Many smaller businesses not ready for the new apprenticeship levy

Small businesses need to get ready for the 2017 apprenticeship levy which will be coming into effect in April.

Smaller businesses could be unprepared for the new apprenticeship levy, which is expected to come into force on 6 April 2017, according to a survey from XpertHR.

The levy will require employers with a pay-bill of more than £3 million a year (around 2 per cent of businesses in the UK) to pay 0.5 per cent of this to fund apprenticeship costs. The government is introducing the levy in a bid to increase the number of apprenticeships in England to three million by 2020.

All businesses that pay the levy will have access to their contribution to pay for apprenticeships in their business. In addition, they will receive a 10 per cent top up from the government. Employers that do not pay the levy will still be able to access government funding to help towards the costs of apprenticeships.

The latest research from XpertHR’s Young Workers Survey 2017 finds that, for many employers, the levy is unlikely to result in major change to the number of young workers recruited to apprenticeship roles, especially amongst smaller employers.

Is the levy important for SMEs?

Whilst two-fifths (39.2 per cent) of employers see the levy as an opportunity either to increase their recruitment of young apprentices or to take them on for the first time, 37.9 per cent say that it will have no impact on their recruitment of young workers in particular.

A breakdown of survey data by organisation size suggests that small and medium-sized enterprises (SMEs) may be less well prepared for the impact of the levy, while large employers are more likely to be putting plans in place to use young apprentices to cover the cost of the levy.

More than half (53 per cent) of medium-sized employers and a quarter (25 per cent) of small employers say that the levy will result in them either increasing their use of young apprentices or employing them for the first time.

This compares to three-fifths (60 per cent) of employers with more than 1,000 staff planning to either to increase the recruitment of young apprentices or to take them on for the first time.

Sheila Attwood, pay and benefits editor, at XpertHR, comments, ‘The new apprenticeship levy is only two months away, however, it appears some smaller businesses that will have to pay the levy because their wage bill exceeds £3 million a year, haven’t properly thought through the implications.

‘It’s possible that some SMEs could find they will need to increase their recruitment of apprentices in future to recover these costs, once the full impact of the apprenticeship levy becomes apparent.’

Other research from XpertHR on the impact of the apprenticeship levy finds that almost three-quarters of medium-sized employers (with 250 to 999 employees) and 29.3 per cent of small employers (one to 249 employees) expected to pay the levy due to the size of their wage bill. This compares to 81.1 per cent of large employers – those with more than 1,000 staff – who will be liable.

Attwood says, ‘Apprenticeships are a valuable part of the UK economy, and many employers are successfully using them as a way of boosting the skills of their employees.

‘As well as ensuring they have the financial capability to pay the levy, it’s important that organisations are proactive, and identify areas where training is most needed, to ensure the apprenticeship levy works in favour of their organisation.

‘Businesses should also think more broadly about apprenticeships and not just see them as a way to recruit new starters. Other training that they have perhaps put off due to cost, could be undertaken as an apprenticeship, as long as it meets the new criteria set out by government,’ adds Attwood.

Employers in England that pay the levy will be able to access the funds they have paid in via a new online portal called the Digital Apprenticeship Service (DAS).

Scotland, Wales and Northern Ireland will have their own funding arrangements, but the details are yet to be confirmed. Any training must be provided through an accredited provider.

Funds will expire 24 months after they have been placed in an apprenticeship service account unless they are spent on apprenticeship training.

Further reading on apprenticeships

Related Topics

Apprenticeship levy

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