The apprenticeship levy should be changed to a ‘flexible training levy' that includes temporary workers, according to the Recruitment & Employment Confederation (REC).
The levy is paid by employers with a pay bill over £3 million a year, who receive an allowance to spend on apprenticeship training.
However, the REC estimates its members alone have around £104 million in unused apprenticeship levy funds, and 95% are unable to use their funds on training for agency workers.
Almost half of the recruitment businesses surveyed (47%) have been unable to use any of the funds paid into their account, but 69% view their unspent funds as a tax and take no further action.
The REC says broadening the levy could benefit around 960,000 temporary workers, improving productivity and helping to address skills gaps.
Neil Carberry, chief executive of the REC, said:
"The apprenticeship levy was designed with the best of intentions, but everyone knows it is not working as intended. It's time for reform.
"Our survey tells us that there are skills shortages in areas that training temps using levy funds could help to address, like hospitality, and health and social care.
"Recruiters are already doing what they can – but the contribution the recruitment industry could make on skills and progression would be hugely amplified if the government broadened the scope of the training apprenticeship levy funds could pay for."
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