Plant & Works Engineering
Chancellor unveils details of apprenticeship levy
Published:  11 December, 2015

The apprenticeship levy will be set at a rate of 0.5% of an employer’s paybill from April 2017. Details were unveiled in the Chancellor’s recent spending review. The levy has received mixed support since it was announced earlier in the year.

Tim Thomas, head of employment & skills policy at EEF, commented: “Whilst the principle of the levy is not supported by business, the Chancellor’s announcement balances the need to secure future employer funding to invest in quality apprenticeships at a rate that the employers affected can afford.

“However, there are several future challenges which must be overcome before manufacturers can support the new Levy. Employers must be able to control the funding, with the lowest possible level of red-tape. Any level of funding available to employers must allow them to cover the real cost of providing a quality apprenticeship with predictable and stable funding over the long term.”

Each employer will receive an allowance of £15,000 to offset against their levy payment, meaning, the levy will only be paid on any pay bill in excess of £3 million, which is welcomed by smaller employers.

However there are concerns that although theoretically only large employers will be paying it, in practice, many more employers – particularly small or micro employers – may find themselves contributing if the £15,000 ‘offset’ is not easy to understand or claim.

Anthony Thomas, Chairman LITRG says if the £15,000 allowance is anything like the Employment Allowance (which employers can claim to reduce their employers National Insurance bill), it will be necessary to tick a box in either the payroll software or on the paper equivalent form to claim the allowance and negate the levy.

The apprenticeship levy, which will be introduced from April 2017, is forecast to raise £2.730 billion in 2017/18, £2.845 billion in 2018/19, £2.970 billion in 2019/20 and £3.095 billion in 2020/21. While not specifically stated, it appears from the Treasury’s figures that the levy will replace all current public funding for apprenticeships, which currently amounts to c. £1.5 billion. The levy will therefore mean that the levy fund will support apprenticeships amongst all employers, including those who do not pay the levy. The rationale for the increase in funding is the Government’s apprenticeship target. Its aim is to create 3 million quality apprentices over the course of the Parliament, which averages at 11,000 apprenticeships each week. The levy fund is exclusively for the support of apprenticeships, and not other forms of training.