The new Apprenticeship Levy: Are businesses prepared?

The new Apprenticeship Levy, coming into force in April, aims to fund 3 million additional apprenticeships over the next five years, but is it the answer to the skills shortage and are businesses ready?

The new Apprenticeship Levy: Are businesses prepared?
Smaller businesses could be unprepared for the new Apprenticeship Levy, coming into force on 6 April 2017, according to a recent survey by XpertHR, a legal compliance company.

Three million apprenticeships by 2020

The levy will require employers with a paybill of more than £3 million a year (around two per cent of businesses in the UK) to pay 0.5 per cent of this to fund apprenticeship costs. The Government is introducing the levy in a bid to provide an additional three million apprenticeships by 2020.All businesses that pay the levy will have access to their contribution to pay for apprenticeships in their business via a new online portal called the Digital Apprenticeship Service (DAS). In addition, they will receive a 10 per cent top up from the Government. Funds will expire 24 months after they have been placed in an apprenticeship service account unless they are spent on apprenticeship training.

The value of apprenticeships 

“Apprenticeships are a valuable part of the UK economy, and many employers are successfully using them as a way of boosting the skills of their employees”, said Sheila Atwood, Pay and Benefits editor, at XpertHR.“As well as ensuring they have the financial capability to pay the levy, it’s important that organisations are proactive, and identify areas where training is most needed, to ensure the apprenticeship levy works in favour of their organisation.”However, the latest research from XpertHR’s Young Workers Survey 2017 found that, for many employers, the levy is unlikely to result in major changes to the number of young workers recruited to apprenticeship roles, especially amongst smaller employers.Whilst 39 per cent of employers surveyed saw the levy as an opportunity either to increase their recruitment of young apprentices or to take them on for the first time, 38 per cent said that it would have no impact on their recruitment of young workers in particular.

SMEs: Less well prepared for the levy

A breakdown of survey data by organisation size suggested that small and medium-sized enterprises (SMEs) may be less well prepared for the impact of the levy.Mrs Attwood said, “It appears some smaller businesses that will have to pay the levy because their wage bill exceeds £3 million a year, haven’t properly thought through the implications. It’s possible that some SMEs could find they will need to increase their recruitment of apprentices in future to recover these costs, once the full impact of the apprenticeship levy becomes apparent.“Businesses should think more broadly about apprenticeships and not just see them as a way to recruit new starters. Other training that they have perhaps put off due to cost, could be undertaken as an apprenticeship, as long as it meets the new criteria set out by Government.”
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Not a 'magic wand'

In addition to businesses being underprepared, Kate Arnott, Manufacturing & Engineering specialist at accountants' MHA MacIntyre Hudson warned that the levy is not the panacea to the skills shortage.“The Apprenticeship Levy is not the magic wand to close the skills gap and there are real concerns around its key elements”, she said.“At present the levy is adding further layers of confusion and many businesses will struggle to take out as much as they put in; especially in areas where registered education providers cannot keep pace with industry requirements.“It remains to be seen if this initiative will make up for years of underinvestment in apprenticeships, which has helped lead to the looming skills crisis we currently face. With 800,000 skilled engineers due to retire over the next decade, it’s crucial that action is taken now to ensure that expertise and knowledge filters through to the next generation.”  For related news and features, visit our Education & Schools section.Access hundreds of global services and suppliers in our Online Directory  Get access to our free Global Mobility Toolkit

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