Why you can’t afford to ignore the apprenticeship levy

Go on, check again. Yes, it really is a Conservative government in power!

It may seem surprising that a Tory government, which is traditionally associated with a free market ethos and limited public-sector intervention, has introduced two huge labour market interventions since it was elected in May. These are the introduction of the National Living Wage and, more recently, proposals for an apprenticeship levy.

Both announcements are liable to add significant costs to businesses. We’ve already explored the impact the National Living Wage could have on hospitality and retail businesses in a recent blog post, but what are the potential implications of the apprenticeship levy?

The government stresses that the levy will help to address the need to increase businesses’ investment in training.  In fact, the number of businesses training their staff increased by two per cent in hospitality, and four per cent in the retail and travel industries between 2011 and 2013.

However, if raising employer investment were the government’s sole aim, it would introduce a broader training levy and not limit it to apprenticeships. Most people accept that the levy is a means to fund the government’s target of creating three million apprenticeships by the end of this Parliament.

Let’s get the ‘three million’ figure out of the way:

• It does not equate to any labour force projections for the types of jobs suitable for apprenticeships
• It is likely to be met – but achieved in some areas where apprentices are not the most appropriate skills solution
• It is driving most decisions about apprenticeships across government.

Why is the government so focused on apprenticeships? Put simply, it sees a clear equation between an increase in apprenticeships and an increase in productivity, and  believes that apprenticeships provide a greater return on government investment than full-time further education.

The danger is that the policy around the levy could not only undermine this (fairly simplistic)argument, but damage it in a similar way to the Labour government’s Train to Gain initiative, which had limited to no impact on productivity before 2010. 

At the same time, hospitality, passenger transport, travel and retail employers have invested a considerable amount of time in developing new apprenticeship standards - stretching standards that create clear career progression routes.

Businesses working on the trailblazers (the groups of employers that have developed the standards and assessment plans) see real value in them providing a route to attract, develop and progress talent in their businesses.

The focus on quality apprenticeships has been at the heart of the reform process to date, which is why so many businesses see them as an important solution.

Their concern is that, if the levy is poorly implemented, it could undermine this quality, provide poor or no returns for businesses and not address the productivity challenge that is central to the government’s economic strategy.

Here are a few of the potential pitfalls that businesses need to be aware of:

• The proposal is for all large businesses to pay the levy and it assumes that, if businesses are investing in apprenticeships, they will see a return. Currently, not all businesses have a stable workforce that suits apprenticeships. Do these businesses re-engineer their workforce to be able to offer apprenticeships or stay as they, not employ apprentices and pay a levy they will not benefit from?
•  The CBI has suggested that the levy could be 0.5% on PAYE. For some businesses this will mean a lot of apprentices – many more than they need and could benefit from. If the system isn’t flexible, it could result in some people doing an apprenticeship that will not benefit them or their business.
• There is a real danger that some employers who invest heavily in training and development may shift their training expenditure to apprenticeships because of the levy. This would mean less meaningful and effective training and development to meet their other business needs and could hamper productivity, not increase it.
• The scope of the levy is so tight that it fails to support the critical progression onto apprenticeships, such as selection and pre-employment programmes, as well as the management infrastructure needed to support, develop and progress apprentices within a business.

As more information emerges, there will be other issues that business will need to consider. It is early days, and information is currently sketchy as the government consults with businesses and training providers.

But most worryingly, because the announcement was made in the summer, too few businesses are aware of the levy and are not even considering what it could mean for their operations.

Given the visitor economy’s size with 5.4m employees, it is critical that businesses start thinking about the levy’s impact and respond collectively to government. People 1st is currently collecting employers’ views and has already provided some recommendations to government – you can add your thoughts here.

It is also critical that the government avoids a 'one size fits all’ approach, and takes into account the different ways apprenticeships work in each sector. It should work with existing trailblazers to look at how the levy can be implemented to help our industries which, in turn, will help it achieve its aims to raise productivity.

The 21st Century chef

Chefs continue to be a critical recruitment challenge for many hospitality businesses. Currently, 42% of chef vacancies are considered hard-to-fill with research from People 1st indicating that by 2022 the industry will need to recruit an additional 11,000 chefs.

Just as with the entire hospitality industry, the chef world has a recruitment and retention challenge. The growth in more informal, casual dining has seen the UK branded pub and restaurant market attracting an extra 47 million visits each year compared to five years ago.

This, allied to a refocus on locality, seasonality and authenticity, has arguably fragmented the chef job description and increased the number of people who work under the job title of ‘chef’ but carry out wildly varying tasks, using different skills.

This industry sea change, begs a number of questions for kitchens of the future: namely, how will we come to properly define the role of a 21st century chef? What skills will people looking to join the brigade of the future require? And how best to recruit, develop andmost importantly, retain, the best candidates?

People 1st is about to embark upon a large-scale body of research with chefs, chef organisations, hospitality businesses, industry commentators, recruitment agencies and suppliers to get a better understanding of the types of skills the industry will need in the next five to ten years.

