Last updated: 28.09.17

Gaining the most value from the Apprenticeship Levy

Earlier this year, the UK government enforced the Apprenticeship Levy upon businesses and organisations across the country. While there was - and still is - much speculation over how well this service will work in the long term, it actually puts control of apprenticeship funding in the hands of employers through the Digital Apprenticeship Service.

The levy is charged at a rate of 0.5%of an employer’s paybill and each business will receive an allowance of £15,000 to offset against the levy payment. However, while the levy will impact employers in all sectors, the levy itself is only paid on the annual paybills in excess of £3 million, which means less than two per cent of UK employers will pay it.

Although the Apprenticeship Levy is designed to help businesses and apprentices across the UK, many companies are failing to embrace it - and are therefore not gaining as much value as they could.

Greater understanding needed

New research from Evolve Learning Group and West London College has revealed that fewer than four in ten eligible businesses understand the apprenticeship levy. In a survey that sampled 1,005 employers with over 150 employees, it was found that 32%of businesses that pay the levy were using the funds to train new and existing staff. In London, only one in six employers utilised their apprenticeship levy funds effectively.

The study also found that 78%of businesses felt that more needed to be done to increase understanding of the apprenticeship levy’s value. 80%also said companies had to be better engaged in using the levy. Only 37%of respondents reported that they fully understood the levy and how it could help their business.

How the levy can help

According to the government, the levy will support quality training. Businesses that are committed to this will get more out of the levy than they pay into it. Employers pay and report levy payments through their normal payroll processes using PAYE real time information (RTI).

It is crucial companies make the most of the levy. By not tapping into it, they are failing to embrace the opportunity to improve existing staff skills and bring new employees on board.

Stuart Rowberry, resourcing and development business partner at OCS Group, said: “I think many businesses are confused about how to use the levy, but with a limited period of time in which to invest the money, these businesses need to take action now or the money will be gone.

“I think one of the issues is that businesses have just seen the levy as a means of training new staff. They are also a great way to upskill existing staff so they can take on more responsibility and develop their careers.”

Why businesses must be proactive

Businesses have everything to gain when they play a big role in the education of young people. Although the apprenticeship levy is still in its early stages, it is a step in the right direction to improve the quality of apprenticeships - if companies are proactive about it.

Because of funding cuts in further education, businesses should play a bigger, more proactive role in the education of young people and the levy helps to formalise the way they can do that. By investing in the apprenticeships of young people, the rewards for businesses in the long run will be enormous.

Sources - Two thirds of emploters not using levy funds to train staff - How businesses can make a success of the apprenticeship levy

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