What are the measurable benefits of apprenticeships and how will they translate in your business? Let's dig into the data and find out.
- 16% of employers offer apprenticeships for the cost and affordability benefits
- Smaller companies are more likely to win new business if they offer apprenticeships
- 23% of employers found that Level 6 and 7 apprenticeships saw salary and levy savings, giving them the chance to recruit experienced people into senior roles
When you think about how successful your business is, you may measure it in terms of:
- The quality of your products and service
- How consistently you win new business
- The cost-effectiveness of your operation
- The skillset of your workforce
- The productivity of your people
Most business decisions are driven by the return on investment you're likely to see. If you're thinking about hiring an apprentice, you need evidence that they are worth the investment. For example, you need assurances that an apprenticeship programme will deliver cost-effectiveness, contribute to quality and develop in-house skills, if those are your business needs.
The Government's Apprenticeships Evaluation survey attempted to do just this, by collating employer feedback about the real-world impacts and benefits of apprenticeships for employers.
We've dug through the report to see if apprenticeships ticks all the ROI boxes, and if they're worth the investment. Let's dive in.
According to the 2018/19 survey, 16% of employers offer apprenticeships for the cost and affordability benefits, but it varied between sectors:
- 34% in arts and media
- 27% in education
- 24% in ICT
- 24% in leisure
- 21% in business
A savvy 7% of employers realised that apprenticeships would bring financial benefits, like incentives, into their organisation, increasing to 15% when the employer worked in the education sector.
For example, in Wales the current incentive is the employer incentive scheme. It awards up to £4,000 for every apprentice hired (up to 10 apprentices) - that's potentially a £40,000 reward.
The study revealed that apprenticeships had a positive effect on business performance:
- 86% said that apprenticeships helped them develop skills relevant to the needs of the organisation
- 76% said productivity had improved
- 74% reported product or service quality had improved
- 36% said apprenticeships helped them to win new business
- 35% cited a lower wage bill
One of the standout benefits was that apprenticeships developed skills relevant to the business, with 86% noticing improvements.
When businesses enrolled existing staff onto an apprenticeship, rather than recruit new apprentices, they experienced greater performance benefits related to skills and quality.
These people had an existing understanding of their sector, field and role, so the apprenticeship refined their approach.
When asked if product or service quality had improved, 82% of employers that had only offered apprenticeships to existing employees saw an improvement.
But 70% of employers who only offered apprenticeships to recruits also experienced an uplift in skills.
It might take longer to realise the skills if you recruit at Level 2 and 3, because the candidate is entry level, new to the business and sector.
But if you recruit someone at Level 4, 5, or 6, you might see a skill boost immediately as the team around them picks up their experience.
The headline is that apprenticeships are good for small employers. They are proven to:
- Help small businesses win new contracts and clients
- Reduce the cost of wages
Apprenticeships win SMEs new business
The survey reported that 41% of small employers, with one to nine members of staff, won more business when they offered apprenticeships.
That might be because they were able to take on more people to complete the work required by new contracts.
It also found a correlation between apprentice Level and new business won:
- 33% said they won more business when their main level was Level 2
- 38% said they won more business when their main level was Level 3
- 44% said they won more business when their main level was Level 4+
You could make some assumptions about why apprenticeships would lead to new business wins.
At the lower Levels, businesses can recruit more hands to complete new contracts - promising the work will be completed quickly by skilled people.
What about the 44% wins at higher apprenticeship Levels?
People at the higher Levels are more likely to be those pitching and negotiating contracts. They have a broad reach, established through years of networking, plus the autonomy, confidence and ability to close deals.
Be they also could be senior managers, in positions of trust delegating and pushing the work through to completion. They've got a good sense of quality and what makes for an exceptional service.
The expertise of staff could be a deciding factor for new clients.
Apprenticeships reduce SME's salary costs
The survey also found that apprenticeships helped small businesses to reduce their wage bill.
That benefit was noticed by 40% of employers with one to nine members of staff, and 39% of employers with 10 to 24 members of staff.
