In April 2017 the government is hoping to be able to fund up to three million new apprenticeships across all sectors. The funding will be paid for by the employers themselves via a 0.5% levy on company payrolls. The move is set to help nurture the next generation of employees and get them off to a flying start in work that they’ll enjoy doing.
However good this deal sounds for teenagers entering the workforce, employers are sceptical and may end up paying more. It’s going to make it even harder for some businesses to cope with the added expense. Some business groups have described it as a payroll tax.
Less Skilled Workers Available
As older employees start to leave the workforce, demand for skilled workers is rising. Less young workers are entering the workforce with the relevant skills and a new scheme needs to be in place to encourage growth and training.
It's uncertain how the Brexit vote will affect employment of skilled migrant workers. It may become more difficult for employers to hire them and will be more expensive. It’s hoped that the new apprenticeship scheme will allow businesses to train skilled workers from this country to fill the gap.
Funding Reform
The apprenticeship levy will give employers access to £15,000 of funding for training and apprenticeship costs. The 0.5% will apply on payrolls above £3 million for example:
An employer with a wage bill of £4 million will pay 0.5% or £20,000 but after the £15,000 is deducted, they would pay £5,000 per year.
An employer with a wage bill of £2 million would pay £10,000 but because of the £15,000 allowance, they wouldn't pay anything.
The new levy will only be for companies with a wage bill over £3 million pounds. This means that around 98% of employers won’t have to pay but will still be able to access the new funds in the future.
The new scheme is a potential win-win for smaller businesses who up until now have found running apprenticeships expensive. After April, all businesses whether they are paying the levy or not will have access to some of the funds created. The government has also stated that smaller companies will have access to extra support of £2,000 per trainee.
Improved Training
The previous apprenticeship system - the SASE framework - was found to be not meeting employer’s needs or expectations. A government think tank was set up to find a solution. The result was the new Trailblazer apprenticeship scheme.
In the new scheme, Employers will have more control over the training. The new standards include a minimum of 12 month apprenticeships which must be linked to a certain occupational level. They must also develop not only the knowledge and skills, but also the behaviour required for the specific role.
Some larger businesses have called for the implementation of the levy to be delayed due to uncertainty in the current economic situation. However, Prime Minister Theresa May is planning to go ahead with the scheme in April 2017, and the government has promised that employers paying the new levy will get more out of the scheme than they put into it.