This month, in April 2017 all large employers, classified as those with a total annual wage bill of more than £3 million, will be required to pay the Apprenticeship Levy. It’s essentially a tax on larger businesses that the government will use to help fund their new initiative to train three million new apprentices by 2020.
The good news for small businesses though, and the reason we are telling you about this now, is that small businesses will be able to access funds to pay for apprenticeship training even though they haven’t paid the levy.
Why is the Apprenticeship Levy deemed necessary?
“Overall, there has been a steady decline in the amount and quality of training undertaken by employers over the last 20 years. This has been bad for UK productivity,” said Nick Boles, the Skills Minister.
The Government would like apprenticeships to become a viable alternative to university degrees and they believe it will help upskill young people to reduce skills gaps in the UK workforce. By involving the businesses in the creation of the apprenticeship training requirements it’s hoped that the training will be what industry needs, as well as ensuring the businesses buy in to the whole process.
What’s in it specifically for small businesses?
Businesses with a wage bill that’s less than £3 million per annum will be asked to make a 10% contribution towards the cost of any apprenticeship training given to an employee and the government will pay the remaining 90%. You will still need to cover the salary of the apprentice.
And businesses with less than 50 employees won’t pay any apprenticeship training or assessment costs if they employ apprentices under the age of 19, and if they are new to apprenticeships, they can apply to receive a VAT free apprenticeship grant of up to £1,500 to assist in employing a new recruit aged between 16 and 24.
For those already employing apprentices, anyone accepted onto training before May 1 2017 will be funded for the full duration under the terms and conditions that were in place when that scheme started.
How does it work for the larger employers?
All employers with a total annual wage bill of more than £3million are required from May 2017 to contribute the amount equivalent to 0.5% of their total wage bill to the levy. The idea is to increase the total funding available to pay for apprenticeship training and assessment, which larger businesses can also make use of for the training and assessment costs of their apprentices.
Who provides the Apprenticeship training and how does it work?
The training is still provided by a Government approved list of training providers and as part of the new system to further engage businesses in the apprenticeship programme employers themselves can also apply to become training organisations and help set the standards and framework for the apprentice training programmes.
The apprentice undertakes training for at least 20% of their working time from an external training provider, working in a real job for their organisation for the other 80% of the time. So for a full time position that’s equivalent to one day a week of training for the apprentice. It is this training and any assessment costs that the employer can now get funded as part of the new Levy scheme.. The apprentice salary is still paid for by the employer.
Apprentices can provide a good way for businesses to recruit younger staff who can be trained to an industry standard at the same time as learning the ropes in your organisation. If you would like to speak to a consultant about this please call 0333 444 0165 or email email@example.com