In undertaking the research, we will seek to formulate a breakdown, by skillset, of chefs working in the hospitality industry and where they are typically found, while getting a greater sense of the proportion of different types of chefs working in the industry.

Allied to this, People 1st will examine how businesses recruit for different chefs, how they train and develop existing staff and the extent to which they are finding it difficult to fill vacancies.

Finally, we will look to examine the impact of immigration restrictions on bringing chefs into the UK from outside of the EU.

If you work in hospitality and care about the future of this fantastic industry we want to hear from you.

To have your say, email me now at martin-christian.kent@people1st.co.uk 

The government’s long-awaited productivity plan: why it raises more questions for employers

So at last we know the government’s take on the so-called ‘productivity puzzle’ of a growing economy and stagnant productivity. Even more critically, we know what it proposes to do to tackle it.

The new ‘productivity plan’ is no five-year Stalinist economic plan, pinpointing the number of tractors to be produced by 2020 in Scunthorpe. Instead, it outlines a range of (mostly existing) government policies that align with key productivity driver and highlights 15 areas for action.

This includes a modern transport system, planning freedom and more houses to buy, resurgent cities and a trading nation open to international investment.   

After reading the plan’s 82 pages, what strikes you is the government’s limitation in tackling productivity. The most revealing aspect is a throwaway comment in George Osborne’s introduction that confidently states that “the drivers of productivity are well understood“. 

While the drivers are commonly agreed upon, successive studies show that it’s the way these drivers interact that have the impact, and that different circumstances require different interactions. This plan makes no reference to this, which is understandable on one level, as it’s a complex issue.

However, the plan’s proposals are like throwing all the right ingredients into a bowl and expecting to make a cake. It needs someone to mix and prepare the ingredients; and that’s where employers come in.

The plan announces that Sir Charlie Mayfield, chairman of the John Lewis Partnership, will lead a business-led action group to identify practical, direct action to enhance productivity in different sectors. This will report by the end of the year, so we’ll have to wait and see to what extent this addresses the plan’s fundamental weakness.

The actions around one of the areas – ‘a highly skilled workforce, with employers in the driving seat’ underline its limitations. In so many ways, it’s reminiscent of ‘The Learning Age’, the Labour government’s first skills strategy in 1998.

It’s highly utopian – “faced with a growing global competition the UK workforce needs to raise their skills base and so more people need to undertake higher level qualifications”. The fact that this strategy largely failed before doesn’t seem to have prevented the current government from adopting the same approach.

Many people in front-facing, operational roles in the hospitality and retail industries have higher level qualifications. But, as we see time and time again, that doesn’t mean that their qualifications are relevant to what they are doing, that they have the skills to do the job or that businesses are maximising their skills to make them more productive.

Similarly, just because more employers have more money as a result of a ‘more competitive tax system’ it doesn’t mean that they will use it to invest in long-term infrastructure as the government intends.

The plan also includes actions that are unlikely to raise productivity. This includes getting more long-term jobseekers into work - yet France, with its high unemployment and restrictive labour market laws, has higher productivity than the UK.

This is largely because businesses are reticent to recruit staff, as it’s difficult to get rid of them. As a consequence, they are forced to maximise the use of their existing staff. Growth can happen on the back of greater employment but, in reality, productivity is unlikely to increase without unemployment rising – something which is not mentioned in the plan.

So, what does this mean for businesses in our industries?

The plan aims to create the conditions for businesses to think and invest more in the long-term - but the choice to do so, and therefore whether or not productivity will increase, still rests with individual businesses and whether they choose to think differently about how they optimise their staff.

As People 1^st has outlined in its recent Skills and Productivity Problem report, there is a strong case for hospitality businesses to think differently – a productivity increase of just one percent would mean an extra £1.43 billion for the economy.  However, the government’s plan alone is unlikely have a significant impact on encouraging a more long-term approach.

We now await the work of Sir Charlie Mayfield and his team of employers to see how they believe businesses should react.

The National Living Wage – what does it mean for hospitality and retail?

The government’s introduction of a National Living Wage is likely to have significant implications for the way hospitality and retail businesses recruit and retain their staff

The announcement on Wednesday came as a surprise, perhaps because few expected a Conservative government to interfere in the labour market. But, in reality, their focus on work rather than welfare is consistent with their policies over the last five years, whilst in coalition.

Despite the severity of the economic turndown in 2008, UK unemployment has bounced back much more quickly than in other EU countries. One of the reasons for this has been that many of these newly-created jobs have been in low-paid sectors like hospitality, retail, care and cleaning.

As a result there has been an increase in so-called ‘in-work poverty,’ with more people receiving tax credits in employment than those unemployed. The large proportion of these jobs has also been seen as an underlying factor in the UK’s stagnant productivity levels.

The phased introduction of a £9-per-hour wage by 2020, whilst falling short of a true living wage, is still a significant step up from the average hourly pay for many operational jobs roles in hospitality and retail. For example: chefs (£8.62); waiting staff (£6.75); bar staff (£6.74); retail assistants (£7.91) and cashiers (£7.68).

So what might hospitality and retail businesses do as a response?

