On 6 April 2017 a new apprenticeship levy is due to be introduced.
The levy will replace the existing apprentice funding currently provided by the government and it is estimated that it will impact approximately 2% of UK employers. A report from the Federation of Small Businesses revealed that 24% of small businesses employed apprentices whilst another 24% were keen to recruit apprentices. According to their report two-thirds of employers retained apprentices after their training ended. Between 2010/11 and 2014/15, 2.4 million apprenticeships were created.
It is predicted that the apprenticeships levy will raise £2.7 billion in 2017-2018 and £3 billion in 2020-21*. The new levy is designed to encourage employers to recruit more apprentices and develop the UK’s skilled workforce for the future. Employers can also choose to retrain their current employees to increase or vary their skill set.
“Our businesses can only grow and compete on the world stage if they have the right people, with the right skills. The apprenticeship levy will help create millions of opportunities for individuals and employers.”
Rt Hon. Robert Halfon MP, Skills Minister
How could the levy affect your business?
The new levy will apply to any employer with an annual pay bill of £3mn or more – equivalent to a monthly pay bill of £250,000. The levy rate has been set at 0.5% of the employer’s pay bill. Employers will receive a levy allowance of £15,000 per year to offset the levy.
Based on annual pay bill of £4mn
£4,000,000 x 0.5% = £20,000
£20,000 – £15,000 (allowance) = £5,000 levy to be paid in that pay bill year
Employers will need to pay the levy to HMRC via PAYE. It will be paid alongside National Insurance and tax on a monthly basis. The monthly pay bill may vary, so employers should ensure they calculate any levy due in a timely manner. Any apprenticeship levy owed will need to be declared and included in the usual PAYE payment to HMRC by the 19th (or 22nd for electronic payments) of the following month. The allowance works out at £1,250 per month and any unused allowance can be carried over from one month to the next. Employers can also receive credit for any unused allowance if they paid the levy earlier in the tax year.
“Once you have declared the levy to HMRC you will be able to access funding for apprenticeships through a new digital apprenticeship service account.”
This funding can then be used to finance training and evaluation of apprentices in England. Separate arrangements will be in place in Scotland, Wales and Northern Ireland.
Employers need to be mindful of the fact that apprentices are entitled to the same rights and benefits as other employees and it is imperative that they have a robust HR infrastructure in place to ensure equality.
*Source: HM Treasury, Budget 2016, March 2016
For further information or to discuss how CBW’s HR consultants can assist you, please get in touch.