apprenticeship Levy and the Retail Sector

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The Apprenticeship Levy and the Retail Sector

The Apprenticeship Levy and the Retail Sector

The Apprenticeship Levy (the “Levy”) came into force on 6 April 2017. In short, the Levy is a payment that will now be collected from large employers in both the public and private sector.

The threshold for “large employers” is calculated by the size of employers’ payrolls so employers with a wage bill of more than £3 million will be required to pay the Levy. The amount is 0.5% of an employer’s payroll and payment will be made to HMRC via PAYE returns.

The main purpose of the Levy is to encourage employers to invest more in apprenticeships and raise funds to improve the amount and quality of apprenticeships available. In this article, we specifically focus on how the Levy may impact the retail sector, but if you do want the finer details of how the Levy operates you can read all about it in our FAQ article released earlier this year.

The retail sector is expected to be one of the major contributors to the Levy with an estimated contribution of £325 million in its first year alone. It’s a large contribution so it’s not surprising that the Levy has received criticism from the British Retail Consortium (the “BRC”). The BRC does in fact support the concept of the Levy, but voiced concerns in August 2016 that its introduction was “over hasty” and would “fail to create apprenticeships at scale and drive up the quality of training.” Their concerns are echoed by retailers, with many worried about how they will utilise their contributions in the most productive and cost-effective way.

Arguably, their concerns are not unfounded. Generally speaking, retail roles require fewer certifiable skills and this presents difficulties for retailers in developing apprenticeship programmes which facilitate apprentices learning a variety of skills because those enrolling on these programmes often struggle to demonstrate that they’re learning new skills.

To overcome this, retailers will need to invest in the development of apprenticeship programmes and training and also make provision for supporting apprentices. For larger retailers with available financial and personnel resources, this should be viable, but for smaller retailers this could prove to be more difficult..

Whilst the Levy could be viewed as just another tax being imposed on them, the introduction of the Levy and the need to develop apprenticeship programmes is not, in essence, a bad idea. If smaller retailers can strive towards developing apprenticeship programmes, training and making provision for support in a way which works within the resources they have, they are likely to reap the rewards. For example, they’ll attract higher calibre candidates who are incentivised by structured training and development and the attraction – and retention - of those higher calibre candidates will most certainly add value to their business in the long term.

Additionally, the introduction of the Levy into the retail sector may also increase the need for more multi-skilled roles. This does not necessarily mean the demise of lower-skilled roles, but instead means that apprentices will be given more responsibility and opportunities to develop an array of skills and understand more about the retailer and its offering. One longer term benefit is that employees will be able to provide a higher standard of face to face customer service and knowledge will not be limited to one product or brand, but be expanded to encompass an array of products and brands. This should help to rival the customer experience which online shoppers have become accustomed to where they are only one click away from a comparison tool or online review to aid them in making a decision.

Well trained employees with a multitude of skills can help retailers beyond improving the customer experience. In a market with increasing competition, market globalisation and the development of new technologies, retailers are constantly presented with new challenges on a daily basis. Retailers can benefit from employees who have been through their apprenticeship and training programmes, as they have first-hand experience and can provide innovative ideas and solutions, and successfully implement them.

Germany is an example of a retail sector which has embraced this model and reaped the rewards by becoming one of the most sought-after retail markets in the world. The German model requires a high degree of training to be completed and this is reflected in the recruitment policies of many German retailers. For example, Aldi keeps costs down by ensuring that its operations are as lean as possible. This includes placing an emphasis on training and development focused on helping the business to become cost-effective in the short-term, but this training also focuses on long term development to ensure that motivation and job satisfaction remains high as well, which reduces recruitment costs.

In summary, whilst the initial perception from some retailers is that the Levy merely represents another tax burden and the accompanying apprenticeship programmes will be difficult to implement, there are in fact various opportunities for retailers arising from it. Firstly, traditionally lower skilled roles can be converted into those which require a multitude of skills, in turn attracting a higher calibre of candidates. Secondly, the introduction of higher level training will present employees with the opportunity to increase their knowledge about an array of products and brands. This should help to streamline in-store customer service and rival that which online shoppers already receive.

If you would like more information on the topics discussed in this article, please contact our retail or employment specialist on 0345 070 6000.