There are two likely scenarios when it comes to people management. Some businesses are likely to place even more emphasis on a young workforce (aged 16-24), as they will be exempt from the new National Living Wage. Already, 34% of the hospitality industry’s workforce is aged 16-24.

The first problem with this approach is that the UK’s ageing population means it will gradually become harder to recruit. The second is that by recruiting students in such large numbers they are, by their very nature, largely transient. This has a negative impact on staff retention making it difficult to develop a skilled workforce. Ultimately, performance suffers.

The other approach is an increased focus on engaging and retaining staff. Businesses will want to ensure they are getting greater returns from their staff.

This means seeing bigger productivity increases, which can only come about by having a stable, engaged and skilled workforce, whose skills are used much more effectively. This is likely to sit alongside a greater use of technology.

For many businesses, this means a different HR approach to dealing with high levels of labour turnover, and the constant recruitment that has become the norm for many hospitality and retail businesses. However, as research from the likes of MIT in the United States shows, the benefits for those businesses that have adopted this approach speak for themselves.

Whichever way businesses choose to deal with the National Living Wage, we’re likely to see greater polarisation in the way they recruit, retain and develop their staff on the back of this announcement. Hopefully more employers will be persuaded to see the returns of a more stable, productive workforce.

What does falling youth employment mean for the tourism and visitor economy?

Youth unemployment has fallen to its lowest level in nearly six years. While on the face of it this is good news for the economy, what are the implications for the tourism and visitor economy sector given its reliance on a young workforce?

Young people are popular with sector employers because they are often keen to learn, happy to work flexible hours and can handle a physically demanding job. Currently, 33% of the tourism and visitor economy’s workforce is under 25, which is three times the rate across the population as a whole. This dependence on young people not only poses current challenges given falling rates of youth unemployment, but demographic changes also mean that there will be fewer young people in the UK population to target in the future. Recent research from the European Commission suggests the UK’s workforce growth will turn negative by 2023.¹

With the sector’s main recruitment pool shrinking can we realistically meet our future recruitment needs? In all likelihood we can’t; by 2020, the tourism and visitor economy is projected to recruit a further 843,000 employees. Sector employers are already reporting hard-to-fill-vacancies for front facing, operational roles that young people typically fill and if it weren’t for migrant workers (see August’s Research Insight report), we would likely have a major recruitment problem.

Tourism and visitor economy businesses need to broaden their recruitment pools – older workers and women returning to work being two good starting points. Yet we need to focus much more on retaining the young people we attract in the first place. Most employers have a good story to tell about a young person that fell into the sector after working casually in their business, yet it is surprising that more businesses don’t promote the career pathways and broader opportunities that can be found in the sector to those working casually for them.

With falling youth unemployment, some social commentators have expressed concern about the quality of jobs that young people are filling and whether this is beneficial for the economy as a whole. In reality, many of these jobs, which are lower paid, part-time work, are found in our sector. However, at the same time, we need to fill a significant number of skilled and management positions. If filled these types of roles would be likely to lift productivity, which would benefit individual businesses and the economy as a whole. So there is a real incentive to retain young people.

Falling unemployment is not necessarily bad news for the sector and while it would be tempting to call for a renewed careers assault, I think it would pay greater dividends to look afresh at whether we are doing all we can to retain the young people we attract in the first place.

[1] Growth potential of EU human resources and policy implications for future economic growth, (2013), European Commission

The emerging disruption on the back of the sharing economy

We are at the forefront of major economic and social change, which has the power not only to disrupt a company’s business model, but also that of an entire industry.

The retail and travel industries have had to respond to the way the internet has changed how consumers buy and make purchasing decisions. The rise of 3D printing makes it look like manufacturing will face similar challenges and it’s clear that sites like Napster altered the way we listen to and buy music. It literally changed the business model and operating assumptions in the music industry.

Yet Napster is just one example of the growing sharing or collaborative consumption economy, which is also making its presence felt in the tourism and visitor economy. The rise of bike and car sharing is reducing the dependence on public transport and, similarly, the growth of accommodation sharing sites such as Airbnb and Couchsurfing are rivalling traditional accommodation providers.

According to Jeremy Rifkin in his thought-provoking book, ‘Zero Marginal Cost Society’, this year Airbnb will surpass Hilton and InterContinental by filling more rooms globally. To date, 3m guests have booked 10 million nights in 33,000 cities across 192 countries using this site.

If you’re thinking that this phenomena is limited to a dedicated group of ‘liberal, communitarians’, think again! Rifkin points out that this trend is part of a move away from people wanting to own a product to having the opportunity to just access it instead. He believes that young people in particular, who have grown up with free access to the likes of Google and Facebook, have a very different perspective to their parents and grandparents when it comes to the need to purchase things.

So what does it mean for operators? Well, first of all, it doesn’t look like this trend is going away and so it should not be ignored. Sites such as ParkatmyHouse for people renting and buying garage or drive space or Thredup, which provides a platform for recycling clothes, highlight the range of opportunities for consumers.

