APPRENTICESHIP REFORMS AND FUTURE WORKFORCE DEVELOPMENT

Conclusion 

Over the next 12 months, the government will confirm key apprenticeship and skills reforms that will shape workforce development for years to come. While policy  delays and funding constraints present challenges, new initiatives – including shorter apprenticeships, Foundation Apprenticeships, and modular funding  models – offer an opportunity to build a more agile, employer-led skills system.

HIT Training Ltd. remains committed to working with employers, policymakers, and sector bodies to ensure apprenticeships and skills training remain relevant, accessible, and valuable to UK businesses and the wider economy.

Introduction 

The government’s planned reforms to the apprenticeship and skills system are set to reshape workforce training across the UK. However, delays in confirming details  – particularly around the Growth and Skills Levy – have led to widespread employer  frustration. Large businesses are holding back on apprenticeship investment, uncertain  whether they will soon be able to use levy funds for alternative training routes, while  the reduction in levy transfers is limiting opportunities for SMEs to take on apprentices. Planning workforce development has become increasingly difficult as businesses lack clear guidance on what training models will be introduced and supported in the long term.

At the same time, financial pressures on the  apprenticeship budget are intensifying. The Department for Education (Dfe) has spent 99% of the £2.525 billion apprenticeship budget in 2023- 24, leaving little flexibility for expansion. However, DfE does not budget for the full levy to be spent  which means that the Treasury is retaining over  £800 million of levy funds rather than reinvesting them into the UK skills system. In response, the government has already announced the withdrawal of levy funding for Level 7 apprenticeships, a move expected to save £240 million annually, and there is speculation that Level 6 apprenticeships could follow. While these changes reflect a prioritisation of funding towards lower-level apprenticeships,  they risk limiting access to higher-level technical training at a time when employers are struggling to fill skilled vacancies.

HIT Training Ltd. (HIT) welcomes reform that makes the apprenticeship system more relevant, efficient, sustainable, and accessible. However, the success of these changes depends on how well they align with the needs of employers. Our position is clear:  apprenticeship reform must maintain quality, reduce bureaucracy, and ensure that all levy contributions, not just those budgeted by the DfE, are reinvested in workforce development.

This paper outlines the key changes ahead and our recommendations for creating a skills system that works for businesses of all sizes.

Functional Skills: 

A Step Towards Flexibility, But Literacy and Numeracy Remain Critical

Before February 2025, apprenticeships were the only adult study programmes that required passing exams in both English and maths (known as Functional Skills) to complete their apprenticeship, which discouraged many potential apprentices. The reforms introduced on 11 February 2025 mean that apprentices who start on or after their 19th birthday no longer need to pass Functional Skills qualifications at the level specified in their apprenticeship standard to complete their programme or to undertake their final assessments.

This change is aimed at removing barriers to success and making apprenticeships more accessible. However, some literacy and numeracy skills remain essential for career progression and workplace success. The requirements for 16 to18 year-olds to study and pass Functional Skills remain unchanged, ensuring that young  apprentices continue to develop these core skills.

While increased flexibility is welcome, HIT remains committed to ensuring that all apprentices have access to the skills they need to do a great job and get on in life, including literacy and numeracy. We want our apprentices to succeed, so we have  looked at each apprenticeship to determine the minimum level of numeracy and literacy the person needs to be successful in that role. If they and  their employer want to aim higher, we are here to support them. Every employer we work with  wants the best for their staff, and we will continue to engage directly with apprentices and employers to assess individual needs, ensuring no apprentice is left without the core skills required for future success.

Shorter Apprenticeships: 

A Step Towards Flexibility, But Literacy and Numeracy Remain Critical

Currently, by law, apprenticeships must be a minimum of 12 months in duration. This requirement has resulted in some entry-level apprenticeships being artificially stretched to fit the 12-month minimum, rather than aligning with the natural pace of learning. The 12-month rule also restricts apprentices who work at a faster pace or who already possess some of the knowledge, skills, and behaviours required for their apprenticeship. 

From August 2025, the government will reduce the minimum duration of apprenticeships from 12 months to 8 months to not only address urgent skills shortages but also allow for faster workforce entry and progression without diluting the quality already ingrained within apprenticeship standards. We support shorter apprenticeships where appropriate, provided that funding remains. Off-the-job training (currently a minimum of 6 hours per week over a 12-month programme) should be proportionally reduced, ensuring that apprentices  still receive meaningful learning experiences without adding an additional burden to them and their employer.

Foundation Apprenticeships: 

A Necessary Stepping Stone for Young Learners

Launching in August 2025, Foundation Apprenticeships are designed to reverse the 40% drop in under-25 apprenticeship starts since 2015-16 by providing a simplified entry route into employment and further training for young people who aren’t quite ready for an apprenticeship. Funded through the apprenticeship levy, these programmes will be targeted at younger learners (exact age group yet to be defined), helping them develop core workplace skills before progressing to full apprenticeships.

To be effective, Foundation Apprenticeships must be concise and practical – lasting no more than  four months – allowing learners to become job ready without unnecessary delays. They should  also contain transferable skills, recognising that  many young people change career paths. If designed correctly, Foundation Apprenticeships could provide an accessible first step into the workforce, ensuring that more individuals gain early exposure to structured workplace training. 

