Are You Ready for the Apprenticeship Levy?

It’s just a matter of weeks until the apprenticeship levy comes into effect, but according to a recent survey by City & Guilds, nearly a third of UK employers are unaware of the existence of the new apprenticeship levy. Yet the findings also show that apprenticeships are a huge area of untapped potential that could be really beneficial for employers to fill skill gaps in businesses across the country. 

So what do you need to know about the apprenticeship levy? Here are the key facts.

What is the apprenticeship levy and why is it occurring?

The apprenticeship levy is a 0.5% government-imposed levy on UK organisations that is due to start on April 6th 2017. 

According to research, the UK lags behind the G7 average in terms of productivity by up to 21% and as a result loses £84 billion a year. The apprenticeship levy has been designed to solve the economic and employment challenges and skills shortages behind this loss of productivity by funding and encouraging a widespread uptake in apprenticeships. It aims to give businesses and organisations the opportunity to invest in up-skilling their workforces and attracting the talent they need to bolster productivity and inspire future growth and success. 

The government has set a target of 3 million apprenticeships by 2020 and £2.5 billion will be invested in apprenticeships over the coming years to facilitate this growth. The apprenticeship levy will play a key role in funding apprenticeships and puts employers in the driving seat, as they understand the skill requirements of their business and their sectors better than anyone else. 

Who does the apprenticeship levy apply to?

The apprenticeship levy will be paid by employers with pay bills over £3 million – around 2% of organisations nationally. These employers will pay 0.5% of their total annual wage bill through PAYE and these funds will be transferred into a digital account where the government will add an additional 10% top-up payment. These funds can then only be used to pay for apprenticeship training and assessment by approved providers. They cannot be used for other costs such as wages, the costs of setting up apprenticeship programmes, or travel expenses.

What are Trailblazer Apprenticeships? 

While the more traditional apprenticeship frameworks are still available at the moment, these are being phased out by 2020 as the government moves over to employer-led standards. These new standards redefine apprenticeships as a qualification that really meets the needs of employers. As such, they have been developed by employer groups and rigorously quality checked.  

There are strict requirements that new apprenticeships must adhere to. The apprentice can be an existing employee or a new hire and must be employed in a real job role; they must work towards achieving an approved standard or framework and spend at least 20% of their time on off-the-job training that is directly relevant to the apprenticeship framework or standard; and the apprenticeship must last a minimum of 12 months and be linked to a specific occupational level and that develop the knowledge, behaviour and skills for a specific job role.

How does the levy affect small and medium-sized businesses?

If you’re not paying the levy but still want to get involved with apprenticeships, then there are funding opportunities and incentives to encourage widespread engagement. The government has recently announced that 98% of employers in England will have 90% of their training costs met with levy funds from the government. To ensure equality and opportunity, the government has also promised extra funds for those who take on school leavers aged 16-18 or young care leavers. 

How do I access funds?

To draw down from your levy fund, you’ll need to register online and register the details of your apprentice. Once you have done this, you’ll be able to see how much can be drawn down for each apprentice in the form of a voucher. These vouchers will be eligible for spending with a registered provider from May 2017. You have two years to spend your funds. If you don’t spend them within this time, they will be reallocated to other businesses seeking to spend more on apprenticeships. However, if your organisation hasn’t yet planned to implement apprenticeships, this time period gives you plenty of time to get a scheme in place. 

How can businesses prepare for the levy?

There are several steps you can take to make sure you’re as prepared as possible before April 6th. 

Whether you’re going to be paying the levy or not, it’s important to keep up to date with legislation to ensure that you know how it’s going to affect you and your organisation. It’s therefore worth keeping as up to date as much as possible with government announcements. There have, however, been delays when it comes to announcing some of the important details of the levy, which is causing considerable frustration as this is interrupting the plans of providers, organisations and apprentices. 

If you are going to be paying the levy, then it’s in your interest to consider taking on apprentices to recoup your investments into the levy. Calculating how much your levy payments will come to is the ideal first step. Next, think about identifying the skills gaps or areas within your business that apprenticeships could help to develop. You may need to conduct a gap analysis to assess this accurately. From here, you can consider which training providers you’d like to partner with or whether you’d like to become a registered training provider so that you can deliver your training in-house.

For more information on apprenticeships, visit https://www.gov.uk/topic/further-education-skills/apprenticeships or check out the latest updates online. Or if you are a company wanting to talk to experts about apprenticeships and how you can cater for this in your business give us a call on 01530 833 533.