Kimberley Dondo reports on companies' lack of understanding of the levy implications

young employees

As of April 6th 2017 the new Apprenticeship Levy is expected to be enforced by the government. It requires employers with a payroll of more than £3 million a year (around 2% of businesses in the UK) to pay 0.5% of this to fund apprenticeships costs. The levy has been introduced as a way to increase the number of apprenticeships in England to three million by 2020.

However according to a survey from XpertHR, small and medium-sized enterprises (SMEs) may not be prepared for the new levy.  Half (53%) of medium-sized employers and a quarter (25%) of small employers reported that the levy would encourage them to either increase their use of young apprentices or employing them for the first time. However 37.9% of the companies surveyed stated that it wouldn’t impact their recruitment of young workers.

Sheila Attwood, Pay and Benefits Editor, at XpertHR, says, “The new apprenticeship levy is only two months away, however, 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.”

All businesses that pay the levy will have access to their contribution to pay for apprenticeships, while also receiving a 10% top up from the Government. Businesses that don’t pay the levy will still be able to access government funding to help towards the costs of apprenticeships. The funds will expire 24 months after they are placed in an apprenticeship service account unless they are spent on apprenticeship training.

Attwood adds: “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. Businesses should also 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.”