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Attracting and retaining talented employees is a critical challenge for any business. Among technology firms, this issue is even more pertinent.

Estimates from the Open University (1) suggest that around 600,000 vacancies in digital technology are costing the UK economy approximately £63 billion a year. Put another way, demand significantly outstrips supply when it comes to professionals with tech skills and experience.

COVID-19 has further accelerated this trend. Research from Tech Nation (2) found that vacancies within the UK tech sector rose by 36% between June and August 2020 – only the healthcare sector experienced a sharper rise in demand for staff.

The figures demonstrate the role that the pandemic has played in increasing society’s reliance on technology, in turn encouraging – or forcing – tech businesses to grow their teams to meet such demand. As such, the topic of how to best attract, nurture and retain talent is more relevant for tech SMEs today than it ever has been.

Apprenticeship schemes should not be overlooked. They can play an integral role in identifying and training new members of staff, particularly younger people and those who have just left secondary school, equipping them with the tech skills they need to excel within the business. What’s more, apprenticeships can also provide a valuable means of upskilling existing employees and building greater loyalty within a workforce.

Developing a talent flow

An apprentice can be anyone aged 16 or over and not in full-time education. As such, apprenticeship schemes are primarily designed for young people that look to gain skills and experience in a particular industry or type of job; however, they can equally be used by professionals to retrain or upskill.

An apprenticeship scheme will last a finite time – it can take anything from one to five years to complete an apprenticeship, depending on the organisation running it and the nature of the scheme, which can range from an A-level equivalent right through to a Masters degree. Crucially, it is a paid role, funded by the employer and UK Government, which will provide an individual with the skills and knowledge needed for their chosen career. It typically combines practical on the job training with mentoring and studying, including paid time off to study, enabling the apprentice to work towards a formal qualification.

In the technology sector, apprenticeships can prove particularly worthwhile. For one, as noted above, there is a shortage of experienced professionals available for hire when it comes to tech roles or tech businesses. So, while it will take time to come to fruition, creating an apprenticeship scheme can help an SME overcome the rigours of the highly competitive job market.

A further benefit is that an apprenticeship schemes allow tech SMEs to shape the training that prospective new employees would receive, with a view to then keeping them within the business after the apprenticeship is complete. Indeed, a common problem among tech firms is that potential new hires, who may have professional qualifications and many years’ experience, are not well versed in the specific technology, systems or coding language that they themselves rely upon.

An apprenticeship scheme, then, can be a mutually beneficial option for both those looking to gain a footing within the tech sector, as well as for employers, to ensure a constant flow of well-trained potential team members who have the precise skills and experience for the business.

Concero is an IT support services company – it specialises in education technology and helping teachers to adopt best practice use of technology in the classroom. Through its partnership with apprenticeship training provider Primary Goal, Concero is enabling technology apprentices to reach their potential with training and on-the-job experience.

Concero’s apprentices have proven valuable during the pandemic, with schools suddenly forced to re-evaluate their use of technology for teachers and pupils alike. Taking on trainees has simultaneously allowed the company to expand its workforce while also injecting new skills and enthusiasm into the organisation.

Concero Co-Founder and Director, James Morris, said: “Our first apprentices came to us with a good base of digital skills, and were eager to learn quickly. They have certainly taught us a thing or two, and now they are making a huge difference in the schools they’ve been placed in.”

Upskilling existing staff and building loyalty

Apprenticeships are not only for those at the very start of their professional careers. They can equally be used for experienced members of staff who want to retrain in a different area, or improve their skills within an existing line of work. Again, for tech SMEs, this can prove highly useful.

Given the pace of change in the technology industry, skillsets must constantly evolve. It is likely, therefore, that an employee hired as a university graduate in 2011 might not have qualifications or experiences related to the digital trends that are shaping the world in 2021. An apprenticeship could allow them to undergo formal training to develop new skills.

The use of apprenticeship schemes for more senior employees is proving increasingly valuable as retirement ages rise. Businesses have a significant wealth of organisational knowledge in their older workers, including client loyalty; an investment in ongoing learning via apprenticeships for older workers helps retain their existing knowledge, supplementing it with new techniques and information to get the best of both worlds.

Alternatively, an effective apprenticeship scheme can help a tech SME to evolve and remould itself over a long period. As the coronavirus pandemic has illustrated, sudden changes to consumer and business behaviour will have harsh consequences on businesses that are not able to adapt with the times. By allowing existing staff members to undertake apprenticeships and retrain in new specialisms, a tech SME can ensure its workforce consists of people with the right balance of knowledge and skills needed as time passes.

An underlying benefit of an apprenticeship scheme is that it will typically build loyalty among employees. Whether a young person from outside the company or an existing member of staff, those who pass through apprenticeship schemes tend to be more loyal; in a survey of over 550 firms offering apprenticeships (3), the majority reported that apprentices stay longer than other recruits, with a third adding that apprentices are more committed to the business than other employees. Given the considerable costs of employee turnover, lost productivity, organisational knowledge and agency fees to find replacement team members, apprenticeships can be a useful and cost-effective way of demonstrating an investment in employees which can be rewarded through greater contribution.

