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Government Announces New Apprenticeship Levy
“By 2020, we want to see 3 million apprentices. To ensure large businesses share the cost of training the workforce, I announced at the Budget that we will introduce a new apprenticeship levy. Today I am setting the rate at 0.5% of an employer’s pay bill. Every employer will receive a £15,000 allowance to offset against the levy”
George Osborne Autumn Statement 2015.
The dramatic announcement in the Autumn Statement 2015 confirmed that government requires business to share the cost of training the UK’s workforce, which will be achieved through the new ‘Apprenticeship Levy’, a compulsory 0.5% of your annual payroll.
Currently the levy can only be used for the creation of apprenticeships, which in themselves are also changing – employers will soon be responsible for the creation, delivery and management of their apprenticeship programmes. Clearly this will cause many implications for businesses both financially and in terms of resource, particularly for those businesses new to the apprenticeship scheme.
Over the coming months DiVA will be hosting a number of bespoke events for business bringing you the latest updates and inviting experts from across the sector to provide further information on how best business can position itself for the changes. In the interim, we have prepared some quick answers to some of the questions we have most frequently been asked by business since the levy announcement.
How will the levy impact my business?
The most obvious impact of the levy will be felt when employers start paying 0.5% of their gross payroll into the levy scheme as part of their monthly PAYE payments. This will be offset by a £15,000 tax allowance which means that if you have less than a £3,000,000 payroll you will not pay anything. There may however be a benefit to those businesses that are under the allowance threshold as they will have access to funds raised from the levy to use as additional funding for apprenticeship training.
So what might my business pay?
Some examples below.
Business with 500 employees, with an average gross salary of £20,000
Payroll: 500 x £20,000 = £10,000,000
Levy sum: 0.5% x £10,000,000 = £50,000
Allowance: £50,000 – £15,000 = £35,000 annual levy payment
Business with 250 employees, each with a gross salary of £20,000:
Payroll: 250 x £20,000 = £5,000,000
Levy sum: 0.5% x £5,000,000 = £25,000
Allowance: £25,000 – £15,000 = £10,000 annual levy payment
Business with 100 employees each with a gross salary of £20,000:
Payroll: 100 x £20,000 – £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000
Allowance: £10,000 – £15,000 = £0 annual levy payment
What happens if I don’t use the levy?
The only way to recoup the levy is by hiring apprentices. Any unused levy payments will be lost to the business. There is the potential that the under used levy will be given to those employers who have exceeded their apprenticeship levy spend to support additional apprentices. This would also include those businesses who will not be making levy payments as they fall below the threshold as set out above.
How do I get started?
Consider turning all support roles into apprenticeships.
Apprenticeships are excellent for entry level admin/support roles e.g. Marketing Assistants, Admin Assistants, PA roles etc. DiVA are able to give you a quick, free impartial assessment of any vacancy you have or are likely to have in the near future to see whether or not it will be suitable for an apprenticeship. If the role is in an area that we don’t cover we can help you find a suitable training company who can.
Convert current roles into an apprenticeship.
Moving existing staff onto an apprenticeship could be a win-win for both employer and employee. The employee has already learned the idiosyncrasies of the business and an apprenticeship could ensure the development of further skills in-line with business need, potentially forming an accession strategy for your business.
Review your Graduate Scheme.
If your company operates a graduate scheme there may be scope to use some of those graduate places for apprenticeships particularly at a higher apprenticeship level.
Get some help.
It can be a hard slog setting up an apprenticeship scheme especially if you’re starting from scratch. There are many potential pitfalls, course options and way too much jargon! Don’t do it alone. Apprenticeships are our business. We can help!
We can help you carry out an assessment of your current and future recruitment strategy, making an assessment of your current vacancies; likely future vacancies based on your workforce plans; the training requirements you have for existing employees; your future recruitment plans; and how all of these may be able to be met through a robust, government compliant apprenticeship programme that will enable you to recoup funds taxed through the apprenticeship levy.
Whether you just want a quick chat about how these changes may affect your business or if you would like us to work with you on a more in-depth strategy just contact Arit or Paul by completing the contact form here. This is a no obligation free consultancy service that we offer to all of our current and future clients.
When should we get started?
Now! April 2017 is not that far away.
Many businesses will be ready to sign off on their staffing budgets for 2016-17 if they haven’t already. Having a successful apprenticeship scheme developed and embedded into your business’s strategic plan in 2016-17 will allow you to be strongly positioned for when the Apprenticeship Levy comes into force.
For more information on how to get started go to our employer page. I’m an Employer get me started!
We will be keeping this news page up to date with new developments and how they may impact all of our businesses as and when they are released. If you would like to be kept informed of updates or future Apprenticeship Levy events just complete the contact form here and we will add you to our Levy-Info mailing list.