Think apprenticeship, think school leavers……think again!
The 6th of April saw the introduction of the Apprentice Levy, but what does this mean for your business?
The apprentice levy will be based on your payroll and payments kick in, via PAYE, once your annual salary bill is £3m or more.
For small business with salary bills below the £3m threshold the levy could be good news, they will have a Digital Apprenticeship Service Account they can access to fund apprentice training without having to contribute to it.
But what about businesses that pay the levy?
The levy is equal to 0.5% of your wage bill and is held in a digital account. If you have a group of companies you can hold the account at a group level and share the fund it creates between the businesses. This could be very useful for groups of businesses that have very diverse employees and one area of the business is more likely to use the fund than another.
Employers who pay the levy will receive a £15,000 allowance to offset against their payment. However, employers who operate multiple payrolls will only be able to claim one allowance for the levy. Some businesses will find that they only pay the levy in months when bonuses or commission are paid, for other businesses the use of seasonal or casual staff may have an impact. There may be an opportunity for a refund when your pay-bill goes back below the threshold, but the impact on cash-flow and needs to be planned for.
What can the levy be used for?
The rules about how the levy can be used are tight. It has to be used to fund apprenticeships with an approved provider and can not pay for wages, travel or subsistence. So this means it cannot be used for internal training or CPD.
Apprenticeships have no age restriction and therefore existing employees who need to up-skill or reskill can complete an apprenticeship. This may become important for employers who need to reskill / retrain older employees.
Additional criteria for an apprenticeship to qualify for funding includes:
- The employee being in a real job lasting for a 12 month period – this is important as it means you are making a firm commitment to employ the apprentice for the full period.
- The apprenticeship must be at a higher level than the Apprentice’s existing qualifications.
- 20% of their working week must be available for off the job training.
- The employee must be developing new skills / knowledge relevant to their role and enable them to progress their career.
What should I do?
Larger businesses might be justified in viewing the levy as a tax, as it is possible that they will build up an account that is potentially far greater than their ability to use it, and funds that are not used within 2 years are lost. It is therefore important for all businesses to review how they can access their levy contributions and whether the business would benefit from Apprenticeships.
People Puzzles are already working with a number of employers to optimise their HR Strategy and in turn their Apprentice Levy, to develop apprentice schemes and to ensure that pay strategies and workload planning take account of the levy.