A new form of tax, known as the Apprenticeship Levy, will hit
many employers from 6 April 2017. The funds generated will be used
by the Government to help pay for apprenticeship training
Employers will firstly want to assess whether they will be
liable to pay this additional tax and secondly, consider whether
they can derive any benefit from it.
How much does an employer have to pay?
The levy will be 0.5% of the employer's total payroll bill.
This will include basic salary but also things like bonus,
commission and pension contributions. However, each group of
employers will receive an allowance of £15,000 to offset
against their liabilities. This effectively means that only those
with a wage bill of more than £3million will be liable to pay
the new tax.
But what about employers who do not have apprentices?
They are still caught by the new tax rules. The levy will apply
to all employers, irrespective of their sector and regardless of
whether they have or intend to have any apprentices.
Can an employer recoup any of this additional tax?
The good news is that if the employer has or takes on
apprentices, they are likely to be able to clawback at least some
of this tax.
Once paid, the tax can be put into an account via the Digital
Apprenticeship Service (which launches in January 2017) and in
addition, those funds will be topped up by 10% by the Government.
Additional top ups may also be available, for example to employers
who employ 16 to 18 year olds.
The funds in the account can be used to pay for approved
training for apprentices. However, the funds do need to be used
within 18 months of being deposited in the account.
What is an apprenticeship?
Essentially, it is formal relationship where the individual
undertakes a combination of work and training. In many cases, an
apprentice must not only be given on-the-job training but spend a
proportion of their time (usually around 20%) doing approved
off-the-job training too.
There are many different types of apprenticeship, from the
traditional roles of plumbing and construction work to professional
services (such as an accountant or solicitor). In the hospitality
and leisure sector, common apprenticeships range from commis chefs
and chef de partie to hospitality supervisors.
Where can I find more information?
Government guidance is available at
www.gov.uk/topic/further-education-skills/ apprenticeships. Given
that the Apprenticeship Levy is still in its conception stage, the
exact mechanics have yet to be published so do ensure you keep up
to date with the latest developments in this area.
Are there special rules on employing an apprentice?
In many ways, an apprentice is just like any other employee.
However, in some situations they can have additional rights, for
example enhanced dismissal protections (namely that the employer
cannot dismiss the apprentice unless there has been a very serious
breach or some form of frustrating event meaning that the
employer's ability to teach the individual is fundamentally
undermined). From the employer's perspective, it is therefore
very important to correctly categorise and document the form of
apprenticeship to ensure that such enhanced protections are not
Is their an age limit on being an apprentice?
No, an apprentice can be any age. It is important to remember
that apprenticeships should not just be offered to the young, as
this could lead to age discrimination claims.
What pay is an apprentice entitled to?
An apprentice who is either under 19 years old or in the first
year of their apprenticeship is entitled to receive a minimum of
£3.30 per hour. Otherwise, the usual national minimum wage
bands apply, currently being £3.87 for 16 and 17 year olds,
£5.30 for 18 to 20 year olds and £6.70 for those 21 and
over. Also remember that the new Living Wage rates now apply to
those aged 25 and over (currently being £7.20). These rates
will increase from October 2016.
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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