With the Apprenticeship Levy just around the corner, UK employers need to make sure they’re ready to make the most of the situation at hand.
The highly anticipated UK Apprenticeship Levy is coming into force on April 6th, 2017.
Part of a government effort to train three million new apprentices by 2020, the controversial tax has been hotly debated among major organisations, of which many are reluctant to participate in the programme.
Somewhat alarmingly, a recent survey conducted by City & Guilds revealed that as of last month, nearly 23% of the 500 senior business leaders who participated were completely unaware of the impending changes to the apprenticeship system. Moreover, 28% said they didn’t know whether or not they’d be required to contribute. In order to clear things up a bit, I’ve outlined some of the key points that businesses need to know if they want to be prepared.
Who Is Required to Pay the Levy?
Employers with an annual wage bill of more than £3 million will be required to pay 0.5% of the total towards the levy. Each company will then receive a £15,000 “levy allowance,” which will not be included when calculating the 0.5% total.
How Does the Allowance Work?
Each company’s £15,000 will be distributed in £1,250 monthly installments, with unused allowance carried over for up to 18 months. Funds will automatically expire 18 months after they enter an account unless they are spent on apprenticeship training.
While the levy is being introduced in April, allowance payments are set to start in May 2017 and it will be up to employers to notify HM Revenue and Customs (HMRC) each month as to whether they are eligible to pay.
How Will Companies Access Their Allowance?
Once an employer has paid the levy to HMRC, they will be able to access funding for apprenticeships through a new digital apprenticeship service account. The account will be used to pay for training and assessment for Apprentices in England, and can also be used to find training providers to assist in developing apprenticeship programmes.
What About Current Apprentices?
Funding for apprentices who begin their training before April 2017 will be provided under the terms in place when the apprenticeship began.
Internal workplace apprenticeship training programmes will be phased out by 2020, when all companies will be required to choose an approved apprenticeship standard training programme.
However, employers may apply to become registered apprenticeship training providers if they meet certain requirements. Employers who choose to register will be required to enter into a contract with the Skills Funding Agency which will monitor training standards.
What about employers who aren’t required to pay the levy?
Employers who are not required to pay the levy will not need to use the digital apprenticeship service to pay for apprenticeship training and assessment until 2018. When the programme begins in April 2017, these employers may choose which training providers and assessment organisation they prefer using the registers available on the digital apprenticeship service.
These employers will have to make a 10% contribution to the cost of their training. The government will pay the rest, up to the maximum amount of funding available for that apprenticeship. You will need to pay this directly to the provider. Employers with fewer than 50 employees will not have to make a co-investment as 100% of the cost will be met by the Government.
How can employers manage the influx of new hires?
At the end of the day, the Apprenticeship Levy presents employers with an opportunity to invest in young talent and help narrow a growing skills gap in the UK. It also opens the door for a more diverse group of candidates, giving recruiters the chance to break industry stereotypes and hire across gender, ethnicity and socio-economic background.
With the proper tools in place, the apprenticeship recruitment process can be cost-effective, efficient and painless. In fact, if companies go about this correctly, they won't just be training the next generation of the UK workforce — they could be hiring the future leaders of the company.
Worried about the Apprenticeship Levy? On Tuesday 28 March, 12:30-1:30pm GMT, LaunchPad CEO Will Hamilton, Corndel CTO Richard Alberg and RSM’s National Student Resourcing Lead Farrah Woolley will be hosting a webinar discussion which will cover the following topics:
- How the Apprenticeship Levy will affect your organisation
- Insights from an organisational perspective
- How to get the most from the government initiative through proper training and recruitment