At the heart of this move is the power of peer-to-peer reviews and the influence this has on buying decisions, rather than the traditional weapon of slick marketing.

Some operators have woken up to the potential threat this new model poses, making the case that the likes of Airbnb are not subject to the same legislation that they have to follow. In response, Airbnb has argued that it is opening up the market rather than taking away existing business.

As the sharing or collaborative consumption economy grows, these arguments will no doubt become more common. It is likely to become more commonplace and has the power that other trends have shown before to disrupt the business models we currently take for granted.

The fight back in the travel industry: harnessing, not competing with, technology

The Institute of Travel and Tourism conference earlier this month had an impressive array of speakers, including Lord Adonis, Mary Portas and – controversially – Nigel Farage. However, it was two separate speakers from TUI and Thomas Cook talking about integrating technology and skills that left the biggest impression with me.

Johan Lungren, Deputy CEO, TUI UK & Ireland talked about how TUI had been trialling their new ‘Generation Centres’; travel shops where digital technology has been fully integrated, and John Straw, Head of Digital, Thomas Cook, talked about how they are maximising the best from the web with their agent’s knowledge and customer service through their new digital approach.

It really highlighted the cutting edge of travel and technology, and the importance of having a skilled workforce.

There were some interesting stats flying around:

• 20% of Thomas Cook bookings are made on  tablets
•  Tesco sold 450,0000 of its low-cost tablets over Christmas, meaning that they are becoming much more common
•  44% of people search for travel in an average month. They do it over 17 research sessions and start 73 days before booking
•  The closing ratio in Thomas Cook’s shop was 50% and on the website it was less than one percent.

While the web offers choice, its problem is that it offers too much choice. How does a consumer really pin down their choice? How do they trust what they are seeing and reading?

Both companies talked about how, in their different ways, they were using the power of their agents to help clients cut through the choice by fully integrating the advice and guidance in a travel shop with the information on the web. It’s had a real impact on business and, of course, on customer satisfaction.

Bringing out agents’ skills and knowledge has been critical; as has ensuring that they can use and harness the technology. It all helps to explain the huge changes we’re seeing in travel. Investment in training and development has increased by 54% in travel agencies and 234% in tour operations and, as a result, the number of employers reporting that staff are not proficient to work in their business has fallen. No wonder then that productivity levels have increased significantly year on year since 2008, which isn’t bad given this was during the economic downturn.

After a difficult period of contraction the travel industry is on the up and its workforce is now set to grow to 94,145 by 2020. The emphasis on having skilled staff is critical, as is the ability to get the most out of them. As another presenter, David Speakman, Group Chairman, Traveller Councillors, summed it up as the move from a transactional relationship with the client to one that’s relational. It’s also about skills and good people!

You can find more travel figures in our recent research insight report at http://bit.ly/T75o5t

Despite the criticism, we are likely to need to recruit more EU migrants

Few people can have escaped the debate, prompted by the European elections on whether there should be tighter controls on other EU citizens coming to work in the UK. If tighter restrictions were imposed, what impact is it likely to have on the tourism workforce?

Just over a quarter of the tourism workforce were born outside of the UK, with 12% of these coming from other EU member states.

Recent figures show that nearly 11% of all EU migrants end up working in the sector. Kitchen assistants, retail assistants, chefs and waiting staff are all popular roles to end up working in, but nearly 13,000 EU migrants are working as restaurant and catering managers.

In real terms the percentage of EU migrants working in these positions is low – on average between one and three percent, with larger urban areas more likely to have a higher percentage than rural or coastal areas.

But with the sector needing to recruit an additional 660,000 staff by 2020, are we likely to recruit more EU migrants? Looking at the UK population, the fall in unemployment means that it is getting harder to target the unemployed. From our own experience having helped 3,500 unemployed people into work over the past two years, it is getting harder to ensure that clients get the quality candidates they are seeking as the people still looking for jobs need a lot of support and have generally been unemployed for a while. The labour market is obviously getting more competitive as the economy hots up, and in all likelihood the sector will once again find it more difficult to attract the calibre of people it’s seeking faced with stiff competition from other sectors.

So it is highly likely that we will need to recruit more EU migrants. This isn’t a new phenomenon and in some respects we are returning to the situation we faced before the economic downturn in 2008, although we are now more likely to be welcoming Spanish migrants (numbers increased by 262% between 2012 and 2013) than those from Eastern Europe. In the early 2000s the sector was highly dependent on recruiting workers from places like Poland and the Czech Republic to come and work in the sector, just like in the 1950s and 60s when it was waves of Irish and Italian immigrants filling key roles.

If tighter immigration was imposed from within the EU it could have significant implications for the sector. If you want to know what it might be like you don’t need to look too far, as the Asian and Oriental restaurant sector is finding it difficult to fill key posts on the back of the changes to UK immigration policy. Its true impact is yet to be felt, but it’s already hampering growth and some businesses have been forced to close.

The debate is not likely to go away and individual sector businesses will probably continue to come under fire for recruiting non-UK workers. However, the need to hire EU nationals will become increasingly urgent as employers find it difficult to recruit from the UK population.

