By Andy Willis, Head of Legal, Croner
The apprenticeship levy was introduced in April 2017 and makes it a legal requirement for large employers with an annual pay bill of over £3 million to pay 0.5% of their pay bill into a digital levy account. This money can then be spent on apprenticeships.
The levy was introduced by the government to help meet their target of achieving 3 million apprenticeship starts by 2020. Requiring large employers to set aside money that could only be spent on apprenticeships would, in effect, force these businesses to take on apprentices. The latest figures, however, tell a different story. The numbers of apprenticeship starts have fallen by 59% between May and July 2017, compared to the same period in 2016.
One reason for the fall is likely to be the confusion the levy caused. Many large employers are still trying to understand the rules around paying the levy and how they can use this to finance apprenticeships within their business. It becomes even more confusing where the employer is part of a group structure as there are set rules about sharing levy amounts across the group. The complexity of the levy is likely to cause large employers to pause their apprenticeship plans until they have a full grasp of the scheme.
When payments enter the levy account, employers have 24 months to spend these or they expire. As such, many employers may simply be waiting to spend their payments. The first payment would have entered the account in May 2017 so they have until 2019 before this money expires. Large employers may be using this period to assess their training plans, identify areas within their business that provide working opportunities for apprentices or assess the current schemes on offer. This planning is likely to put apprenticeship hiring on hold.
It’s not only levy paying employers that were hit by recent apprentice changes. Smaller employers now have to pay 10% of apprenticeship costs and have to allow the apprentice to spend one day a week away from the workplace for training. These changes are likely to negatively affect the number of apprenticeship starts in smaller businesses.
Once employers have gained more understanding of the levy scheme and put their business plans in place, it’s likely the number of apprenticeship starts will increase again. Whether this hits the government’s 3 million targets or not, remains to be seen.