Can the Apprenticeship Levy deliver real value for industry?

By Sarah Cosgrove, Monday 11 January 2016

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With just 15 months to go before the Apprenticeship Levy comes into force, companies are advised to start planning their apprenticeship provision, if they have not done so already.


Any business which pays more than £3m in wages and salaries will, from April 2017, pay a 0.5% levy on its total wage bill through the PAYE system. 

However, in order to encourage the creation of 3 million apprenticeships by 2020 the government has promised that this money will be returned to businesses in the form of training credits, or vouchers, to use on government-approved training courses. In addition every company will get a £15,000 allowance to spend on apprenticeship training. 

Beyond Chancellor George Osborne’s big announcement in the Autumn Statement on 25 November, there has been little information released about the structure of how it will work and the Department of Business Innovation and Skills (BIS) was light on details when asked by PrintWeek. It is expected draft clauses to the forthcoming Finance Bill, due to be released this month, will explain more. Furthermore, the refund system will be different for English firms than those in other parts of the UK, which already run their own apprenticeship systems, leading to some concerns that only English firms will benefit.

A BIS spokeswoman says: “In England, employers who are committed to training will be able to get back more than they put in, through a top-up to their account. Control of the funding will be put in the hands of employers via the Digital Apprenticeship Service to ensure it delivers the training that they need.”

This service will help employers, whether or not they pay the levy, choose an apprenticeship training course, find a candidate and choose a training provider, BIS adds. 

Professional education provider BPP, the training partner for more than 1,300 professional apprentices across the UK, including the first wave of apprentice degree students, is one of the organisations trying to decipher the new rules. It has produced a FAQ document and is running an email helpline for business.

Head of strategic partnerships at BPP professional apprenticeships, Emma O’Dell, says the levy is causing concern for some business leaders. “At the moment, they are unsure of the financial impact and processes required to implement a successful apprenticeship scheme,” she says.

“The release of the draft Finance Bill in January should make things slightly clearer, but with the final version not being released until spring, it is important that companies seek advice now so that they are fully prepared when the details are finalised.”

Despite concerns about logistics, however, company leaders do recognise the levy fund could help tackle the current skills gap, O’Dell adds. 

According to the latest annual CBI/Accenture Employment Trends Survey, released last month but undertaken before the Autumn Statement, 43% of firms aim to take on more staff this year but they are concerned about the rising cost of the National Living Wage, effective from 1 April, and the Apprenticeship Levy. Only 16% of respondents said they believed the new levy is the right approach to tackle the UK’s skills challenges and nearly half, 47%, were concerned about it being costly and bureaucratic.

CBI director for employment and skills Neil Carberry says the CBI will work with the government to ensure businesses’ money is well spent.

“The levy board will also need to focus on delivery quality apprenticeships, not just the quantity to hit a political target,” he says.

Paul Brough, chief executive of Leicester-based £20m turnover Opus Trust Marketing, which has an annual wage bill of £4.5m, says the levy will be another tax on firms that are not set up to recruit apprentices, or that won’t benefit from doing so. 

“The question I have is what do I get for the money and how far will 0.5% of my wage bill take me, is it unlimited? There is a lot still to be defined,” he says.

“In our case we have a dedicated in-house training team and have a focus on training; my concern would be for smaller organisations who fall just above the threshold who do not have the resource already in place to deal with this. They may make the decision to reduce headcount to make up for the government tax.”

Brough says Opus Trust is happy with its current scheme and using an external training provider that takes care of government bureaucracy. “The challenge in the future may be dealing with government directly through the Digital Service,” he adds.

“This is a gimmick from a short-sighted government in an effort to produce a sound bite about apprenticeships and their efforts should be directed in more meaningful consultation with the 2% of employers who are going to pay for it.”

Operations director at Pensord, Karl Gater, has a more positive view. 

