Is the apprenticeship levy good or bad for business?

Is the apprenticeship levy good or bad for business?

The government has announced plans to introduce a new UK-wide levy on large employers to fund apprenticeships – a significant shift in skills, policy and funding. Experience of levy systems in the UK and internationally is mixed, with many failing to deliver the intended business benefits.

The new apprenticeship levy – what does it mean for you?

The amount that UK businesses have invested in training has fallen consistently over the last 20 years and UK productivity now lags behind other major Organisation for Economic Co-operation and Development countries.

With this in mind, the government must ensure the new apprenticeship levy drives up quality, gives employers real control and delivers the higher level skills that businesses and the economy needs.

The apprenticeship levy will come into effect in April 2017, at a rate of 0.5% of an employer’s pay bill. With a £15,000 allowance for employer this will mean the levy will only be paid on employers’ pay bills over £3 million. Subsequently, less than 2% of UK employers will pay the levy.

Shopping for an apprentice?

The government will create the Digital Apprenticeship Service online portal; from here UK businesses will have access to a range of services which allows them to ‘shop’ for apprentices, as well as find accredited training providers. Training is paid for using the digital vouchers companies paying-in will receive. All UK companies will have access to the portal, regardless of whether the business has contributed to the Apprenticeship Levy or not.

The government believes this will create a national database of apprentices, which will improve the quality and availability of apprentices.

The good, the bad and the levy!

Many employers have raised concerns over the plans to fund apprenticeships through the levy on large businesses, warning that the policy is a ‘blunt tool’ in driving up standards of vocational training.*

However, businesses could use the opportunity to their advantage and create a workforce for the future.

The Good

  • Revenue from the levy will help fund all post-16 apprenticeships in the UK
  • Funding will be directly controlled by employers via the apprenticeship vouchers
  • Businesses will be able to ‘get back more than they put in’ by showing their commitment to training and increasing their apprenticeship numbers
  • SMEs will have access to funds to recruit apprenticeships and tailor the programme to their requirements, thus helping to grow their own workforce and positively impacting the UK economy

The Bad

The levy has bought much scepticism as to whether it will bring ‘quality’ to apprenticeships and many larger organisations in the UK are rumoured to have said that the levy will only encourage low quality training programmes to help increase numbers, so the government can reach their target of three million new apprenticeships by 2020.

How is your business preparing for the levy?

With some businesses labelling the levy as a ‘payroll tax’ and,  with just 14 months to go before the Apprenticeship Levy comes into force, companies are advised to start planning their apprenticeship provision if they have not done so already.

If your business is eligible to pay the levy, the earlier you prepare, the easier the transition will be.

For more information on the new apprenticeship levy, click here.