The productivity problem – lessons from the tourism and visitor economy sector

Amid better economic figures, the productivity problem continues to receive significant media attention. The problem is this; if the economy is getting better and unemployment is going down, why is productivity so low compared to other countries that are not doing so well economically.

While it is a fresh problem for the economy as a whole, productivity levels in the tourism and visitor economy sector have traditionally been lower than, say, the US and France, and the reasons for this may help explain what’s happening more broadly.

Productivity is obviously about maximising outputs from inputs.  We’ve seen how technology and innovation have played a major role in raising productivity levels in manufacturing and engineering. However, the very nature of the service sector and the necessary interaction between staff and customer means that productivity levels are naturally lower. That’s not to say that technology doesn’t play a role; it obviously does and the rise of online shopping, booking and reservations have changed the interaction between a business and its customers, and reduced the number of staff required.

But if we go back to our inputs and, in particular, the most significant one, which is the workforce, we need staff that are fully skilled and empowered to respond to customer needs. We also need managers that can get the most of out of their staff and who can position their businesses to respond to customer needs.

And here we have the problem. The number of employers that report that their staff lack the required skills is rising and managers come out high in this category. Figures currently suggest that there are 408,500 staff working in the sector that do not have the full range of skills required.[1] High labour turnover continues to mean that staff are not in post long enough to develop the skills they need and that not enough operational staff are progressing to management roles. To top it off, despite the high levels of training in the sector, a lot of it is focused on initial training to deal with the constant recruitment that takes place to address labour turnover rather than at those skills and occupations that have the highest skill gaps.

The continued recruitment of low skilled, transient staff in the UK tourism and visitor economy sector is very different to that found across the rest of the EU, where in varying degrees they rely on a stable, professional workforce.

A significant part of the UK sector is increasingly crying out for a skilled, professional workforce and over the next decade we are going to see greater polarisation between this more skilled workforce and the low skilled, transient one that has grown in size over the past twenty years. However, despite this development, it will only be when we can get out of the mindset that a flexible workforce can only be achieved through transient recruitment that will we see productivity levels significantly increase.

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[1] People 1st analysis of the Employer Skills Survey, 2011, UKCES

2014 is all about recruiting skilled professionals

2013 was the year to shout about job creation. It saw sector employers pledging jobs and work experience, and highlighted the importance of tourism and the visitor economy as a job creator and critical player in the UK economy. Currently, the sector employs one in five of the working population and by 2020 it is projected to need a further 1.7m people.

This week the latest unemployment figures showed a drop of 7.1 percent and all the statistics show that it has never been easier for sector employers to recruit. Looking at the latest Hospitality Employment Index, which we produce jointly with Caterer.com, it shows that there are currently 21 people applying for each advertised role on Caterer.com, an increase from 19 applications per job last year. This is a far cry from the situation ten years ago where the ratio was something nearer one applicant for every two jobs. Similarly, the number of employers reporting hard-to-fill vacancies is no worse than that of any other sector, although employers in seasonal and rural areas do find it much harder to recruit.

So given the sector is not finding it particularly difficult to recruit, why is it continuing to make so much noise about job creation?

I think there are a number of reasons for this. The first is that it was one of the few sectors to recruit during the economic downturn and many employers wanted to take the opportunity to show the Government the industry’s size and importance. Another reason is that some employers have made a deliberate decision to recruit jobseekers as part of their corporate social responsibility, so naturally enough they are shouting about their commitment. And all credit to them. This last year we helped 3,500 jobseekers into employment in the sector, and our experience has shown that it can often be easier to recruit elsewhere. Yet most of these employers are passionate that recruiting previously unemployed people is the right thing to do and part of their investment in local communities.  Third, sector employers have used the debate about job creation to try and tackle the persistent, negative perception of careers in the sector.

Going forward however, the challenge a single focus on job creation produces is that it removes the focus from the real problem; recruiting people into skilled jobs.

While the number of employers reporting hard-to-fill vacancies is relatively low, those reporting difficulties finding skilled staff remain higher in our sector than across the economy as a whole. This is likely to get much worse as a third of the new jobs projected to be created in the sector are in higher skilled and management positions.

So if 2013 was the year of shouting about employment potential, let 2014 be about bringing attention to the large number of skilled roles that need to be filled. This means that:

• We need be supporting the further education colleges and making sure that funding cuts don’t hamper their ability to produce quality students that enter the sector
• The sector takes responsibility for its own destiny as part of the apprenticeship reforms and that the changes address those occupations that have skill shortage needs
• There is support for the new centres of excellence that are being created. Already, for the first time in a decade, we will have skilled front of house students going into the hospitality industry (if you haven’t seen the video – you’re missing a treat! Check it out at http://bit.ly/19ovEdI). Other centres of excellence in patisserie and confectionary start soon and we want to see similar ones set up for travel and aviation.
• There is a sensible and constructive debate about how the sector can have a flexible labour force without chronic labour turnover. We currently have one of the highest labour turnover rates of any sector; as a result most training goes on initial teaching and not towards skill gaps.

