HR · 12 August 2016

Smaller employers gain concessions in apprenticeship funding reform

apprenticeship reform
Employers with under 50 staff that take on an apprentices will not be made to contribute towards the cost of training

The government has announced plans detailing for the first time the proportion of the cost of training an apprentice that should be levied on individual small businesses.

In an announcement on 12 August, the government laid out proposals for how new apprenticeship funding arrangements should work under a newly-updated apprenticeships system.

In an important trade off with small business, the government has pledged that employers with under 50 staff which take on an apprentice aged between 16 and 18 will not be made to make a contribution towards the cost of training.

The proposals also outline that businesses which take on younger apprentices will benefit from a cash incentive of £1,000 per apprentice.

With recent research revealing the untapped potential of millions of smaller British firms to take on apprentices, the new concessions could prove vital to reaching the government’s proposed target of three million new apprentices by 2020.

The Federation of Small Business’s (FSB) national chairman Mike Cherry said in a statement: “Smaller businesses are taking on more apprentices than ever before. What’s more, a quarter of our members say they are considering employing an apprentice in the future, but only if they feel they’re affordable.”

A quarter of small businesses already employ an apprentice, according to recent FSB research, with 70 per cent of these apprentices aged between 16 and 19 years old.

Some 67 per cent of apprentices at small businesses surveyed by the FSB were offered long-term employment following their training, emphasising how necessary small firms are to the success of the UK apprenticeship scheme.

Cherry went on to say: “Getting apprenticeship reform right, including changes to existing funding arrangements, is key to apprenticeship growth among small businesses.

“Many small company owners are committed to apprenticeships, but many more continue to be worried about the time and personal commitment required.”

Apprenticeship reform, including the new proposals, is underpinned by the planned apprenticeship levy – to be paid by larger UK employers from Apirl 2017.

It is hoped the apprenticeship levy will lead to greater investment in training, with employers handed more influence over how apprenticeships are deigned.

Company owners from all sectors and industries will need to pay the apprenticeship levy if their firm’s wage bill amounts to more than £3m a year.

Those businesses paying the levy will gain access to a new digital apprenticeship services the will allow them to allocate levy contributions to specific training, however the vast majority of employers will not be required to pay the levy ­– continuing to benefit from government support.

Meet LDN Group’s Simon Bozzoli – the man connecting London’s employers with young apprentices. 

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Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.