March 2017

WARWICKSHIRE MEANS BUSINESS

How the new apprenticeship levy will work

Major reforms of the way apprenticeships are delivered come into force next month in the shape of the new apprenticeship levy. In an exclusive article for Warwickshire Means Business, Sue Husband, director of the National Apprenticeship Service, explains the thinking behind the levy and outlines the potential benefits for employers, apprentices and the economy.

 

Apprenticeships play a vital role in helping local businesses grow and prosper. A great way for employers to improve the skills base of their businesses, apprenticeships offer a ladder of opportunity for people to gain the life changing skills they need.

In 2015/16, 4,950 apprenticeships were started in Warwickshire. Nationally, apprenticeship participation reached a record high of nearly 900,000 in 2015/16, with 625,000 individuals starting an apprenticeship since May 2015.

The apprenticeship levy

Apprenticeships are at the heart of the government's drive to equip people of all ages with the skills that the country and employers need. They provide the opportunity and the means, to help address the skills shortages reported by many industries.

The government has embarked on a large-scale programme to reform the way apprenticeships are delivered and funded in England. Getting apprenticeships right for the changing work place depends on involvement and investment from employers.

Employer-led apprenticeship reforms are making apprenticeships even more valuable to employers by putting them in control of the development of apprenticeships, choosing the skills, training organisation, apprentice and how the apprenticeship is delivered - to ensure it meets their organisational needs. These reforms include changes to how apprenticeships are funded. This spring, all employers operating in the UK will be subject to an apprenticeship levy. The government has agreed an allowance for employers with an annual pay bill less than £3 million who will not contribute to the levy.

Through the levy, £2.5 billion will be invested in apprenticeships by 2020, and with more money than ever, the government will be helping people access better quality apprenticeships.

Who will the apprenticeship levy affect?

The levy is being introduced to support the delivery of an additional three million apprenticeship starts in England by 2020.

From Thursday 6 April, 2017, all UK employers will be liable to pay the levy, however a ‘levy allowance’ of £15,000 per year is also being introduced. This means that less than 2% of UK employers, including connected companies with an annual pay bill of more than £3 million, will pay the levy.

Where several UK employers are connected as a group, only one £15,000 levy allowance can be used. Groups of connected UK employers must decide what proportion of the levy allowance each employer in the group will be entitled to. Find out more about calculating the levy for connected companies or charities on GOV.UK.

How will the levy work?

With the changes to apprenticeship funding imminent, there are some things employers operating in the UK must do now.

If you have a pay bill, or are connected to a group with a collective pay bill of more than £3 million, then you should: 

  • Start planning how your business could use apprenticeships.
  • Read the updated guide for employers on paying the levy, accessing the apprenticeship service (an online digital system) and paying for apprenticeships in future.
  • Use the online tool for employers to calculate your levy contribution, begin to plan your training and estimate what you will have available to spend on apprenticeships.

If you are a UK employer, or group, with a pay bill of less than £3 million then you will be classed as a non-levy paying employer. In England, the government will pay 90% of your apprenticeship training and assessment costs. You will cover the additional 10% as well as any additional costs you agree with your chosen apprenticeship training provider.

The government is offering additional support to organisations with fewer than 50 workers by paying the full cost (100%) of training and assessment costs for their apprentices aged 16-18 and for those aged 19-24 formerly in care or with a local authority education, health and care plan.

All employers in England will have access to a new, easy to use apprenticeship service that will help support them to manage their apprenticeship programme. From May 2017 levy-paying employers will be able to access funding for apprenticeships through their apprenticeship service account.

The levy operates across the UK, arrangements are in place for those employers that operate in Scotland, Northern Ireland and Wales.

What are the benefits of the levy? 

The introduction of the new levy will dramatically change the apprenticeship sector. Through the levy, double the amount of money (£2.5 billion) will be invested in apprenticeships in 2019/20 compared to 2010/11, enabling growth of opportunities for people of all ages and from all backgrounds. Businesses will be able to establish new apprenticeships and increase the number of apprentices they currently recruit while also being able to up-skill their existing workforce with higher or degree-level apprenticeships.

Through the levy, the government is investing £60 million in supporting the training of apprentices from the poorest areas in the country, as well as providing an additional £150 a month for training providers to give extra learning support to an apprentice with learning or other disabilities to ensure social mobility for all.

The levy offers employers more control over apprenticeships to boost skills gaps within their organisation and tailor training opportunities to suit their needs.

How do I find out more?

These funding changes come in to effect from Monday 1 May 2017. Take a look at GOV.UK for Apprenticeship reforms: information for employers and take action today.

For more indormation about apprenticeships locally and the help provided by Warwickshire County Council's Apprenticeship Hub, please visit www.warwickshire.gov.uk/getanapprentice

 * Sue Husband, Director, Apprenticeships and Delivery Service, Skills Funding Agency, was previously Head of Education for the UK at McDonald’s. She started her career with McDonald’s in 1987, as a 16-year-old crew member, whilst studying for A-levels. Sue went on to work in a variety of roles in Operations, Franchising, Communications and Training, working with both Company and Franchised restaurants.

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