Undoubtedly the recruitment of people into skilled roles is a more challenging conversation to have, but one that we should not put off as it is critical for the future competitiveness of the tourism and visitor economy sector.

Another year, another qualifications review!

The Whitehead Review into adult vocational qualifications reported earlier this month and, like previous reviews, it seeks to address the impact and relevance of training and reduce the growth of unnecessary qualifications. Why do we have so many qualification reviews and why don’t any of them seem to address the issues they are seeking to resolve?

Qualification reviews come along pretty regularly and most have similar aims to increase:

• The take up of qualifications
• The skills of the workforce and;
• The competiveness of UK plc.

There are two problems around qualifications. First, despite the large take-up of qualifications, skill needs remain stubbornly high. Second, in some areas of the economy qualification take up is low and some people believe this impairs the professionalism of certain occupations or industries.

Looking closer to home, the take up of qualifications across the tourism and visitor economy is low. Ten percent of the workforce has no qualifications and only 42 percent has one at level 3 – the level that the government is increasingly focusing on.

Yet, despite the obsessive focus on qualifications, the link between skills acquisition and qualifications attainment is spurious at best. Qualifications have often been used as a short hand for skills and there are obviously many skilled and experienced people with no qualifications. Similarly, having a qualification doesn’t mean a person is skilled.

Since the introduction of competence-based qualifications in the early 1990s, the focus on training and assessment has largely taken a back seat. It goes without saying that it is the training that leads to a qualification that develops the skills employers are seeking. Equally important, the assessment should be sufficiently robust to test the transfer of knowledge and the use (however limited!) of those skills.

Possessing a qualification itself should tell an employer that someone has the relevant skills. This was the case twenty years ago when employers could name the qualifications and had confidence in them; and as a result, specific qualifications were requested in job advertisements. These days are long gone. The stream of qualification reviews means that many employers do not recognise qualifications because they are not around long enough for employers to get used to them. It’s a sharp contrast to what happens on the European mainland, where employers largely recognise the qualifications because they themselves went through a very similar system.

The latest review, like many of its predecessors, is likely to have very limited impact as it lacks bite and doesn’t really address the core issue of training or assessment. On the contrary, Doug Richard’s review of qualifications is likely to have a greater impact.

The creation of professional standards that are set by industry and reflect what someone in a given occupation should be able to do immediately removes the problem of the myriad of qualifications. For the first time it also puts in-house training on the same status as qualifications. Gone is the obsession with qualifications and getting the inputs right; it doesn’t matter because the output is key and meeting the professional standard. These will be independently assessed to determine whether someone has met the standard, regardless of whether they have undertaken a qualification, an apprenticeship or received in-house training.

There is potential to hope that the incessant monotony of qualification reviews will finally come to an end. However, I have a sneaking suspicion that the Government’s control of apprenticeship standards through its trailblazer rollout and the lack of autonomy for sectors to put in place a system that reflects their needs will mean that the familiar cycle of qualification reviews will be with us for many years to come.

The ever changing role of the state in addressing sector skills

So the wait is over and the Government has finally announced how it will implement the apprenticeship reforms in England that Doug Richard recommended earlier in the year. Many employers have been on tenterhooks waiting for the announcement as they have the potential to bring huge changes to the way in which employers use apprenticeships and the role that apprenticeships play in addressing skills for our sector. However, to what extent is the sector dependent on the state to address its skill needs? How do the constant changes in government policy affect how skill needs are being addressed and how employers ultimately engage with the skills system?

Let’s look at the facts. The vast majority of employers are not dependent on the publicly funded skills system; in fact, 85 percent of training delivered is informal and in-house, with very little resulting in formal qualifications across the tourism and visitor economy. The smaller the business, the truer this is.

Most apprenticeships in the sector are at level 2 and therefore do not address the increasingly urgent skill shortages and gaps at higher levels. From a funding perspective, with the demise of Train to Gain in England, apprenticeships are largely the only game in town. Last year 38,442 individuals completed apprenticeships in the sector and the vast majority of these were employed by large businesses. Yet despite this take-up, skill shortages (generally at level 3 or above) remain unaddressed.

Research into Train to Gain, which provided funding for people to gain a level two qualification, suggests that it had limited impact on addressing skill needs because it was being delivered to employed people who already had the required skills. Similarly, there is evidence that a significant percentage of apprenticeships are what has been termed ‘dead weight’; meaning that an apprentice receives the same experience and training as they would have done from normal in-house training. The test will be whether employers continue to offer the apprenticeship when Government announces the need for greater financial contribution from employers. Clearly, if an employer sees the benefit of an apprenticeship over in-house training, they should be prepared to pay for it. It’s not clear which way this will go, but it has been suggested that there could be a drop as much as 70 percent in the number of apprenticeships if employer contributions were to be increased. Yet currently the hospitality industry has the highest instances of employers paying for apprenticeships without any government subsidy.

Employers are likely not to engage with the skills system because it is confusing and costs too much. With the increasing focus on transient recruitment, many employers see little point in investing in a staff member through the skills system if they aren’t going to be in post for long.

