Apprenticeship levy raises concerns

Fri, April 7th, 2017

Apprenticeship levy raises concerns in light of mounting costs for businesses

The apprenticeships reform and introduction of a levy for employers has been billed by the government as a measure to ensure quality apprenticeships, which in turn will address the skills gap and boost productivity.

From April 6, employers with a payroll in excess of £3m will be charged at a rate of 0.5% of their annual wage bill - employers will receive a tax allowance of £15,000 to offset against their levy payment.

Contributions will be boosted by a 10% top up from government and incentives are being offered for companies with fewer than 50 employees.

Although that is when the payments start the previous system remains in place until the end of April with the new set-up going live on May 1.

It is a move intended to encourage a more serious and considered approach to training. The introduction of the levy follows a wider reform of apprenticeship standards to make them as attractive an option as higher education, or university.

But for many employers, the levy is just another addition to the increasing costs of building or running a business.

Previously, apprenticeships were lauded as an option that benefitted all parties, in providing real, hands on experience to young learners as well as affordable skills for employers.

It remains to be seen whether the levy will succeed in raising the quality and perception of apprenticeships – or indeed, simply be another financial burden for burgeoning businesses.

What’s more, according to research by training organisation City & Guilds, one in three of the employers are still unaware of the levy or still had questions as to how the system will work. Given the system is expected to draw in somewhere in the region of 22,000 companies, that’s a lot of unanswered questions.

And the new system has come in for some criticism from trade bodies, professors and MPs too, who have questioned whether the levy will in fact help meet the costs of producing the next generation of skilled workers.
There are also concerns as to whether the government have given due consideration to tackling areas of acute skills shortages or whether the new system will support the productivity agenda.

However, many agree more must be done to make apprenticeships a more attractive option for young people and ensure they provide a real and tangible route into the jobs market.

The reform aims to engage employers and defer responsibility to them for designing relevant apprenticeships to make sure we are developing the right skills and addressing skills gaps.

Director of learning and skills at Liverpool & Sefton Chamber of Commerce, Paul Cherpeau says: “We currently have hundreds of apprentice learners placed with businesses across the Liverpool city region who can testify to the enormous benefits employing an apprentice can offer.

“In many instances, apprenticeships can offer a fast-track into a career with real, hands on and accelerated learning opportunities.”

Speaking at an event to discuss the apprenticeship levy last month, Paul said that whilst more than 98% of companies would not have to pay the levy, the way apprenticeships are funded will inevitably changing for all businesses – with the majority required to contribute cash to recruit and train them.

Paul added that employers can still take on fully-funded apprentices under the current funding system until April 30.

“We are strongly urging all employers to take advantage of the fully funded opportunities before the reforms are imposed.

“If you are a business looking to take on an apprentice – or train an existing employee on an apprenticeship qualification - before April 30 we can help you but you would need to contact us as soon as possible.”

The levy comes into force on April 6 and is intended to raise the required funding to help government in their promise to deliver 3 million new, quality apprentices by 2020.

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