The Apprenticeship Levy

The Apprenticeship Levy came into effect on 6 April 2017 and is part of the government’s commitment to creating 3 million apprenticeships in England by 2020.

The levy requires all employers operating in the UK with an annual pay bill of more than £3 million to spend 0.5% of the total to help fund apprenticeships. It is estimated that 2% of UK manufacturers will be required to pay the Levy.

Levy paying employers now have to create an account with the Apprenticeship Service to receive levy funds to spend on apprenticeships and to pay training providers.

Non-Levy paying employers can now share the cost of training and apprentice assessment with Government, who will fund 90% of the costs.

An additional change is that there are no longer any restrictions on the age of apprentices and fewer restrictions on the previous qualifications an apprentice can possess. The funds can be used to train new recruits, or can be used to upskill the existing workforce.

The Impact of the Levy So Far

Despite the government’s aim to create three million new apprenticeships by 2020, the impact of the levy so far has been disappointing. Recent research by the Education Apprenticeship Service has shown that:

Almost half of eligible employers haven’t signed up for an account with the Apprenticeship Service. Just 10,500 accounts were set up by the end of August – barely half of the 19,150 predicted by the Department for Education.

There have been 34,700 “commitments” to take on an apprentice using the new service since May. Of these, 8,000 are still pending approval. Numbers peaked in July at 8,300, but have dropped off since then.

Almost half of the commitments (16,300) relate to apprentices aged 25 and over. Just 7,300 are for apprentices under the age of 19, while 10,700 were in the 19-24 age bracket.

More of the apprenticeship are at lower levels. Some 16,400 were at intermediate levels, with 13,800 at advanced levels and 4,200 at higher levels. The levels of the remaining 200 apprenticeships are unknown.

How can Manufacturers make the best of the new apprentice environment?

Despite the disappointing start, it is essential that companies do not see the Apprenticeship Levy as just another tax, but instead make the most of the new Levy funding and put in place a well-planned apprenticeship programme. Those companies that take this opportunity to identify and address skills gaps and those that plan for future skills needs will be in the best possible position to respond to changing market conditions.

Take the opportunity to your review your current and future skills requirements, identify gaps, and plan the best way to prepare your workforce for tomorrow’s challenges.

Undertake an audit to identify training requirements within your organisation, the Levy can be used to enhance the skillsets of your existing workforce. There may also be opportunities for you to convert existing training programmes into apprenticeships. Your Apprenticeship Fund should be available for this or you can have 90% of the training costs paid from the fund if you are not a Levy payer.

Develop an attraction strategy that will attract skilled workers as well as potential apprentices. It is important that organisations understand what motivates and appeals to their ideal candidates, and tailor their attraction strategy accordingly.

What is FIESTA doing to support this?

FIESTA is working to set up an approved Apprentice Training Agency (ATA) for the furniture and interiors sector ( ATA’s recruit, employ and arrange training for apprentices on behalf of employers and are designed and regulated to support both large and small members who wish to take advantage of the many benefits of the new training environment. We will provide more details of this initiative early in 2018.