Workers face £40k financial penalty if they switch careers, research warns

Experts call for lifelong learning entitlement to be expanded to help ease financial burden

Experts call for lifelong learning entitlement to be expanded to help ease financial burden

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Workers face a bill of around £40,000 if they want to retrain – a financial penalty that hits mostly younger people and those with lower-level qualifications, a new report has warned.

The Learning and Work Institute (L&W), which conducted the analysis shared exclusively with FE Week, is now calling for the incoming lifelong learning entitlement (LLE) to be expanded to help ease the financial burden on people wanting to switch career.

The government gave the greenlight to the LLE legislation last month, which will provide the equivalent of four years of tuition loans to students on courses between levels four and six when it launches in 2025. But the L&W said the LLE should cover courses at levels two and three as well. Under its plans, funding for those courses would not need to be paid back.

Analysis by the institute found that people switching sectors face an average pay cut of £3,731 (14 per cent) per year.

However, if training is needed to change careers, workers face a potential retraining bill of up to £40,000. L&W calculated that to take a one-year, full-time course, the average worker would lose £30,000 in lost wages plus course fees on top of the subsequent drop in their earnings.

L&W chief executive Stephen Evans told FE Week the £40,000 number is a “ballpark figure” which would vary by person, but pointed out that it was certain industries and demographics that would mostly be hit by the penalty.

His report, co-authored with Lovedeep Vaid, said that of the 7.4 million people who started a new job in 2022-23, 1.7 million switched sectors.

According to the research, job moves were one third higher in retail, and double in hospitality, compared to the UK average. In addition, people with lower qualifications were 30 per cent more likely to switch sectors than higher qualified people and young people were three times more likely to switch sectors than older people, meaning career change is “particularly significant among workers with lower earnings”.

‘A patchwork quilt of offers’

While Evans said the current LLE is a “good idea”, he argued the “real gap is for level two and three [qualifications]”.

“It should be free training, plus maintenance loans for living costs that you would have to pay back, unless you’re on universal credit.” Currently, support for level two and three courses resembles a “patchwork quilt of offers”, he said.

The level of support for level two and three courses depends on a learner’s age and course, but Evans argued widening that support would reduce the “big financial risks” associated with retraining.

“People have got families to support, or they’ve got rent costs, or mortgage costs, they’ve got financial commitments.

“They are struggling with their bills already. Are they going to take the risk of this big drop in income and the potential long-term pay penalty when they’re struggling to make ends meet already?”

L&W suggested grouping financial support for all courses from level two upwards under the LLE.

‘Reflect 21st century reality’

The report warned that without better support to manage longer working lives and changing skill demands, “people and businesses will find their opportunities limited and economic growth will be held back”.

“Policy and practice need to change to reflect 21st century reality,” it added.

The report also called on the government to expand the right to request time off to train scheme, which allows people to take up to 16 weeks off work to do that. Under the plan, workers would be able to stay employed while training for a year.

They would not be paid, but it would mean “they could return to their current employer after training either in a different role or if retraining does not work out for them.

“This helps to reduce the risk to people of retraining by ensuring they have a job and employer to return to.”

On top of that, L&W reiterated calls to widen access to skills bootcamps and apprenticeships. Government data shows that three-quarters of skills bootcamp starters already have a level three qualification, while nearly one in five have a postgraduate qualification.

“What about the 16 million working-age people not qualified to level 3 who want to or need to retrain?” the report asked.

A spokesperson for the Department for Education claimed that funding is already available to help career changes, including “for many level two and three courses through the adult education budget and advanced learner loans”.

They also said the opportunity is there for more people to upskill for free via skills bootcamps or the free courses for jobs scheme.

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One comment

  1. Just Saying

    The statement “£40k penalty” seems to reflect a poor standard of research work (and probably biased) which when exclusively reported upon to generate a sensational headline, merely serves to highlight this. What value is there in reporting that a single seat in row Z of the “ballpark” is occupied by someone who may have a bill of £40k? …. Really !