From April all employers in the UK with an annual pay bill over £3m will have to contribute to the levy at a rate of 0.5 per cent of their annual pay bill, raising an estimated £3bn towards creating more apprenticeships.

Each employer will receive an allowance of £15,000 to offset against their levy payment. It is envisaged that the levy will help deliver new apprenticeships and will support quality training by putting employers at the centre of the system. Employers who are committed to training will be able to get back more than they put in by training sufficient numbers of apprentices.

Small businesses will not have to pay training costs for 16- to 18-year-old apprentices. “This investment will create a ladder of opportunity for millions of people and give businesses the skills they need now and for the future.” Said Skills and Apprenticeships Minister, Robert Halfon.

However, although the Levy is upon us, it appears that many businesses are still in the dark, according to a study by the British Chambers of Commerce (BCC) which showed that two out of five firms either did not understand or did not know about the levy.

The survey of 1,600 business leaders also found that most believed the new levy felt more like a tax, showing that the government had been unsuccessful in communicating its apprenticeship fun ding policy.

Marcus Mason, head of education and skills at the BCC, commented that, “Firms value apprenticeships as a way of developing skills and increasing productivity.

A view which is borne out by a government survey into employers’ reactions to the levy, which found that although many employers expressed dislike for the levy, upon exploring their responses further it was found that on balance they were inclined to look for means of reclaiming as much of their levy payment as possible by increasing their 8 apprenticeship provision.

Though most employers could roughly estimate the size of their levy liability they were unsure of how much apprenticeship funding this could fund in practice - some indicated that until they had more information on expected levels of employer contribution to the costs of apprenticeships there was little point in trying to work out their planned response to the introduction of the levy

For those who had a longer history of engaging with apprenticeships and knowledge of the costs of this form of training, this was somewhat clearer. Employers were however clear to note that the levy payment would be entered as a cost in their internal management accounts and as such it would need to be accounted for in some way.

Though concrete plans for the use of their levy funds were not in place for the majority of employers involved in this study, many were in the process of preparing outline plans for consideration by management. A substantial proportion of companies who responded to the survey are involved in the delivery of relatively high cost apprenticeship (e.g. engineering and construction) where the decision to train apprentices was largely driven by the employer’s demand for skills in the workplace that could really only be met through apprenticeship, didn’t predict any great change in their hiring intentions.

However the levy could act as a catalyst to increase the provision of apprenticeship training in the business by employers that had hitherto been engaged in providing relatively low cost apprenticeships (e.g. in business services) but where similar alternatives to this form of training were available. The payment of the levy would likely tip such employers towards adopting the apprenticeship training route as opposed to the alternatives available to them. For some businesses, they had already begun to increase their use of apprenticeships but the levy was likely to accelerate this uptake

Through the levy, £2.5bn will be invested in apprenticeships by 2019-20 – twice what was spent in 2010-11.

David Williams of Middlesex University, who contributed to the BCC study said, “It is really important that government communicates to businesses the value of the levy in terms of its use to drive up the quality of on-the-job training and development.”

“The Government should allow businesses to use the levy funding to support other high-quality workplace training or there is a risk of displacing other valid forms of training. Fundamentally, treating apprenticeships as a numbers game would benefit neither businesses nor apprentices themselves.”

“The Government needs to ensure that businesses understand how they could benefit from the reforms, because if it just feels like yet another tax then then the policy will have failed.”