Clarity needed over Apprenticeship Levy and funding

Greater clarity is needed to help businesses understand Government changes to apprenticeship funding, latest research has shown.

In April 2017 the Government will introduce its Apprenticeship Levy, which means firms with payroll over £3m will have to pay 0.5% of the value above £3m into an apprenticeship fund.

As soon as an employer has funds in its levy account it will be able to select a provider and an apprenticeship programme and commit to the apprenticeship.

Firms with payroll below the £3m threshold will have to register with the fund and will be required to co-invest in the training cost. It is proposed that these employers contribute ten per cent of the cost, with Government paying the balance.

There will be additional financial support for small employers (fewer than 50 employees) who train 16-18 year olds and for those where the apprentice is a 19-24 year old care leaver or is 19-24 years old and has a local authority education, health and care plan.

Firms will be able to offset the levy against Corporation Tax but will not be able to offset it against contributions to sector training bodies.

But a survey of 1,600 businesses nationally in August found that 39% had no idea how the Apprenticeship Levy would work or hadn’t heard of it.

The survey also showed that about 30% of medium-sized companies – those employing 50-249 staff – will have to pay the levy but only 26% thought they would be able to recover all of their levy payment or more.

Over half of the respondents (51%) said they had no idea how the reforms would work. The results suggest that the Government has so far failed to adequately communicate the apprenticeship funding policy.

In the East Midlands, according to the East Midlands Chamber’s Quarterly Economic Survey for the third quarter of 2106, 31.4% of firms said they currently employ apprentices and 16.7% said they planned to.

But 36% said they didn’t know what the impact of the changes to apprenticeship funding next April would be, while 21% said they felt the changes would increase employment of apprentices.

Data from the East Midlands was fed into the British Chambers of Commerce survey.

Diane Simpson, Deputy Chief Executive at East Midlands Chamber, said:-

“Firms value apprenticeships as way of developing skills and increasing productivity. However, with just six months to go until the levy is introduced, our research shows the Government needs to step up its communication to business to ensure that businesses understand how they could benefit from the reforms.

“If it just feels like just another tax then then the policy will have failed. Devolved administrations also need to provide a guarantee that the money raised is ring-fenced and kept for training.

“And Government should allow businesses to use the levy funding to support other high-quality workplace training. Treating apprenticeships as just a numbers game will benefit neither businesses nor apprentices.”