It’s been just under a year since the UK government introduced the Apprenticeship Levy in May 2017. Here we take a look at how businesses are handling the new regime.

What is the Apprenticeship Levy?

In a nutshell, the Apprenticeship Levy is a new kind of tax. It represents a concerted effort to fund more apprenticeships and is intended to eradicate skills shortages and get more young people into work. In the longer term this should help to increase productivity.

Companies whose total payroll exceeds £3 million are legally required to pay the Apprenticeship Levy at a rate of 0.5% of staff costs. Smaller firms that wish to take on an apprentice must still register with the scheme even if they are not required to pay the levy. Firms can apply to receive £15,000 per year to help fund the cost of an apprenticeship.

Some Problems

According to new statistics released by the Department for Education, only 11,900 of the 20,000 companies eligible to pay the levy are claiming the benefits they are entitled to.[1] Even more worryingly, as reported in The Telegraph, 194,100 apprenticeships were started in Q1 and Q2 of the 2017/18 academic year “compared to 258,800 reported at this time a year ago” – a drop of 25%.[2]

But why? Principally, many businesses view the Apprenticeship Levy as an unwelcome cost. A BCC survey published six months after the introduction of the levy revealed that 56% of levy-paying businesses did not expect to recoup “any or only a portion of their payment” despite the availability of benefits to help with the cost. Jane Gratton, Head of Business Environment and Skills at the BCC, also cited a lack of flexibility in the way the funding can be used and a general lack of awareness about the scheme as being major stumbling blocks.[3]

The Long-Term View

However, it shouldn’t all be doom and gloom. Here at Frontline we strongly believe in the value of apprenticeships. There are hurdles to overcome before the Apprenticeship Levy is widely accepted, but the bottom line is that taking on an apprentice should be viewed as an investment. Taking a long term view, it makes sense to invest now – not only in your own business but in the wider economy. It may seem like a burden in the short term, but investing in the workforce of tomorrow will ultimately benefit everybody.

Expert Advice

Frontline Recruitment can help you access the best apprentices on the market. If you are unsure about what the Apprenticeship Levy means for your business, our experts will be more than happy to help. Call us today for a confidential consultation.