That's compared to just 29% of employers who recorded salary savings with 100 or more people on staff.
It's a myth that apprenticeships are for teenagers. Apprentices can be any age, and work at senior levels. And, you can recruit an experienced senior team on a budget, via an apprenticeship programme.
Employing experienced people and enrolling them as a diploma standard Level 6 or Level 7 apprentice means reducing levy and salary costs. In the 2018/19 Apprenticeships Evaluation, 23% of employers reported this a cost-saving when hiring Level 6 and 7 apprentices.
Because apprenticeships are on-the-job training, you'll realise the benefits almost as soon as you recruit.
Let's look again at those five critical areas you would expect an apprenticeship to give you return on investment:
#1. For apprenticeship cost-effectiveness
This is possibly the quickest manifestation of apprenticeship ROI.
Apprentices must be paid minimum wage or national living wage for their age bracket, but that allows your salaries to remain affordable for the duration of the apprenticeship
If there is an incentive, you'll receive cash injections to support your running costs. The employer incentive scheme for example is paid in two equal payments. 50% when the apprentice has been employed for four weeks and 50% after they've been employed for 270 days.
#2. For product quality and service
Product quality and service ROI might be realised within a few months.
An apprenticeship can last between one to four years, but your candidate can start applying their skills straight away. You should see a change in quality and service almost instantly.
In terms of measuring how your quality and service has improved, you need to identify key performance indicators for your business and actively review performance before and after you adopted the apprenticeship programme.
For example, if you're manufacturing products, your KPI might be a pre-determined number of products passing quality control per week. Compare how many more items are passing quality control with skilled assembly and monitoring.
If your business is customer service-based, client surveys are your best friend. Compare customer reviews now they are conversing with skilled workers and watch for an upward trend.
#3. For the skills of your people
The skills of your people are entwined with their output - so if your quality and service improves, their skills will upgrade at a similar rate.
Your apprentice will have an allocated training advisor who will help you to keep track of their progress.
But you'll find that as the apprentice progresses through the qualifications, they become more confident and autonomous. They might ask for more responsibility, or naturally pick up complex work.
To measure the skills development, make sure your employee review process is relevant to the development of the apprentice. Record their accomplishments and report on them. Find out how to manage your team's appraisals in our blog.
#4. For new business wins
This is perhaps the easiest one to measure, but it might take longer to be realised.
Keep tabs on how many more deals you're able to close with skilled apprentices in the entry-level and senior roles at your organisation.
If your business mirrors the trends seen nationally, apprenticeships help you to clinch more sales.
#5. For employee productivity
People skills, service, quality and productivity all feed into one another.
Although, productivity can be up but quality diminish, so keep close tabs on your processes.
To measure effort and the rate of output, there is a broad calculation you can use.
Before the apprenticeship programme, you made £500,000 in sales in one month and you have six people contributing to those sales. Their salaries cost £12,500 that month.
£500,000 / £12,500 = £40
Your company generates £40 of sales per hour.
After the apprenticeship programme, you might see an uptick in sales and receive financial support from the government for hiring an apprentice. You might make £550,000, but reduce labour costs by £4,000.
£550,000 / £8,500
Your company has generated £65 of sales per hour.
But if you wanted to look at individual employee productivity, divide your sales by the number of employees in the team, and the growth is apparent:
£500,000 / 6 employees = £8,333 revenue generated per employee
£550,000 / 6 employees = £9,1666 revenue generated per employee
You might see productivity ROI in the early days, but as we've already mentioned, keep a close eye on quality.
If you experience sales taper off after an initial peak, review the process and dip check what's being produced.
Are on-the-job training programmes worth the investment?
They are worth the investment.
However, have clear goals about what you want to achieve through an apprenticeship programme.
Is it to reduce costs? Improve quality and service? Increase new business? Improve skills or productivity? And if so, by how much?
If you know the answers to these questions, you can tailor the apprenticeship programme to meet the very specific and unique needs of your organisation, and watch the returns roll in.