HR · 6 April 2017

What smaller employers need to know about the new Apprenticeship Levy

apprenticeships levy
Small business owners can use the Apprenticeship Levy the fund workplace training for young people

The UK Apprenticeship Levy is introduced today (6 April), meaning companies with an annual payroll above £3m will be charged 0.5 per cent on annual bills to fund the government target of three million new apprenticeships by 2020.

The new system will change the way apprenticeships are funded and accessed in Britain. The government has claimed the Apprenticeship Levy will give employers greater control over workplace training.

While owners of small companies are likely to fall beneath the threshold, the Apprenticeship Levy does open funding opportunities for smaller employers. They may not pay into the fund, but they can draw from it.

Changes for smaller employers

A new “co-investment” system will be introduced from May 2017. This means non-levy paying employers will pay ten per cent towards apprenticeship training, with the remaining 90 per cent paid by government up to the maximum funding band.

For business owners with fewer than 50 staff, the Apprenticeship Levy will fund all training for 16 to 18 year olds, and 19 to 24 year olds with an Education Health Care (EHC) plan.

All non-levy paying employers will receive an incentive payment of £1,000 for young apprentices and those with EHC plans.

The government’s digital service (GDS) has said it will assist employers in accessing the online apprenticeships database, where they can search and select training frameworks and post apprenticeship vacancies.

Non-levy paying employers will not be able to use the digital apprenticeship service to pay for training until 2018, when the government will issue further guidance.

John Perkins, chair of the Institution of Engineering and Technology’s education and skills panel, acknowledged that more needed to be done to make small business owners aware of the opportunities brought by the Apprenticeship Levy.

“We are concerned that smaller organisations who are exempt from paying the levy may see it as an initiative for larger businesses only and risk being left behind,” Perkins said in a statement.

“There remains a need to work with these smaller employers, who make up the majority of UK business, to ensure they understand the benefits of the levy in helping to create apprenticeship-led pathways into work and invest in on-the-job training.”

A number of studies have shown that awareness of the new system remains low across the board, and not just among smaller employers.

A new study by recruitment specialist Manpower revealed as many as 63 per cent of all UK employers had little or no knowledge of the Apprenticeship Levy, while the Chartered Institute of Personnel and Development (CIPD) has suggested under a third of affected business owners have calculated how much the levy will cost their firm.

Should you hire an apprentice?

Research from the Federation of Small Businesses (FSB) in 2016 showed the number of small business owners taking on apprentices was nine per cent higher than the national average.

The National Apprenticeship Service has claimed 90 per cent of employers reported a benefit to the regular flow of suitable staff.

Our employment law expert recently provided a guide to hiring an apprentice

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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