With 492,700 young people starting new schemes, 2016 has been a big year for apprenticeships. Up 12% from last year, more and more people are seeing the benefits of starting new schemes themselves or offering them in their workplace.
What is the Apprenticeship Levy?
Coming into play on the 6th April 2017, the Apprenticeship Levy aims to help small businesses get the funding to hire and train apprentices in order to build a well-trained and skilled workforce.
The Levy means that businesses with an annual wage bill exceeding £3 million will be required to pay the levy, 0.5% of their wage bill in order to fund apprenticeships.
However, the government have also included a ‘levy allowance’ of £15,000 per year which means that businesses need to spend 0.5% of their wage bill, minus £15,000.
Most businesses in the UK, around 98%, will be exempt from the Levy.
Benefits for Small Businesses
The government has agreed to contribute 90% of training costs to businesses exempt from the Levy, with the employer expected to pay the remaining 10%. For firms with fewer than 50 employees, the government is pledging to pay 100% of their training costs.
Companies will receive £1,000 when they take on an apprentice between the ages of 16-18. Companies will also be able to get £1,000 for taking on an apprentice between 19-24 should they have previously been in care or have a Local Authority Education, Health and Care plan.
Levy-paying businesses can also use the Levy funds to train existing staff should they wish.
Benefits for Apprentices
A recent report from the Federation of Small Businesses (FSB) revealed that 24% of its members planned to take on an apprentice in the future. Small businesses are leading the way by hiring apprentices at 9% higher than the national average.
One of the aims for the Levy is not only to help businesses but also to ensure that young people find themselves with more choice and opportunity to benefit from apprenticeships.
The government says it’s committed to helping businesses see the benefits of taking on new apprentices and aims to make this process as easy as possible. The government’s new digital apprenticeship service will allow employers to select an apprenticeship framework most suited to their business. It will provide advice on training providers, assessment organisations and post-apprenticeship vacancies.
Bad News for Larger Businesses
Though 98% of businesses will be exempt, those who are liable to pay the Levy will find themselves with a potentially large bill next year. Some larger businesses are unhappy with the upcoming changes, particularly with the mandatory increase of the Living Wage. As a result, many larger companies have decided to cut hours or pay during public holidays to make up the cost of these two extra expenses.
Overall, apprenticeships are a good idea for businesses as well as the apprentices themselves. Apprentices get to learn on the job and the business gets an eager worker who they train from the ground up.
What do you think of the new Apprenticeship Levy? Does it make you more likely to offer an apprenticeship scheme at your business? Let us know what you think the comments below.