Apprenticeship levy

The Apprenticeship Levy. Can scaling businesses benefit from recruiting apprentices?

The biggest challenge facing scaling businesses is often not motivating and retaining staff, it’s finding great talent in the first place.

Recruiting graduates and “growing your own” has gained momentum among SMEs, but could the new “apprenticeship levy” help them source future leaders at lower cost?

So, what are the advantages of apprenticeships?

  • Apprenticeship programmes generally combine work and class based training. For employers, this means that apprentices will be building skills that are directly relevant to their business.
  • Apprenticeships aren’t only for school leavers. Being able to qualify up to bachelor degree level and above means than existing employees can develop their skills and strengths through apprenticeship training.
  • Investing in people through long term training plans often leads to improved motivation, commitment and loyalty. Not only do businesses retain the value of their investment for longer, they can reduce the significant time and cost involved in recruiting and onboarding replacement hires.
  • For small businesses, having access to government funds without having to pay the cost of the levy makes training apprentices a cost effective way of developing talent.
  • For many, the ever increasing burden of student loans makes the opportunity to obtain a high quality, nationally recognised qualification, while also earning, an attractive alternative to university. The competition for the brightest apprentices could soon match graduate recruitment. Building a successful apprenticeship programme now could help employers attract the best talent for years to come.

What is the Apprenticeship Levy and who has to pay?

The Apprenticeship Levy applies to UK employers who have, or expect to have an annual PAYE bill of over £3 million – this includes the cost of salary, bonuses, commission and other payments that are subject to Class 1 NICs.

Relevant employers will have to pay 0.5% of their annual payroll into the Levy. These funds can then be used to pay for training for new apprenticeships.

Payments are to be made monthly from 6 April 2017. If paybill unexpectedly increases during the year and is likely to exceed £3m, employers will have to start paying the levy at that point.

Small businesses set to gain from new approach to funding

A new ‘co-investment’ scheme for employers with an annual paybill of less than £3m will mean that the government and employers will share the cost of training apprentices, with the government paying 90%. Small employers will therefore be able to benefit from the new approach without having to pay the levy.

Employers will be able to access government co-investment funding, through appropriate apprenticeship training providers, from 1 May 2017.

Apprenticeships will be available in many professions

Apprenticeship programmes are being developed across a wide range of disciplines, including Digital; Science; Legal; Finance and Accounting; Sales and Marketing; Procurement; HR; Business and Administration.

Qualifications available up to professional level

Apprenticeships will be available at seven different levels. Level 3 is equivalent to 2 A Levels while Levels 6 and 7 equate to a bachelor’s or masters’ degree. At the moment, not all disciplines offer apprenticeship training to all levels.

Arrangements differ across the UK

Different arrangements for apprenticeship programmes and funding apply in Wales, Scotland and Northern Ireland.

Protecting the ‘Apprenticeship’ brand

A new criminal offence means that it is unlawful for a training provider to offer a course or training as an apprenticeship if it is not a statutory apprenticeship under the new provisions. This means that employers can be confident they are paying for high quality, regulated training.

What you should do now

If you want to know more about how you could benefit from the Apprenticeship Levy, please contact Kay Mellor kmellor@ifteam from our HR Services team.