How the Apprenticeship Levy Can Help You Upskill Your Staff
May 29, 2019 Comment off
In the current competitive business climate, it’s more essential than ever for businesses to ensure their staff are as good as they possibly can be. And many are unaware that the Apprenticeship Levy ensures a mandatory fee is available to them to upskill their teams.
The UK Government’s introduction of the Apprenticeship Levy back in 2017 made a commitment to developing vocational skills and increasing the quantity and quality of apprenticeships. The Apprenticeship Levy came on the back of the Government’s promise to create an additional three million apprenticeships in England by the start of next year (2020).
The Apprenticeship Levy will help deliver these new apprenticeships and support quality training by putting businesses at the centre of the system. Employers who are the most committed to training will reap the most rewards and get back more than they put in by training more apprentices.
What is the Apprenticeship Levy?
The Apprenticeship Levy is a compulsory tax that employers pay to fund the development and delivery of apprenticeships.
Businesses with a wage bill of more than £3 million are charged an Apprenticeship Levy of an additional 0.5% of their total pay bill – which includes all payment to employees that are subject to Class 1 secondary National Insurance contributions, such as wages, bonuses and commissions. The Apprenticeship Levy will be taken from all businesses, regardless of whether or not they employ apprentices.
This fee is placed into a special fund that is to be used exclusively on apprenticeship training of both new and existing staff. That money sits in the business’ HMRC digital account until it is either spent on apprenticeship training, or it expires. All employers receive a £15,000 allowance to offset against the amount they have to pay.
To understand and forecast your monthly contributions to support apprentices, whether or not you pay the Apprenticeship Levy, use the Funding Apprenticeships Systems’ forecasting tool.
The Apprenticeship Levy not being maximised
In March 2019, a massive underspend by businesses eligible for the Apprenticeship Levy was revealed by the City & Guilds Group. Only £268 million was spent by Apprenticeship Levy-paying employees in the programme’s first year of operation, 2017-18. That equated to just 13 per cent of the Treasury’s £2 billion apprenticeships budget, which contributed to a £400 million underspend.
The Department of Education, which is responsible for distributing the Apprenticeship Levy funds, has revealed that 53 per cent of the budget was spent on apprenticeships that began before the levy was introduced. Only £189 million was spent on apprentices for non-Levy paying organisations and £58 million spent on maintaining the apprenticeship programme and service and people training on former policies.
Furthermore, a recent Freedom of Information Request by the Open University found that more than £3 billion in Apprenticeship Levy funding remains unspent as businesses used just 14 percent of their available funding. It also found that less than one in five levy-paying businesses (19 percent) had made apprenticeship commitments, with many reporting frustrations with the scheme.
Businesses, therefore, need to gain a clearer understanding of what the Apprenticeship Levy actually covers and need to put greater focus on spending the fund on new apprenticeships.
Getting started with the Apprenticeship Levy
The Apprenticeship Levy comes at a substantial financial cost to businesses, so it’s vital to gain the maximum benefit from it and maximise the training available to your apprentices.
Many businesses that pay the Apprenticeship Levy are struggling to understand it and put into action the best plan of action for investing it. So it’s important to understand how your business can reap the rewards, so consider the following questions:
- What is the key skill sets your business needs to invest in?
- Which department needs the most investment, and why?
- How will you go about prioritising certain skills above others, and keep everyone happy?
- How will you go about selecting the best apprenticeship providers?
- Who is going to own this task and the training process overall?
Funding for businesses that don’t pay the Apprenticeship Levy
The Apprenticeship Levy is mandatory for businesses that have a wage bill of more than £3 million. But those that come in below the threshold could still get a piece of the pie.
Employers not paying the Apprenticeship Levy but who offer apprenticeships to people aged between 16 and 18 will receive 100 per cent of the cost of the training from the Government, up to the maximum funding bands. They will have to pay 10 per cent of the cost of the apprenticeship training for apprenticeships aged 19 and over, with the Government paying the remaining 90 per cent up to the maximum funding bands.
Businesses that don’t pay the Apprenticeship Levy and have less than 50 employees will also receive a £1,000 initiative when they take on an apprenticeship aged between 16 and 18.
Roles that the Apprenticeship Levy covers
The funding available through the Apprenticeship Levy can help businesses provide training to a wide range of roles and positions. Providers are offering training from IT Technical Sales, Sales Executives and Customer Service Practitioners through to Team Leaders and Operations Department Managers.
The Apprenticeship Levy is available to help your business upskill staff across your organisation, with additional position training including project management, business analysis, customer service and leadership and management. For example, Specsavers uses apprenticeships to plug skills gaps it currently has or foresees it may encounter in the future. The organisation developed its own apprenticeship scheme in spectacle making and now has up to 300 apprentices training up to become optical assistants in its stores nationwide – which led to it becoming the overall winner at the 2018 CIPD People Management Awards.
A core focus of the Apprenticeship Levy funding should be attributed to developing employees’ sales skills. Sales are the core function of most businesses, which both support current revenue levels and generates growth. Therefore, sales apprenticeship training is an obvious choice for investing in training, be it through the Apprenticeship Levy or by taking advantage of the Government’s 90% co-investment funding.
The Apprenticeship Levy funding in practice
Contrary to popular belief, apprenticeships can be any age and don’t necessarily have to be new starters. You can invest in current staff through apprenticeship training to improve employee retention and plug any skills gaps that may exist across your business and could be hurting your bottom line.
The funds provided through the Apprenticeship Levy could be a vital tool to help you retain valuable employees, help them realise their potential by developing their skills, and secure their future with your business.
A good example of how to use it is pub chain and brewer Greene King, which first began delivering apprenticeships in 2011 and pledged to offer 10,000 more back in 2016. Its managers are supported through an online system that enables them to support learners’ development and Level 3 and 4 management programmes are co-delivered with a training provider. Managers are essential to encouraging apprentices to develop and put their skills to use.
Also benefiting from the Apprenticeship Levy is Santander, with the bank having more than 700 apprenticeships on various apprenticeship schemes, from financial services qualifications through to data analysis and compliance programmes. The bank works with several external partners and delivers training services through an online platform, face-to-face sessions and study time. Each apprentice has a coach dedicated to their learning, alongside line managers encouraging their development.
How to use the Apprenticeship Levy service
Once a business starts paying the Apprenticeship Levy they get access to their funds through the Digital Apprenticeship service. They can then use that money to choose and purchase apprenticeship training as well as find new apprentices and manage their apprentices.
Employers that are paying the Apprenticeship Levy can join the Government’s apprenticeship service, which enables them to:
- Receive Apprenticeship Levy funds that they can spend on apprenticeships
- Manage their apprentices
- Pay for their training provider
- Stop or pause payments to their training provider
Using this service, businesses can only use funds to pay for apprenticeship training and assessment for apprentices that work at least 50 per cent of the time in England and only up to the maximum funding band for that apprentice.
These funds cannot be used to pay for other associated costs, such as wages, statutory practise licences, travel and subsidiary costs, work placement programmes or for the setting up of an apprenticeship programme.
Funds paid through the Apprenticeship Levy are only available for 24 months when they are credited to an employer’s account, so it’s vital to take advantage of the opportunity while it’s still available.
Put your Apprenticeship Levy fund to use now
Businesses are missing out on a major opportunity to close any skill gaps that exist in their teams and ensure they are equipped with the best possible ability, agility and knowledge to handle the challenges of the modern business world.
It’s vital to understand the benefits that the Apprenticeship Levy offers your business and put it to use by making long-term strategic decisions about training and skills. It’s crucial to make use of the levy to invest in training and make your business as strong and competitive as possible.