How beneficial is the Apprenticeship Levy for UK companies and FE students?

Published: 05 Sep 2017

Man-cutting-material

A new Apprenticeship Levy was introduced in April 2016 and seeks to improve funding for the vital apprenticeship sector, creating valuable investment to close the skills gap in key industries and increasing uptake of apprenticeship jobs. A few months into the levy, we look at how this tax is affecting business and what signs there are, if any, of improvements in the sector.

Who pays the Apprenticeship Levy?

The Apprenticeship Levy is a tax on UK employers, in both the private and public sectors, with annual earnings of £3m or more. These businesses are liable to pay 0.5% of those earning for this new tax. This is then combined with an extra 10% from the Government, creating a substantial fund for use in supporting apprenticeship training.

Having this fund is key to encouraging and enabling a business to hire apprentices. As inexperienced but well educated workers, apprentices have the potential to add value to a business, after on the job training. However, apprentices continue to study while working, meaning they are not available the full hours of another worker. The income needed to allow a business to spend time with this employee, rather than hiring someone who can already do the job, has to be made up. And it is, by the Apprenticeship Levy.

Apprenticeships can plug skills gaps in the UK workforce

Increases in the available apprenticeship jobs and reductions in the number of apprentices are two of the reasons why the government decided that there needed to be a far greater investment in skills and knowledge acquisition programmes across the UK workplace. The new apprenticeship scheme is trying to help close the skills gap, created from schools and universities, as a sufficient number of leavers and graduates didn’t possess the right skills to plug gaps in sectors requiring engineers, designers and digital wizards.

FE students are the ideal apprentice candidates for the levy

The Apprenticeship Levy is a good chance for Further Education students, aged from 16-18, to get jobs within highly reputable companies and to learn while they earn money.There are 15 different bands of apprenticeships, ranging from £15,000 to 27,000, meaning companies can hire for more or less experienced roles depending on company size and requirements.

Higher paid apprenticeships will be allocated to the engineering and technology focused schemes, which will range from Level 1 (semi-skilled operator) to a Level 7 (Post-grad Engineer). Apprentices are knowledgeable workers, not complete novices. They only lack the real world experience and opportunity in their chosen field.

Employers are able to find a training provider to support their apprenticeship training, on the Register of Apprenticeship Training Providers, set up by the government. Along with Apprenticeship Levy funds, all the key incentives are there for a business to take on an apprentice.

What are the advantages of the Apprenticeship Levy?

Apprenticeship schemes are beneficial to companies and apprentices alike, as employers can benefit from the expertise that has lacked within the company and apprentices learn, by getting real world experience, but also life skills for the future. The Evaluation Employer Survey has shown that 76% of businesses experienced a wide range of benefits as a result of training apprentices – including improved productivity, increased staff morale, staff retention and generating new ideas. Also, according to research by the YMCA, more than 3 quarters of young people said that going on an apprenticeship improved their skills and career prospects, while 4/5 recommended them to others.

What are potential disadvantages to the Apprenticeship Scheme?

One of the biggest problems concerning the Apprenticeship Levy is the fact that quite a lot of companies in the UK are unaware of the scheme.

A survey by the training experts, City & Guild, in February, found that out of 500 organisations, just 1 in 3 of the employers who were due to pay the levy, were unaware of it. It was also found that only a few of the employers understood how beneficial the huge range of training opportunities were, that were on offer.

It was also reported, a month following the Levy, that 1 in 4 UK firms, had never considered recruiting apprentices. The results that were gathered from an Adecco survey, also stated that many of the firms claimed that either the qualification was not suited to the business or the schemes would require too much time from the management teams.

What do employers think of the levy after three months?

The Apprenticeship Levy has become quite a success for various companies already. Three months on from the Apprenticeship Levy being first implemented, it has recently been positively reported by the Open University that, 54% of levy-paying organisations have already accessed their “levy pot” of funding. These companies pay a portion of payroll each month via PAYE, towards their levy, and luckily 25% plan to in the future. Unlike the clueless business owners in February, figures by Open University were looking much more promising regarding the knowledge of the Levy. From Open University’s survey, 4/5 of senior managers said they had a good working knowledge of the levy.

Back to listing