The confusion in the skills system is ever present, despite several attempts to hide or remove the wiring. But I think the problem is now so much about the amount of wiring and more about the extent to which the system is constantly changing. The skills system has frequently been the victim of attempts to address wider policies such as worklessness, entrance into higher education or low literacy and numeracy levels. Rather than addressing these at source, the wider vocational system becomes distorted trying to address wider issues and ultimately fails in its core role.

It is unsurprising then that many employers increasingly rely on their own solutions, but too often in-house training has been ignored or dismissed in relation to qualifications. This is crazy and creates an artificial divide between the skills system and day-to-day training.

Doug Richard’s recommendations about creating professional standards for key occupations provides a simple way forward that can address this divide. This would mean that employers set common standards that are independently assessed and focus on the knowledge and skills someone needs to perform their job. It then doesn’t matter how someone develops the skills –informally or through qualifications – but the focus shifts to the quality of skills acquired.

However, the Government’s approach to introducing this system is likely to be less than effective, as while the policy is coherent, the implementation is over-engineered and (once again) is likely to miss what the policy is aiming to achieve. We have already seen this with the introduction of traineeships and through the wider employer ownership agenda.

If the Government were to allow employers in different sectors to take real ownership of the skills agenda and let the policy do what it’s designed to, there is a chance that government interventions can help skills . We have to hope for the future, but the past suggests that the skills system may prove too attractive for governments to leave alone.

Apprenticeships: restating their skills and productivity role

Apprenticeships are in the eye of the storm. Over the next 18 months we are going to witness huge changes to the way they look, and how they are delivered and funded in England. There is a long and rich tradition of apprenticeships in both the hospitality and retail sectors and in many respects these changes should give us an apprenticeship that is much closer to their original incarnation. Apprenticeships have seen successive governments spend decades re-shaping them, trying to ensure greater parity of esteem with academic qualifications, addressing numeracy and literacy, and providing progression to higher education, etc. In essence, they have been the victim of a succession of education and welfare policy interventions, but as a result they have lost their original purpose, which were around skills development and productivity.

In recent years both hospitality and retail have seen huge growth in apprentice numbers, with approximately 57,000 people completing a sector-specific apprenticeship in the past year. Apprenticeships have become much more than a way to develop the skills, knowledge and competence for someone to enter a professional occupation. Instead, they have become the main route to access government funding since the demise of Train to Gain. Unsurprisingly, this has meant that they have become so stretched and contorted that they have lost their original purpose.

While employers have welcomed the most recent changes warmly, they are likely to mean that apprenticeship numbers will fall dramatically across hospitality and retail. This is because the recommendations are likely to restrict apprenticeships to those in new roles and the government is looking for a much greater financial contribution from employers. In the immediate aftermath of these changes, we project that numbers could drop as much as 70-80 percent, so what impact would this have?

A recent paper by the Edge Foundation suggests that apprenticeships have taken on the ‘dead weight’ – or training that would have taken place anyway – that was previously in Train to Gain. Figures suggest that about 85 percent of apprenticeships could be classified as dead weight and it is likely that a large proportion of these are in hospitality and retail. If that’s the case, these changes will not have a significant impact on skills development as the same quality in-house training would still be delivered.

So while we are likely see a significant fall in the number of apprentices, what impact might these new apprenticeships have on the sector? For a start, they are likely to be broader and much more demanding, enabling someone new to the sector to develop the full breadth of skills, knowledge, behaviours and competence to become a professional. One of the recommendations has been that apprenticeships should focus on what someone needs to achieve rather than become obsessed with pinning down the various qualifications or training programmes that could make up one. The view is that employers should set the appropriate standards that apprentices need to achieve.

People 1st has been working with employers in aviation, retail and hospitality to develop and test these new professional standards and see what impact they would have on future apprenticeships. They are already suggesting more ambitious and robust frameworks and have generally been enthusiastic and supportive of this new consensual approach. They see the simplicity it brings, the fact that it is a real industry standard, and like the consistency that it brings.

The introduction of professional standards also helps address the needs of those existing staff that need development by recognising the critical role of in-house training. Sector employers are making a significant investment and this is most likely to be offered in-house. For too long the perception has been that qualifications are better than in-house training and, as a result, there has been no parity. For the first time, however, professional standards allow them to stand on an equal footing. To support this People 1st has developed a quality mark with employers and is currently assessing and recognising quality training through its Quality Mark process.

There is still huge uncertainty about how these changes are to be introduced. If the government gets it right, they could be a good thing for the sector as apprenticeships will regain their primary skills and economic crown and carve out a clearer role to develop skilled professionals in the sector. If successful this will enable the sector to tackle its skill shortages, but also help tackle the lazy assumption that the sector has nothing to offer but low skilled roles. Overall it’s clear that the sector is gearing up for the change and there are some exciting opportunities ahead.

Flexing our professionalism

It’s not often that a workforce issue becomes a big media storm, but few can have escaped the ongoing attention on zero hour contracts. The debate highlights not only the changing labour market, but also the fact it has largely gone unnoticed; until now!

