The apprenticeship levy was introduced in April 2017 and its introduction was part of a series of changes made as the government attempted to introduce what it described as “greater flexibility” to the system.

For many young people, apprenticeships are an attractive alternative to University or regular employment because they simultaneously provide an education and real-life experience in a work force.

They have also helped to reduce the classic scenario many young people find themselves in “I need experience for a job, but I can’t get experience as no one will hire me”. Statistics support their popularity as 77% of young people agreed that apprenticeships offer good career prospects. In fact, 92% of companies that employ apprentices believe by doing so their workforce is more motivated and satisfied.

Despite such positive engagement from both apprentices and employers, the number of new apprenticeships has dropped by 25% in the first two quarters of the year – many argue that this fall may be because of the lack of funding and the alleged “rigidness” of the levy.

In this article, we explain the recent changes to the apprenticeship levy and what the systems future may hold.

What is the apprenticeship levy?

The levy was created to encourage employers to invest in apprenticeship programmes. In addition to this, the Government also aimed to raise additional funds to increase the quality and quantity of apprenticeships.  The original levy was first introduced in April 2017 and it affected employers in all sectors above a certain size.

Each employer received an allowance of £15,000 to offset against their levy payment which was charged at a rate of 0.5% of an employer’s pay bill.

What changes to the apprentice levy have occurred?

The changes occurred in April 2017 as the 2% of employers with a pay bill over £3m annually must now pay the apprenticeship levy. The £3m comprises of 0.5% of the pay bill paid through HMRC’s PAYE process.

New changes allowed levy-paying employers to make transfers of no more than 10% to several other employers – previously companies were restricted to make the transfer to a single employer.

Companies that do chose to transfer a portion of the levy can support training in smaller companies. This will benefit companies that would not otherwise afford training for their apprentices and will be a popular choice for companies within a supply chain. However, employers receiving transfers from other companies won’t be able to use them till after 1^st May of this year.

The allowance of 10% is calculated from the overall amount of levy during the previous tax year, with the English percentage applied as well as the 10% government top-up payment.

Employer guidelines

As a result of these changes, the government issued an employer guide for those hiring apprentices. The guide features a checklist of considerations that should be made before employing an apprentice. These include whether the apprentice’s knowledge and skills will be developed and if the employer is offering a genuine job.

Inside this document, the rules on eligibility for work are addressed – highlighting that apprentices must have the necessary paperwork and log at least 50% of their working hours within England.

Employers must select a main provider and negotiate the total cost of the apprenticeship, if the price exceeds the maximum funding band – it is the employers duty to pay the difference.

The apprenticeship must begin after the last Friday in June of the academic year of the apprentices 16^th birthday for them to be eligible. Paperwork must also be created and completed, such as an apprenticeship agreement, a commitment statement and evidence of weekly hours worked must be recorded.

What should we expect for the future?

It is still uncertain whether the government’s recent changes to the apprentice levy will be enough to reform the system and motivate small businesses to hire apprentices.

Although the government has allowed for up to 10% transfer between employers, some businesses have called on the government to allow for more flexibility in the system. This is because they want a higher transfer rate though we do not yet know if the government is considering this prospect.

Because of the popularity of the apprenticeship scheme, the government aims to improve the issues surrounding them such as the current funding system. By doing so, the opportunity of taking on an apprentice on becoming an apprentice would become a more attractive prospect for all parties involved.

To speak with us about the apprenticeship levy, please contact us today on 01606 333 900 or email hello@burtonbeavan.co.uk.