Announced in last year’s Autumn Statement, businesses with a wage bill over £3 million will be charged a 0.5 per cent levy to help fund three million apprenticeships, raising around £3 billion by 2020.
The government estimates that the levy will be paid by less than two per cent of UK employers who will receive a £15,000 allowance to offset the payment of the levy, which will be paid in vouchers.
The legislation will be introduced in the Finance Bill 2016, and the apprenticeship levy will be payable through Pay As You Earn (PAYE) systems, alongside income tax and National Insurance.
‘Good news’ for independents
In an exclusive interview for GW, IMI chief executive, Steve Nash said: “There’s potentially some very good news here for the independent sector.
“Any business with a pay roll of less than £3 million is actually entitled to a subsidy and I guess the majority of independents would fall under that limit.”
Speaking last year following statement, the IGA’s Stuart James also welcomed the boost in training.
He said: “Apprentices will now have the right levels of funding to ensure quality training and development to grow into highly skilled technicians.
“Government money alone could not have funded this.”
The IMI’s head of policy and standards, James Stockdale said the levy “is in essence a tax” for all businesses paying over £3 million per annum on salaries.
He added: “That money will be put into a separate account and will be made available to that employer for them to invest into apprenticeship programmes – the amount contributed will then be ‘topped up’ by the government at a ratio of £2 for every £1.
“If employers don’t draw down that funding within specific timescales, still yet to be defined, then it is likely that the money will be released for other employers of all sizes to use.”
Return on investment
Following a three-year study commissioned by the IMI, apprentices were found to generate a return on investment between 150 per cent and 300 per cent, as well as reducing long-term recruitment and training costs.
Steve Nash told GW that the government’s commitment to apprenticeships has “good and bad aspects to it”, the most significant of which is the levy.
He said: “There’s still a big job to do because we have at least 20 years where successive governments have said ‘uni, uni, uni, it doesn’t matter what you go to do, go to uni’.
“Nevertheless, our research shows that there is a growing awareness among students and their parents about the apprentice route.”
Will your business fall under the £3 million wage cap? Will the levy help your business? Share your comments and any concerns in the comments below.