The Apprenticeship Levy: Changing the face of apprenticeships

Author
Nicky Williams
Head of Skills | Business West
14th February 2017

As a businesses owner, you may already be aware that you’ll have to pay a levy from April – but have you considered how it can be intelligently spent to help your business grow? 

From April, every business in the UK with a salary bill of over £3 million will be liable to pay the new Apprenticeship Levy. The levy will change the face of apprenticeship delivery bringing with it a host of training benefits for all businesses.

The levy has been introduced as part of the Government’s vision to increase the quality and quantity of apprenticeships and reach the commitment of 3 million apprenticeship starts by 2020, this is a clear steer that businesses will need to start investing in skills and training.

What are the facts & figures?

  • Collected from April 2017, employers with an annual salary bill (and operating in the UK) of over £3m will be charged 0.5% of their annual pay bill. 
  • All levy payers will be given an allowance of £15,000 per year to offset against the levy.
  • The remaining balance will be paid through the Pay as You Earn (PAYE) system monthly and these payments will appear in a 'levy account' through the ‘Digital Apprenticeship Service’.  
  • Employers have 24 months to spend their levy funds on training

Still think you’ll not be affected? 

You may not have a huge workforce; but many high growth, high value SMEs in the South West have highly skilled teams with high salary bills. A significant number of businesses will just tip over into the levy tax bracket or will do so in the next few years.

Many businesses are still not aware of how their levy account can be spent to develop the skills of their existing workforce, as well as recruit and train new employees; the levy contribution is only the start.

As a small business, whilst you may not be directly affected by the levy; the way apprenticeships will be delivered and funded is also changing from May and this is a great training opportunity. 

So what do you need to know?

Training raises the level of skills available in the economy, driving productivity and national prosperity. Economic benefits are great to a business when individuals achieve a higher level of qualification, increasing their productivity and become more valued in a company. So whilst this is good news, many businesses are not aware of how their levy account can be spent to develop the skills of their existing workforce as well as recruit and train new employees.

Levy-paying employers can register with the Digital Apprenticeship Service (DAS) to set up their digital account. It’s up to the employer to work out how much they will need to pay to HMRC on a monthly basis through PAYE (minus the £15k allowance) and at present you will have 24 months to spend that annual levy. Through the digital account, employers will be able to redeem their entitlement to pay for apprentice training and access information about appropriate apprenticeship training courses and providers. 

There are still concerns on how this will all work; particularly the cost of training and administrating the levy and how the digital account for levy employers will operate. However there are benefits to the changes that come with the apprenticeship levy.

See the levy as an opportunity

From May 2017, new funding, more government investment and new standards for apprenticeships will be there for everyone to benefit from. SMEs are the biggest employers of apprenticeships in the region and therefore they should be ready to reap the benefits from the reforms. Non-levy payers will get;

  • 90% of the apprentice training paid for by Government (at present)
  • 100% paid for with additional incentives when employing someone under the age of 19

And, for levy paying companies, the money in the 'levy account' can be used on apprenticeship training not only for new staff but also for Continued Professional Development for existing staff – up to higher degree apprenticeships.

The region is gearing up to be a beacon of best practice in apprenticeship delivery. The West of England LEP has a grand apprenticeship ambition, and the region has an active local Employers Apprenticeship Ambassadors Network. As an employer, you can become more involved by helping shape delivery of apprenticeships through the new standards to ensure training meets employer’s needs or raising awareness of the opportunities your business might offer potential apprentices.

How can Business West help?

We are keen to ensure that all businesses are ready for the change and get the most from the apprenticeship reforms.

If you are a business in the West of England you can benefit from our new free Skills West support service which will provide you with impartial advice and guidance not only for the apprenticeship levy but to help manage all your skills needs and requirements. Get in touch with us today.

  • We're here to help

    Think you'll be impacted by the apprenticeship levy? Our skills advisers can answer any queries you have. Give us a call on 0330 124 4446

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    If you have any specific questions about the apprenticeship levy or hiring an apprentice, simply let us know. Call us on 0330 124 4446