The government drive to boost apprenticeships is getting a massive boost next year, but many businesses should be planning now to ensure they get the most benefit.
It’s the new Apprenticeship Levy by which the Government aims to fund three million apprenticeships in the UK by 2020.Some are calling it another tax on business but the idea is to persuade companies to take on more apprentices.
The new system was announced in the Summer Budget of 2015 and will not only see a requirement for some employers to contribute; it will also bring changes to the funding for apprenticeship training for everyone. Apprentices don’t have to be brand new to an organisation, they can also be employees looking to make a move up the career ladder or make a change in work direction.
It all kicks off on April 6, 2017, and while it does apply to all employers, a £15,000 allowance means that only those firms whose pay bill exceeds £3 million will actually have to pay - 0.5% - into the levy each month, subject to the rules on connected companies and variable pay. It is also possible that there will be certain circumstances in which some employers with an annual pay bill of under £3 million will have to pay some levy at some point during the year or that a group of companies with a combined pay bill under that figure will be subject to making a payment.
It’s not just the private sector which will be affected; the public sector is liable too. Local councils and other organisations will be required to pay 0.5% of their wages bill. The sector will also have to meet the legislative requirements that are found within the Enterprise Bill stipulating that all public sector organisations must ensure that at any one time, 2.3% of their workforce are apprentices. In practice that means, for example, as well as paying the levy, local councils would need to manage and train 100 – 200 apprentices annually.
For those that do not have to pay there will be a new system in which, having decided upon the apprenticeship and training provider and agreed the cost, you will
contribute towards that cost and the Government will pay the rest up to a cap directly to the provider.
The Government says the levy will not affect the way businesses fund training for trainees who started an apprenticeship programme before May 1, 2017. Companies will just need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.
The introduction of the new system will, the Government maintains, put apprenticeship funding into employers’ hands while at the same time encouraging them to invest in their apprentices and take on more. Those who pay the levy in England and are committed to apprenticeships training will, it points out, get more back than they pay in thanks to its 10% top-up paid directly to a specifically created online digital apprenticeship service account, which they will be able to set up from January.
As the monthly payment goes into this account, it gains the top-up, in effect 10p for every £1 that’s entered. But the money does have to be spent on apprenticeship training, it can’t just be left to accrue, and if it isn’t spent after 18 months it will expire - top-ups too - and used to fund apprenticeships training for SMEs.This new digital apprenticeship service is also available to those who don’t have to pay the levy as it is aimed at helping all businesses select an apprenticeship framework or standard, chose a training provider, deliverer and assessor and advertise apprenticeship vacancies.
Not surprisingly, the announcement of the new levy has been met with mixed reactions. Some organisations fear that larger business will have to find additional funds to pay for the ‘on costs’ of recruiting more apprentices while others view it as a way to raise funds to increase the quality of apprenticeships across the board and of ensuring apprenticeships are built into the skills plans of all larger businesses.
The British Chambers of Commerce, which has broadly welcomed the scheme, has also sounded a note of caution.
Director of Research Mike Spicer says: “The government’s apprenticeship target is lauda-ble, and businesses see them as a vital way of narrowing the skills gap.
“But the focus must be on high-quality apprenticeships rather than purely as a numbers game.
“We look forward to inputting our member views in this complex area going forward.”