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Posted 15th August 2018

How have businesses fared in the first year of the apprenticeship levy?

The apprenticeship levy was introduced in April 2017 as a way to generate funds to further apprenticeship starts, with a target of 3 million by 2020. The levy means that all employers with a wage bill exceeding £3 million must pay 0.5% of this, into the government apprenticeship service. This will in turn go towards funding apprenticeships. For contractors the levy has meant that their take home pay is affected.

Apprenticeship levy

In its first twelve months the apprenticeship levy has come under a great deal of scrutiny, including those in the umbrella, recruitment and contracting industries, due to the significant impact it has had on income as well as a relatively meagre impact on improving the apprenticeships in the UK.

A recent report published by the Open University has revealed that an astounding £1.28 billion of apprenticeship funds are currently sitting in accounts within the National Apprenticeship Service. In fact, only 8% of funds have been used so far, meaning that a significant majority of businesses haven’t used any funds that they have paid in.

Businesses are able to draw down on funds until April 2019 to fund apprentices within their business or train their existing workforce. However, if businesses continue along the same trend and fail to withdraw funds, the Open University has warned that this could ultimately cost said businesses millions of pounds.

Despite poor uptake of the levy so far, 92% of levy-payers agree with the theory behind the levy with only 3% wanting the scheme to be halted. For businesses, it seems that one of the main issues lies in the bureaucracy they face when creating apprenticeships as well as the extensive management time that is required, which many simply can’t account for.

Many businesses have called for the simplification of the levy to make the process much easier to follow, as well as reforms into the red tape that businesses are met with when trying to take advantage of the levy.

There is a general consensus that the levy, in its current form, is failing to do its intended purpose. With more guidance called for to educate businesses on how they can appropriately use levy funds, as well as further support for small businesses who aren’t currently paying the levy so that they may also reap the potential benefits.

Some plans have already been set in motion by the government to aid smaller businesses, including an announcement that businesses are able to transfer 10% of their levy funds to other employers so that they may themselves utilise the power of further training and apprenticeships.

With skills shortages impacting various industries across the UK, investment in apprenticeships and training will go a long way to resolving this issue. Therefore, over the coming months we hope to see further guidance from the government for businesses of all sizes, so that the levy can be used for its intended purpose.

Read Open University’s full report into the first year of the Apprenticeship Levy here.

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