UK: Consultation On The Apprenticeship Levy - Are You Listening Lord Sugar?

Last Updated: 8 September 2015
Article by Nick Elwell-Sutton

The Government has made vocational training through apprenticeships a flagship policy for this Parliament with a stated aim of creating three million apprenticeships by 2020.

Despite the summer recess, there have been two major announcements in recent days covering future policy in this area: the launch of the consultation on the Apprenticeships Levy and the requirement that businesses bidding for larger value Government contracts must in future demonstrate a clear commitment to apprenticeships.

Apprenticeship Levy

The consultation which runs until 2 October 2015 is aimed at seeking the view of business and other stakeholders on how the levy should be implemented.  The rate of the levy and its scope will be detailed later in the year, most probably in the Autumn budget statement.

Who will it apply to and when will it take effect?

Currently only the construction and engineering construction industries are subject to a statutory training levy although the consultation paper is clear that, in future, all sectors will be subject to the new levy but that only larger employer will be required to pay it. The consultation paper is seeking views on how a "larger employer" should be determined and states that it will be based on the total number of employees. While the levy will apply to employers across the United Kingdom, only employers in England will receive vouchers as skills training is a devolved policy area in Scotland, Wales and Northern Ireland.

The consultation expects the new levy to come into operation from April 2017.

How much will it be and how is it to be paid?

The level will be set in the Autumn spending review so there are no clues in the paper as to the cost to business but it will be calculated on the basis of employee earnings and collected via employer PAYE returns.

So what does the employer gain?

As an incentive for employers to encourage apprenticeships, there is already draft legislation abolishing national insurance contributions for apprentices age under 25 and engaged in approved apprenticeship arrangements so there is a very real financial incentive for employers.

In terms of the scheme itself, employer will receive a digital voucher that can be applied against the cost of meeting approved apprenticeship schemes which cover 350 areas across almost every sector from accountancy to insurance, software to aviation and from financial services to golf greenkeeping.  A full list can be accessed here.

One point of particular interest in the consultation is that employer will be able to receive vouchers in excess of the amount that they are required to contribute meaning that businesses can get more out than they put in.  This is made possible by redistributing levy funds received from employers who decide not to use their voucher entitlement. The consultation is also seeking views on whether a proportion of the levy paid by larger employers should be made available to smaller employers exempt from the levy and whether employers should be permitted to use it to train people other than their own employees, for example to support supply chain companies.

There will be financial limits placed on the use of the vouchers against each individual apprentice to avoid abuse of the system and to encourage wider take up of apprenticeships with higher limits available for 16-18 year olds.

Interaction with existing statutory training levies

The current industry schemes covering construction and engineering construction currently run until March 2018 and Construction Industry Training Board and Engineering Construction Industry Training Board will be consulting separately with employers on their future.  The consultation paper puts forward two proposals: that the new apprenticeship levy would run alongside the existing statutory schemes;  or that the current statutory schemes are abolished and replaced with the new levy.

The consultation paper can be found here.

Government procurement

As part of the Government's commitment to the development of apprenticeships, from 1 September 2015 all bidders for Government contracts worth greater than Ł10 million will have to demonstrate a "clear commitment to apprenticeships". This will apply to all central Government contracts and those of Executive Agencies and non-departmental public bodies.  Quite what a "clear commitment" must amount to is not specified, but public sector contracts will have agreed apprenticeship numbers included in the contractual arrangements and a bidder's apprenticeship arrangements will be taken into account in assessing and weighing the merits of their bid. For businesses heavily reliant upon public sector contracts, such as those involved in outsourcing, this will have a significant and immediate effect.

The Crown Commercial Service procurement policy note setting out further details can be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nick Elwell-Sutton
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