A year of the Apprenticeship Levy – where are we?
While the debate continues about the success of the Apprenticeship Levy, one thing appears to remain clear – that many employers are still baffled by the government initiative.
It’s now exactly a year since the Apprenticeship Levy came into effect, impacting on all employers who are looking for training for their staff, both existing and new. The initiative splits businesses into two categories; levy and non-levy paying employers. Those companies with an annual wage bill of more than £3m pay 0.5 per cent of their payroll costs into the scheme, which they can then claim back for training using their online digital account. Employers in this category will receive a 10 per cent top up from the government, meaning for every £1 that enters a business’ digital account it gets an additional 10 pence.
Non-levy employers are businesses with an annual wage bill of £3m or less (approximately 98% of all businesses). Businesses in this category will receive 90 per cent of the training costs from the government, and they pay the remaining ten per cent of the training costs.
The aim of the Apprenticeship Levy is to raise £3bn a year and thus create three million new apprentices by 2020.
Amid claims by some employers that the levy simply isn’t working and figures showing a decline in the number of apprenticeship take-ups; there is still optimism that the scheme will work – all it needs is time.
On the first anniversary of the Apprenticeship Levy, Damian Burdin, Chief Executive at Progress to Excellence Ltd, has echoed the words of the Apprenticeship and Skills Minister, Anne Milton, who said this week:
“Lots of businesses up and down the country have already kick-started amazing apprenticeship programmes and are using their levy funds to help change lives and get the skills they need. It has taken some businesses longer to get going on their apprenticeship programmes using the levy while many are forging ahead growing the numbers of apprentices within their businesses, getting a skilled and loyal workforce.”
The minister’s support for the levy comes after analysis by the Open University that only eight per cent of apprenticeship levy funds – a figure of £108m – has been spent since the scheme’s launch a year ago, with £1.28bn of £1.39bn paid in by businesses “sitting unused” in accounts.
Reiterating Anne Milton’s comments, Damian Burdin said: “Yes, there have been concerns about the levy and that businesses could just be writing it off as a tax and deciding not to spend it.
“But there is great optimism in the sector that the scheme will work. Those businesses who pay the levy have known from the outset that there was a two-year window in which to utilise their funding, so it is hoped that they will start using their apprenticeship funds rather than lose them after 24 months. According to the Association of Employment and Learning Providers, the outlook is extremely positive, with businesses strategically planning the roll-out of their apprenticeship programmes accordingly.
“This is the message that needs to be put across loud and strong to all employers, whether they be levy or non-levy payers. We must remember that we are still in the very early stages of huge reforms and, with time and the right information at their fingertips, more employers will begin to understand how the levy works and not be deterred from taking on new apprentices or upskilling their existing staff this way, simply through lack of knowledge.”
Recent figures showed that more than 20 per cent of employers in England have no idea about whether they need to pay the levy or not. At the time of the levy’s introduction, the government estimated that this figure would only be in the region of two per cent.
Damian Burdin added: “It is crucial that employers know how the levy works so they can then make well-informed decisions about apprenticeship training within their business.”
Apprenticeship levy facts
- The apprenticeship funding reforms came into effect in May 2017 to help fund people training at work (levy paying employers starting paying from April 2017).
- The levy is paid to the Education and Skills Funding Agency (ESFA) which companies can then recoup from a digital account administered by the National Apprenticeship Service, to be spent within 48 months.
- Eligible organisations must register their own apprenticeship accounts with ESFA under a PAYE scheme.
- The government estimates the levy will raise £2.8b in 2018.
- UK employers with wage bills of over £3m automatically pay 0.5 per cent of their payroll into a central apprenticeships fund.
- Companies with a wage bill of less than £3m pay 10 per cent of training costs directly to the provider, with the government paying the remaining 90 per cent, up to a funding band maximum.
- Government incentives are available to employers training 16- to 18-year-old apprentices, if the company has fewer than 50 employees.