The £11.9m-turnover Welsh printer, whose salary bill was £3.8m in its 2014 calendar year accounts, outsources HR provision. Gater says to some extent it doesn’t matter how the process works, it will deploy the best internal or external resources to make the most of it.

“We’re going to embrace anything that can be done that’s going to help get people into work. We’re all very quick to criticise and maybe it’s too easy to say let’s not bother. If you want to do it, you’ll make it work,” he adds.

The main industry provider for apprenticeships is the BPIF, which works with around 550 apprentices across approximately 230 print firms. 

“The BPIF sees the Apprenticeship Levy as another business tax, potentially adding to employer’s costs, and adding complexity,” says programme director Ursula Daly.

“We understand government’s need to balance budgets, and can potentially see some merit in the potential for a levy to reduce the element of “freeloading”, where one company leaves training to others, and then simply poaches staff. We are also a little reassured by the £15,000 rebate, ensuring that the levy will not directly add to costs for companies with payrolls less than £3m.  

“That said, we are however dismayed to see that the government expects the costs of administering the levy to account for 25% of the total raised, implying an unreasonable level of bureaucracy.”

Whether the Apprenticeship Levy really does “raise the skills of the nation” as Osborne promised remains to be seen but one thing is clear. It is coming and companies should prepare. 


Affected businesses should get a head start on planning for the levy

ursula-dalyUrsula Daly, BPIF programme director

For those employers who know that they will be included or whose payroll costs approach the £3m cut-off, I would suggest starting to plan now. April 2017 is not that far away and budget setting for 2016 will need to take into account your plans. By conducting a high-level review of your business skills requirement and undertaking a Training Needs Analysis of each business area you can ensure you are ready. 

The next step is to select the appropriate training to address your skills gap. It is important to pick an option that is suitable for your business and not just one to spend the contribution through the levy. You could end up with inappropriate training or training that impacts on the day-to-day running of your business. 

The BPIF can assist with both analysing your training needs and building your training plan.

While there is no doubt that apprentices add real tangible value to a business, employers should consider the total cost of employing an apprentice. There are associated costs other than those paid to the learning provider and the funds from the levy can only be used to fund off-the-job training. The current outline from government suggests that the employer will have two years in which to spend their ‘fund’, this would suggest that employers should look to set up a rolling programme so that at the start of each April they are enrolling their new quota of apprentices. There have been some discussions as to the definition of an apprenticeship that the government will apply, in fact there are quite a few questions still to be answered by government and we hope to get some of these early this year. 

However, this should not stop employers getting a head start on the planning process. It is important that at a minimum employers understand as soon as possible what their levy liability will be and how that converts to supporting their training and development needs over the coming years.


What’s your opinion of the Apprenticeship Levy?

tony-barnettTony Barnett, managing director, John E Wright

“I’m really glad I don’t have to think about it just yet as it would probably give me a headache. I fully support the idea of apprentices and we have hired a number very successfully and these are now fully integrated into our 100-strong workforce on a proper working wage. However, I do worry about the extra costs and the red tape that goes with these schemes, and suspect that when we see the fine print it may all be too complicated.”

john-corrallJohn Corrall, founder, Industrial Inkjet

“My personal feeling is that ‘grow-your-own’ is the best way to get people who fit in well. The hope is that they come to us without bad habits or irrelevant skills and we get to teach them to do it right. However, I don’t appreciate being forced to do it. We will do it when we have the right vacancies and we can find the right people. The way this scheme is described it seems like just another ill-planned knee-jerk tax on UK industry – and yet another headache for our hard-pressed admin team.”

terrye-teversonTerrye Teverson, managing director, KCS Print

“I am generally in favour of apprenticeship schemes if they are properly run. We do ours via the BPIF. My concern is that apprenticeships are seen as a way of paying young people less. If someone is doing the a job they should still be paid a proper wage. The apprenticeship scheme does need to add true value and give the apprentice a real skill that is quantifiable. I think the larger companies will be most likely to benefit from a pool of skilled people so it’s reasonable for a small levy to come into play.”  

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