A guide to the Apprenticeship Levy

A guide to the Apprenticeship Levy

23 May 2017 By de Poel

Apprenticeship Levy

de Poel, one of our HR Services & Solutions framework suppliers gives us an insight into the Apprenticeship Levy and what it means for your organisation and the Public Sector.

After months of debate, speculation and analysis as how exactly it will impact both the Public and Private Sector, the Apprenticeship Levy is finally here. Introduced in the Finance Act 2016, the Apprenticeship Levy came into force on Thursday 6th April 2017, with the first levy payment to be taken in May’s payroll.

Intended to increase funding to boost the number of apprenticeships in the UK, the levy applies an annual 0.5% charge on an employer’s total payroll (that is the total employee earnings subject to PAYE and NICs) once this payroll is in excess of £3 million.
 
In turn, each employer paying the levy will receive a flat annual allowance of £15,000 to offset against their levy payment, with the ability to access further subsidised funding for apprenticeships through a new Government apprenticeship service voucher account.
 
Whilst it sounds relatively straightforward in theory, in practice the Apprenticeship Levy is already presenting itself to be somewhat of a minefield. As a leading workforce solutions specialist and independent adviser, de Poel has been advising our client organisations and recruitment agency partners on the Apprenticeship Levy and its unintended impact on the costs of the supply of temporary workers via recruitment agencies.

Under the terms of the levy, a recruitment agency’s pay bill for temporary workers supplied to clients actually increases the recruitment agency’s levy exposure (not the client’s). This is because this temporary worker pay bill is added to the agency’s corporate staff pay bill for the purposes of working out the apprenticeship levy.

This therefore increases the costs for each recruitment agency supplying temporary workers despite it being virtually impossible for the temporary workers themselves to benefit from the apprenticeship levy, for two key reasons:

1. The average length of service of a temporary worker is 19 weeks, whereas apprenticeship training must last at least 12 months and a day

2. An apprentice is required to spend at least 20% of their time on off-the-job-training, which would mean any temporary worker would have to be released one day out of five by the client hiring organisation – which, in turn, would require a back-fill cost to be borne by the client.

Partnering with apprenticeship and tax consultancy experts to provide comprehensive guidance in every area concerning the Apprenticeship Levy, we received advice that the levy does count as a legislative tax on employment, in a similar vein to Working Time Regulations, Pensions Auto-Enrolment and National Insurance Contributions changes.

With all the noise surrounding the introduction of the Apprenticeship Levy, it has been easy to overlook the fact that Thursday 6th April represented a complete overhaul of how apprenticeships in the UK are structured and delivered. The levy has understandably become something of a focal point due to the financial implications, however we are supporting our client organisations to take a broader view and focus on a longer-term, strategic approach.  

The introduction of the new apprenticeship standards – and the levy as a means to fund apprenticeship programmes – have the potential to further tackle skills shortages and drive productivity. This is as part of an effective recruitment and retention strategy, including initiatives such as the engagement of temporary workers, temp-to-perm conversion programmes and workforce modeling (the process by which demand is matched directly with the availability and preference of skilled workers).

We believe that key to creating an effective, inclusive and flexible workforce able to expand and contract with the ebb and flow of the market and the hiring organisation’s own unique requirements, is for the Public Sector to continue to revise and evolve their recruitment practices. This will, in turn, attract a more diverse group of prospective apprentices and ensure that Public Sector organisations gain maximum value from this new Government initiative. 

Alongside the recent introduction of the Apprenticeship Levy, we recognise that the Public Sector continues to face unique challenges. These include unyielding funding cuts, one of the most diverse and complex workforces of any sector, rising demand for 24/7 workers and the need to satisfy local agendas – all played out against a backdrop of intense public and media scrutiny.

Our neutral vendor, ‘pay as you save’ funding model, combined with our proven success across the Public Sector – from local councils to NHS Trusts – means that we have become a trusted recruitment partner since our inception in 2001. We remain committed as ever, in supporting our client organisations to navigate a raft of challenges and changing employment legislation, including the Apprenticeship Levy.

For more information on the Apprenticeship Levy and how the de Poel solution can add value to your organisation through the YPO HR Services & Solutions Framework, please click here. 
 
Categories: Education , Frameworks , Procurement

Leave a comment