What is the Apprenticeship Levy?
The Apprenticeship Levy was first announced in the 2015 Summer Budget with the aim to fund three million apprenticeship places.
The Levy will replace taxpayer funded apprenticeships for companies of all sizes. From April 2017, 0.5% of an employer’s wage bill must be paid through Pay as You Earn (PAYE). When George Osbourne announced the plans last year, he stated that businesses would “get out more than they put in”.
While all companies receive an offset allowance of £15,000, only employers with a payroll above £3 million will have to pay the levy.
The employers who are too small to pay the levy, around 98% in England will have 90% of their costs of training paid for by the government. Extra support will also be available for those who take on apprentices between the ages of 16 and 18 as well as those who take on young care leavers. Levy-paying businesses that want to invest in more training will have 90% of their additional costs paid by the government.
What do businesses have to say?
The EEF, Britain’s largest manufacturing employers, the CBI business lobby group, the Institute of Directors and the Charity Finance Group are urging the government to postpone the levy by at least a year.
The CBI who represent companies that employ nearly 7 million people has criticised the levy and say that it should be postponed until April 2017. Director General of the CBI, Carolyn Fairbain said that while they welcome the government’s plans with apprenticeships, “the apprenticeship levy in its current form risks turning the clock back on recent progress through poor design and rushed timescales.”
She also said that “the levy is too narrowly defined. It covers only one type of training and employers can only reclaim off-the-job costs. As a result, valuable forms of training risk being cut back, with quantity put ahead of quality.”
Though businesses were already concerned about the impact of the levy, this has been amplified by recent events. This has suddenly become a larger concern due to the potential and current effects of Britain’s vote to leave the EU. Brexit has led to a growing uncertainty with everything from recruitment, to trade and economic effects on businesses.
Who should foot the bill?
While many businesses will benefit from the ease of being able to recruit apprentices, the larger businesses who would prefer not to foot the bill may not be entirely happy with this added expense.
Brian Berry, Chief Executive of the Federation of Master Builders (FMB) said that this was a “fair settlement for small employers”. He also pointed out that “small and medium-sized firms do the majority of training in our industry. Micro businesses [those employing fewer than 10 people] alone train around half of all construction apprentices. It is therefore crucial that new apprenticeship funding arrangements work for these firms and do not impose higher costs on them.”
Theresa May has been eager to address inequality by making a point of being unafraid to stand up to businesses. She has so far refused pleas from businesses to postpone the levy in favour of creating more apprenticeship places that aim to tackle inequality and poverty.
Minister for apprenticeships and skills, Robert Halfon has said that the levy will help “people of all ages and backgrounds have a chance to get on in life”.
“Apprenticeships give young people, especially those from disadvantaged backgrounds, a ladder of opportunity. That’s why we continue to work tirelessly to deliver the skills our country needs. The apprenticeship levy is absolutely crucial to this,” he added.
There are concerns that the current levy risks devaluing apprenticeships by focusing more on the number of people involved in them than the quality of training they receive.
The Chartered Institute of Personnel and Development (CIPD) said that “It is irresponsible for the government, particularly in a time of economic uncertainty in the aftermath of the referendum, to simply press ahead with a policy that is not fit for purpose.”