How the introduction of the apprenticeship levy will help businesses

The Apprenticeship Levy – which comes into effect in April 2017 – promises to provide a greater financial incentive for small to medium sized enterprises (SMEs) to offer apprenticeships and training programmes.

There has been a surge in demand for apprenticeships throughout 2016 – statistics released by the House of Commons earlier this year stated that there were 492,700 young people starting apprenticeship programmes, an increase of 12 per cent than in the previous year.

The primary aim of the Apprenticeship Levy is to ensure that SMEs have access to funding to hire and train apprentices, so that they can build a talented and skilled workforce for the future.

Only organisations that have an annual wage bill exceeding £3 million will be required to pay the levy, charged at 0.5 per cent of their wage bill. Some 98 per cent of the UK’s small businesses will therefore be exempt. There will however be important changes to be aware of.

The government will contribute 90 per cent of the training costs for non-levy paying companies, meaning the employer just needs to pay the remaining 10%. This is hoped to improve employer engagement and ultimately increase the quality of their apprenticeship schemes.

Cash incentives

Wishing to support smaller employers, who have historically played a very important role in helping young people getting into work, the government will also be introducing cash incentives to encourage more businesses to hire and train apprentices.

For the UK’s smallest firms – specifically those with fewer than 50 employees on their payroll – the government has agreed to pay 100 per cent of the training costs of apprentices between the ages of 16-18 years old, or those aged 19-24 and have previously been in care or who have a Local Authority Education, Health and Care plan.

To help support getting young people into quality apprenticeships, companies will receive £1,000 from the government when they take on a 16-18-year-old apprentice. Businesses will also receive a grant of £1,000 when taking on apprentices who are aged between 19-24 and have previously been in care or have a Local Authority Education, Health and Care plan. This will help ensure all apprentices have equal opportunities in the workplace.

The levy works to enhance the value of apprenticeships, not just by creating more opportunities and high-quality apprenticeships, but by highlighting the commitment from businesses to develop young and dynamic employees.

Levy-paying businesses are also able to use Levy funds to train existing staff to up-skill their current workforce, ensuring that their staff receive up-to-date training and gain all necessary skills.

A recent report by the Federation of Small Businesses (FSB) has revealed that 24 per cent of its members would take an apprentice in the future. This could potentially see the creation of more than one million new apprenticeship schemes in the UK, and would be a significant boost to the government’s pledge to create 3 million more apprenticeships by the year 2020.

The report also shows that small businesses are making an important contribution in regards to hiring apprentices: the proportion of SMEs employing an apprentice is nine per cent higher than the national average.

For businesses employing apprentices who were hired before May 1st 2017, they will continue receive funding for the full duration of their apprenticeship, under the terms and conditions in place at the start of the scheme.

The government’s new digital apprenticeship service will help employers select an appropriate apprenticeship framework suited to their business’ requirements. It will offer advice on training providers, assessment organisations and post-apprenticeship vacancies.

However, non-levy paying companies will not be required to pay for apprenticeship training and assessments through the digital service until at least 2018.

The levy aims to create much needed economic growth, as more and more young people are encouraged by the increasingly appealing prospects on offer.

Investing in the future of the workforce

Apprenticeships provide businesses with a fantastic opportunity to invest in the future of their workforce. We work with a number of SMEs, in a variety of sectors, providing them with suitable apprenticeship candidates that fit the requirements of their business.

The benefits of apprentices to businesses is numerous. One of the most important aspects is that apprentices learn on the job. This allows employers to nurture and develop an apprentice’s skillset, whilst they benefit from the wealth of accumulated knowledge and business practices of the existing team – all while contributing to the wider business and providing genuine value.

As an organisation, we have worked with apprentices for over 20 years and have found structured and well-planned apprenticeship programmes allow businesses to train apprentices and hone skills that fit specific requirements – which in turn, makes them invaluable to the future growth of the business.

In the long term, both the apprentice and the business benefit. The apprentice gets to earn-as-they-learn, gaining invaluable work experience and earning nationally recognised qualifications, while the employer benefits from having a work-ready and enthusiastic young person eager to be taught the ropes and someone who is actually giving back to the business right from the get-go.

It’s worth bearing in mind that the core aims of the apprenticeship levy are, firstly, to provide opportunities that help develop young people and, secondly (crucially) to aid the development of businesses themselves. The UK has a much-publicised skills shortage, and the levy is just one of the tools aimed at fixing that, while apprenticeships themselves are a much wider part of the solution.

Ryan Longmate is managing director of Positive Outcomes

Further reading on apprenticeship

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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Apprenticeship Levy

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