The Apprenticeship Levy: Why does it matter?

Written by Angela Middleton on 21 August 2017 in Opinion
Opinion

Angela Middleton gives us another Apprenticeship Levy primer.

The Apprenticeship Levy was introduced almost four months ago (on 6 April 2017). Despite the support the levy can and does provide for apprentices, many businesses are yet to use it to their full advantage. This may be due to general confusion over how to apply the levy, as well as a lack of understanding of what the levy entails.

What is the Apprenticeship Levy?

The levy is effectively a tax on all UK employers to support the funding of apprenticeships. It was introduced at a rate of 0.5% of total PAYE (Pay As You Earn) tax to all businesses with an annual payroll bill of over £3m.

It is payable alongside Income Tax and National Insurance and employers can claim this back to fund apprenticeship training. The government also tops up each business’s apprenticeship fund with an additional 10% every month.

Individual employers' funding is made available to them via a new digital account, through which employers can pay for training for apprentices via a recognised training provider. If businesses do not claim these funds, they will lose them. It is therefore imperative that businesses use their funds sooner rather than later as the funding expires after two years. 

The introduction of the levy is progressively seen as a logical next step to getting more apprentices into companies and employers tend to accept and understand this. 

The benefits of the Apprenticeship Levy

Organisations need to be suitably informed about how the Apprenticeship Levy works and how it will benefit their business. As a result, they will be more enthused about using their levy funding in the most advantageous way for their business.

There has been an increase in positivity surrounding apprenticeships. The introduction of the levy is progressively seen as a logical next step to getting more apprentices into companies and employers tend to accept and understand this.

Some employers tend to be more vigilant than others, but this is often because they are keen to use the funds they amass to their full advantage. From my experience, I’ve found that employers want to use the levy fund in the most beneficial way for their business. Of course, this varies depending on each company and there is no one-size-fits-all approach.

Moving towards a recruitment strategy focused more on apprenticeships is not an overnight exercise. Look at the way your business operates and see how apprentices can add to the development and growth of the company.

When a business takes on one apprentice, they tend to be interested in taking on other apprentices in the future. Changing your business to accommodate more apprentices will not happen overnight. However, if you start to make the changes now you will reap the benefits sooner and more effectively.

The Apprenticeship Levy provides effective support for doing this and it will make life easier for businesses in the long term.


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Many businesses will also use a proportion of the levy fund for the training of existing members of staff. The prime reason for the Apprenticeship Levy being introduced is to create new apprenticeships, but this does not mean the training that is offered to existing staff is not beneficial.

These members of staff are already in a secure and stable job, but it is very important that businesses continue to invest in them. Also, sometimes it won’t be possible for companies to use their whole Apprenticeship Levy fund on new apprentices.

For example, in the case of many large local authorities they would have to take on thousands of new apprentices every year to use the funds available to them, which is unlikely to be feasible. Instead, they can use the money from the levy to think about the career pipeline of employees and to provide adequate training to support internal development.

When focusing on the Apprenticeship Levy or any other legislative changes to your business, it is important to be pragmatic. Not every business can embrace change immediately but it is clear that there is not the strong resistance to the levy that was suggested when it was first discussed.

By ensuring that employers have all the facts and access to proper consultancy services which will help them to make informed decisions on how to use their funds, there is no reason for the levy to be anything other than a great success – for everyone. 

 

About the author

Angela Middleton is chairman of award-winning Apprenticeship Levy consultancy and training provider MiddletonMurray

 

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