However, there is concern that by calling them Foundation Apprenticeships, the government may  require them by law to follow the same minimum duration rules as other apprenticeships, meaning they would have to last at least eight months. If this happens, they could lose their appeal to employers  who need short, targeted training programmes of no more than four months to quickly equip  employees with essential workplace skills. 

Future Changes to End-Point Assessment:

Reducing Stress, Maintaining Rigour

Currently, an apprentices competency is only assessed at the end of the programme through an independent End-Point Assessment (EPA). The government has indicated that changes are forthcoming to simplify the process, introducing continuous assessment to reduce reliance on high-stakes final tests. 

A shift towards ongoing competency assessment is welcomed, provided it maintains integrity. A more balanced assessment model could improve apprentice confidence, reduce drop-out rates, and ensure that learners demonstrate skills progressively throughout their programme. HIT will monitor developments closely over the coming months and contribute to discussions on how best to implement these reforms.

Growth and Skills Levy: 

Reform is Needed, but Employer Confidence Must Be Restored

The proposed Growth and Skills Levy aims to give employers greater control over how they use levy funds, allowing a percentage of contributions to be spent on training beyond traditional apprenticeships. However, delays in confirming these reforms have created uncertainty, with many large employers hesitant to invest in apprenticeships while waiting for clarity on levy spending rules. 

Additionally, the reduction in levy transfers from large employers to SMEs is having a tangible impact on small businesses, making it harder for them to offer apprenticeship opportunities.

For the Growth and Skills Levy to be effective, all  funds paid into the levy must be reinvested into training, rather than a significant portion being retained by the Treasury. The system must also be simpler and more flexible. Many employers,  lacking a government-funded alternative, have  had to convert existing training schemes into apprenticeships to use their levy budgets. While  this works in some cases, it often results in staff not completing their programmes because the  apprenticeship structure does not align with their specific training needs.

Apprenticeships encompass all skills, knowledge, and behaviours required for a role. Therefore, modularising the programme – allowing employers to choose the components their staff need –  makes sense for those who do not require an entire apprenticeship. Modules could be individually certificated and, if needed, could  eventually build into a full apprenticeship. This simple flexibility would significantly help employers upskill their workforce quickly.

Furthermore, the Apprenticeship Service (formerly the Digital Apprenticeship Service, or DAS) is  cumbersome and inflexible, requiring employers to register and approve apprenticeship starts through a centralised system. This additional administrative burden is generally unwelcome – especially by SMEs. Allowing training  providers to manage the system on behalf of  employers – if desired by the employer – could  streamline the process and encourage more employer engagement.

A modular, employer and employee-friendly system would make apprenticeships more accessible, practical, and responsive to modern business needs, increasing engagement, upskilling, and retention. 

Impact of Devolution on Adult Skills Funding  and the Importance of Local Engagement

The devolution of Adult Skills Funding (ASF) is transforming how education and training are administered locally across England. Currently, approximately 60% of the Adult Skills Fund is devolved to nine mayoral combined authorities like the Greater Manchester Combined Authority and the Greater London Authority, enabling these regions to tailor adult education and skills to local needs.

To accelerate devolution, the government’s Devolution Priority Programme will establish six additional mayoral combined authorities, with  elections scheduled by May 2026. The proposed areas are: 

◗ Cumbria 

◗ Cheshire and Warrington 

◗ Norfolk and Suffolk 

◗ Greater Essex 

◗ Sussex and Brighton 

◗ Hampshire and the Solent 

Devolution allows these authorities to shape adult education and skills in their area to support local  needs, including addressing specific skills gaps and priorities. However, it also introduces complexity, as education and training providers and employers  must navigate varying rules between devolved and non-devolved areas. 

HIT Training Ltd. is proactively engaging with local  authorities across these existing and proposed  devolved areas. Our goal is to represent the interests of both small and large employers in our  sectors, ensuring that Local Skills Improvement Plans (LSIPs) reflect the real needs of businesses.By collaborating closely with local authorities, we aim to contribute to the development of responsive training programmes that address specific regional skills shortages and support economic growth.

As devolution progresses, HIT is committed to adapting our strategies to meet the unique requirements of each region, ensuring that our apprenticeship and training offerings align with local priorities and contribute effectively to workforce development nationwide.

Impending National Insurance  

Contributions Increase: 

Implications for Businesses and the Role of Apprenticeships 

In the October 2024 Budget, Chancellor Rachel Reeves announced significant changes to employer National Insurance Contributions (NICs), effective from April 2025. The employer NIC rate will increase from 13.8% to 15%, and the earnings threshold at which employers begin paying NICs will decrease from £9,100 to £5,000. 

The increase in NICs is expected to substantially affect businesses, particularly small and medium sized enterprises (SMEs). Higher employment costs may lead companies to adjust their operational strategies, including hiring freezes or staff  reductions, wage and benefit adjustments and increased product and service pricing.

Apprenticeships as a Mitigation Strategy 

Despite these challenges, employers can leverage existing NIC exemptions to mitigate increased costs.Since April 2016, employers have been exempt from paying Class 1 NICs for apprentices under 25 years old, earning less than £967 per  week (£50,270 annually), who are on an approved UK government apprenticeship standard or framework. 

To further incentivise investment in apprenticeships and alleviate the financial burden of increased NICs, the government should consider removing the age limit for NIC exemptions on apprentices. Extending this exemption to all apprentices, regardless of age.