Small firms benefit from Apprenticeship Levy changes » SMEInsider

Small firms benefit from Apprenticeship Levy changes

The long awaited details of how the apprenticeship levy will be applied have been published. Smaller firms with fewer than 50 employees which take on a 16-18 year old apprentice will not be required to make any financial contribution towards the cost of training.

In addition, businesses of all sizes will only be required to contribute 10% of the cost of training an apprentice. Under the plans, government will cover the 90% of remaining training costs. However, there are limits on the type of training that business can spend their levy money on. There was also confirmation that there will be no delay – the levy’s introduction is set for April 2017, despite calls from employers that it be delayed.


‘Getting reform right is crucial’

Mike Cherry, FSB National Chairman, welcomed the news, saying: “This announcement sends a clear signal that ministers are listening to our members’ concerns. Smaller businesses are taking on more apprentices than ever before. What’s more, a quarter of our members say they are considering employing an apprentice in the future, but only if they feel apprenticeships are affordable.

“While many small firms are committed to apprenticeships, many more continue to be worried about the time and personal commitment required. Getting apprenticeship reform right, including changes to existing funding arrangements, is key to apprenticeship growth among small businesses and the government achieving its target of three million new apprenticeships over the course of this parliament.”


More measures announced

Other key measures include:

  • Businesses that do pay the levy (those with a paybill of over £3m) will be eligible for a top up of 10 per cent every monthly. The Department for Education says, though, that if those businesses don’t have enough in their levy account then they will also receive the remaining 90 per cent of the costs.
  • A £2,000 incentive to help 16-to 18-year-olds, young care leavers and young people with an Education and Health Care (EHC) plan, make their first step into the world of work. The split will see £1,000 to employers and £1,000 to training providers.
  • A new online calculator will be set up to help businesses work out their costs and obligations.
  • As predicted in the consultation, the government will set up a new register of apprenticeship training providers to come into effect in April 2017.
  • As laid out in earlier consultations, existing and new apprenticeship frameworks and standards will be placed within a funding band. The upper limit of each funding band will cap the maximum amount of digital funds an employer who pays the levy can use towards an individual apprenticeship. The upper limit of the funding bands will also cap the maximum price that government will ‘co-invest’ towards, where an employer does not pay the levy or has insufficient digital funds and is eligible for extra support. It will be up to employers to negotiate prices with providers, within these funding limits.
  • Employers that recruit an apprentice with additional learning needs (such as dyslexia), or other learning difficulties or disabilities, the government will make a payment directly to the training provider to help them with the extra costs of supporting the apprentice’s learning.

There was, however, confirmation that the levy funds can only be used towards the costs of apprenticeship training and end point assessment. There were hopes that the government would broaden out the scope of what funds could be spent on, but that has been dashed. It was this measure in particular that has drawn criticism from the CBI, which had hoped to see wider application allowed.

“The government’s announcement provides business with much needed information which shows some progress, including support for smaller firms, but fundamental problems remain,” CBI director-general, Carolyn Fairbairn, said. “The Levy is too narrowly defined. It covers only one type of training and employers can only reclaim off-the-job costs. As a result, valuable forms of training risk being cut back, with quantity put ahead of quality.”


‘Firms can only compete with the right skills’

Robert Halfon, the newly appointed Apprenticeships and Skills Minister said: “We need to make sure people of all ages and backgrounds have a chance to get on in life. Apprenticeships give young people – especially those from disadvantaged backgrounds – a ladder of ‎opportunity. That’s why we continue to work tirelessly to deliver the skills our country needs. The apprenticeship levy is absolutely crucial to this.

“Our businesses can only grow and compete on the world stage if they have the right people, with the right skills. The apprenticeship levy will help create millions of opportunities for individuals and employers. This will give our young people the chance they deserve in life and to build a highly-skilled future workforce that the UK needs.”

There was confirmation that further details on funding in particular will be announced in October.