Greater flexibility in the labour market is nothing new and has been increasing gradually over the past forty years. A recent report from the Work Foundation suggests that across our sector, an estimated 20 percent of the hospitality workforce were on zero hour contracts, compared to eight percent across the economy as a whole. Retail came in slightly lower at six percent. What the report also highlights is the broader picture of flexible working that is largely being ignored and which, in some forms, may have more serious implications for the economy and society as a whole.

Much of the tourism and visitor economy has come to rely on a flexible workforce to cope with fluctuating demand and seasonal patterns. Today, in hospitality half of the workforce is part-time. A flexible workforce is not necessarily a bad thing if it meets the needs of the employer and individual. The issue is more about how that flexibility is achieved.

The problem lies with the transient workforce that makes up a high percentage of sector jobs. Transient labour, such as students and international workers, make it easier to fill vacancies, but it also increases staff turnover. As staff are not staying very long in post, they are not developing the required skills and experience to make a full contribution to the business. It is unsurprising then that the sector’s productivity levels are lower than they should be, as staff are not fully proficient in their jobs and training is instead being targeted at new starters.

This trend is not new and the concerning thing is that given this huge cost, many employers are not looking at a more efficient approach given the cost of constant recruitment and initial training. And that does not even touch on the loss of business because an organisation does not have a full cohort of skilled staff.

It also impacts the sector as a whole, as the perception of a low skilled, unprofessional sector begins to stick in some people’s minds. As a result, it is harder to attract people who are looking for a career in the sector. After all, how does someone who wants to pursue a career in front of house in hospitality or a sales position in retail tell the difference between one job that can offer them a career and another that is being filled by transient workers? It’s no wonder that many higher skilled roles in the sector are difficult to fill.

The irony is that one of the ways employers are tackling this problem is by attracting skilled workers from outside the UK and the debate about ‘UK jobs and UK workers’ is another workforce issue that is liable to attract media attention.

Find out more by visiting www.people1st.co.uk/news/policy or by following Martin-Christian on Twitter

Is it right to assume that growth and employment are natural bed fellows in the government's industrial strategy?

Western governments are coming out of the financial crises with a sore head and the realisation that they need to think afresh about how to get their economies back on their feet. The result is often a debate about the best way to boost growth and employment, but while ‘growth' and ‘employment' are often used in the same breath, to what extent are they natural soulmates?

The past 30 years has seen huge changes to the composition of most Western economies, with the UK at the forefront of many of those changes. During that time we have witnessed the gradual erosion of the UK's manufacturing base and the growing dominance of the service sector as we become a greater consumer society.

Many manufacturing jobs have moved to countries that can produce the same goods at a cheaper rate. Some professional service jobs have also gone the same way and have moved off-shore. Many of the people who were formerly in these jobs have found their way into other sectors.

Despite the fact that this labour outsourcing is now fiercely debated, at the time this trend didn't go unnoticed. During that late nineties and noughties, successive UK governments implemented policies to try and stimulate the demand and supply of higher value skills and jobs to ensure we could compete globally.

Today, the government's industrial strategy identifies sectors such as aerospace, advanced manufacturing and creative media, as it believes they will boost the UK's growth and employment. I don't think any sensible person would critise the government for trying to focus limited resources on the sectors that will provide the greatest return. The challenge is more about the assumed link between growth and employment. Most of these sectors are indeed high growth areas, high value and dependent on skilled workers, so it is surely right to be stimulating their growth – but what will be their impact on jobs?

There is increasing evidence that the historic relationship between productivity and employment is breaking down. No longer does higher productivity mean an increase in employment. One reason for this is the impact of technology, which is reducing the demand for jobs – an analysis sagely outlined by Erik Brynjolfsson and Andrew McAfee in their book ‘Race Against the Machine'. How the government manages this change could have significant implications on the rest of the economy.

There are large parts of the economy not included in the industrial strategy. Despite their exclusion, they are still contributing to the economy in terms of both growth and jobs. Critically, under the right conditions, that contribution could be increased to create more jobs and greater growth.

The sectors making up the tourism and visitor economy are among those not included in the industrial strategy. It's true that their productivity rates are smaller than high value sectors such as aerospace and advanced manufacturing, however, they employ one in five jobs and its employment projections are higher than that of the econonomy as a whole. The need to boost productivity is critical and a modest increase could have a significant impact given the size of the sector. The same goes for other major sectors such as agriculture and logistics, just to name two.

I'm not suggesting that the industrial strategy should be jettisoned; simply that it needs to be accompanied by broader policy thinking that takes a wider view and doesn't put all its eggs in one basket. Governments in countries like Germany and the Netherlands have found ways to empower each sector to create conditions to increase growth and employment, despite some receiving greater support.

We will see to what extent the industrial strategy facilitates or prevents this happening in the UK; whatever happens, a greater acceptance that growth does not necessarily bring significant employment opportunities will mean we can take a broader view on the economy and the labour market and as a result increase the speed of our economic recovery.

Find out more by visiting www.people1st.co.uk/news/policy or by following Martin-Christian on Twitter