Earlier this year the Government announced that it would be introducing an apprenticeship levy on large employers as part of its pledge to create 3 million quality apprenticeships over the next five years.
In August the Government launched a consultation seeking views on how this levy should be implemented and its response to this was published on Wednesday. George Osborne communicated some of the Government’s decisions during his Spending Review and Autumn Statement speech on the same day.
Key information about the levy:
- It will come into effect in April 2017
- It will be set at a rate of 0.5% of the employer’s wage bill (excluding benefits in kind) payable via PAYE
- Employers will receive an allowance of £15,000 to offset against their levy payment (connected companies will only receive one allowance). This means that, in effect, the levy will only be paid by employers with a wage bill in excess of £3m (fewer than 2% of employers)
- Employers receive funds in a digital account that they can spend on training providers of their choosing
- Employers who pay the levy will be able to access more funding than they have put in, through government top-ups
- Levy funding which is not used within two years will expire (meaning it will be available for other employers)
It’s far too early to tell what the effect of the levy will be in practice. Whilst those businesses fully embracing the scheme could, as George Osborne put it, ‘get more out than they put in’ it is fair to say that many are concerned about the introduction of the apprenticeship levy, not least because it comes at a time when businesses are already being impacted by other financial changes such as the national living wage. Whilst the levy may only effectively be paid by 2% of UK employers, those 2% employ a vast number of the UK’s private sector workforce and the Office of Budgetary Responsibility have voiced concerns that the levy will have a negative effect on earnings growth, meaning that the costs will largely be passed on to employees.