The Apprenticeship levy takes effect on 6 April 2017.
With less than a year to go, this has caused some alarm recently among employers. The Institute of Directors (IoD) and Confederation of British Industry (CBI) described it as “an extra payroll tax on business”. The Manufacturer’s Organisation (EEF) called for the start date to be delayed to allow for more consultation and to make sure the new digital account – through which employers will be able to obtain funding – is fit for purpose.
However there has been nothing to suggest that the government intends to postpone the levy, the aim of which is to fund the increase in apprenticeships to 3 million by 2020. Reaching that target will require a 20% increase in the number of apprenticeship starts.
No-one is arguing that this increase is a bad thing in itself – in fact there is widespread support from employers for an increase in good quality apprenticeships. But the levy is complicated, and many organisations are taking the ostrich approach rather than engage with and plan for it.
Why do we need Apprenticeships?
The amount and quality of training provided for employees has declined over the last 20 years. The increase in apprenticeships is designed to reverse employer under-investment in training and increase productivity. Higher and Degree Apprenticeships are intended to drive economic growth by targeting sectors where skills gaps exist. Higher Apprenticeships cover levels 4 and 5 (up to Foundation degree), while Degree Apprenticeships are for Levels 6 and 7 (Bachelors and Masters). These skills are essential to business growth, and the experience of employers with whom we are already working is that return on investment is clearly seen from an early stage.
So what is the levy, and who is affected by it?
The Apprenticeship Levy will be paid by private and public sector organisations with a pay bill of over £3 million, including Higher Education Institutions (HEIs). The levy will be charged at a rate of 0.5% of an employer’s pay bill. Employers with lower pay bills will not be required to contribute, but will still be able to access apprenticeship funding, which will be paid by digital voucher.
Any levy amount unused after 18 months by the employer who paid it will be taken away and put into a general fund to support apprenticeships.
The digital voucher can only be used to provide apprenticeship training. Higher level apprenticeships are an opportunity to make cost effective use of the fund, and will bring real business benefits.
Take our quiz here to see how Levy Ready you are. Don’t worry if your score is low – we can help!
Uni@Work is one of the HEIs chosen to work with the Skills Funding Agency to deliver Higher and Degree Apprenticeships across England. Head of Uni@Work Claire Buckland is the Apprenticeships Ambassador for the Coventry University Group, and there isn’t much we don’t know about the new Higher and Degree Apprenticeships and the levy. Get in touch and we’ll be happy to help!