Further, three quarters of UK employers say that improved productivity, better quality of product or service and higher staff morale were all effects of hiring apprentices, government research has showed (4).

Financial considerations

There are a number of financial considerations for tech SMEs considering hiring an apprentice, including state-backed funding (5).

For British businesses, they must only pay 5% towards the cost of training and assessing their apprentices; the Government pays the remaining 95%. The employer is responsible for agreeing a payment schedule with a chosen training provider and then paying that outfit directly.

UK businesses can also claim up to £2,000 as an incentive payment (6) if they hire an apprentice that starts their role between 1 August 2020 and 31 March 2021. This is part of the Government’s financial support schemes launched in reaction to the pandemic, with a view to getting more people back into work.

Further, in April 2017 the Government launched the Apprenticeship Levy – an additional tax on UK employers with a wage bill in excess of £3 million. Employers that meet this criterion are now required to pay 0.5% of their payroll each month as a levy tax, which can then be reinvested back into their workforce in the form of apprenticeship training.

The initiative, designed to encourage large firms to create or improve apprenticeship schemes, has relevance for tech SMEs.

As of 2019, employers that pay the levy and have unspent funds have the option of transferring up to 25% of the annual levy contribution to another employer. This is known as an apprenticeship levy transfer – it means UK-based tech SMEs could receive support for their apprenticeship schemes from another business, typically a partner, a company in their supply chain, a charity, or a local firm.

Lloyds Banking Group was an early mover when it came to signing up to levy transfers, committing £9 million over three years to support SMEs with the development of apprenticeships, by assisting with the cost of tuition and exam fees. To date over 450 apprentices and 250 businesses have benefitted from this support with over half of these roles being new roles.

One of the most notable examples comes from the West Midlands Combined Authority (WMCA), which set up an Apprenticeship Levy Transfer Fund to cover the costs of training apprentices at SMEs across the region, with large employers pledging their unspent levy. Lloyds Banking Group was one of the first large employers to join the scheme with a pledge of £3 million – one of the biggest contributions to date.

Since July 2019, the WMCA’s apprenticeship scheme has funded the training costs of 204 apprentices and 94 SMEs in the region’s fastest growing sectors, including digital. The aforementioned case of Concero and Primary Goal is one such success story to come from the WMCA’s Apprenticeship Levy Transfer Fund.

Andy Street, the Mayor of the West Midlands, said: “It’s critical that we support new jobs and training opportunities including those for young people, who we know are being disproportionately hit by the coronavirus lockdown.

“Thanks to Lloyds Banking Group and other big employers who have contributed to the levy transfer fund, we are equipping local people with the skills employers will need in the future, as our region’s economy recovers from COVID-19.”

Apprenticeships to be key in 2021

There are numerous potential benefits to tech businesses that hire apprentices. From gaining greater control over staff training and being able to better navigate the highly competitive job market, through to boosting employee loyalty and receiving financial support, it is an option worth considering for established businesses confident of having the resources and knowledge required to implement a successful scheme.

The UK Government has long heralded the importance of apprenticeships for opening up new career opportunities to young people – and in light of the pandemic and its devastating effect on the job market, with redundancies rising sharply, particularly among young people, apprenticeships will remain highly topical in 2021.

Figures from late last year (7) showed that 11% of people aged between 16 and 24 lost their job as a result of the pandemic, making this group twice as likely to suffer this fate when compared to other workers. As Andy Street states above, apprenticeships will be a vital mechanism for enabling more of these young people to re-enter full-time work, offering them a secure framework to learn, develop and pursue new job opportunities.

Importantly, employers should monitor Government announcements closely as it is possible that further financial supports could be introduced (or existing policies changed) for those hiring apprentices. The Spring Budget, scheduled to take place on 3 March 2021, is one such occasion when changes could be tabled.

Our relationship managers are experienced in the tech sector and are keen to support further growth of this vibrant industry. Please get in touch today to discuss how we might help your business.

Darren Cable, Area Director Technology, Media and Creative at Lloyds Bank Commercial Banking

07841 780 343 || [email protected]

For more information about how Lloyds Bank supports UK tech businesses, click here.

 

1- The UK skills shortage is costing organisations £6.3 billion | Business at The Open University

2- UK tech jobs bounce back after lockdown – Tech Nation

3- APPRENTICESHIPS ENCOURAGE EMPLOYEE LOYALTY BUT ALSO HELP COMPANIES WIN NEW BUSINESS – Engage Employee

4- Apprenticeships evaluation 2017: employers (publishing.service.gov.uk)

5- Employing an apprentice: Get funding – GOV.UK (www.gov.uk)

6- Incentive payments for hiring a new apprentice – GOV.UK (www.gov.uk)

7- Covid job losses hitting young people hardest in UK, study finds | Business | The Guardian

 

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