22 Feb 2017

Apprenticeship Levy: Making sense of it all

Written by Peter Hitchen, Director at Instep

If, like me, you've been steadily wading through the plethora of downloads available on the new Apprenticeship Levy then you are probably wondering if you'll ever get to completely understand it's intricacies - and foibles!

Instep has been busy working with clients to help them assess the impact of the Levy on their annual training budget and to help them develop a strategy that best utilises any contribution they are required to make to the Levy. But it's still been a challenge for us, even with our 25 years' experience in the training and development sector, so we can sympathise with the angst it might be causing employers.

On 6th April this year the new Apprenticeship Levy comes into force and employers with an annual wage bill in excess of £3million will be paying 0.5% of that wage cost into an account set up for them by the Government. This new 'tax' has been coming for some time now, but how prepared are you in terms of understanding both the process of submitting your payment and, perhaps more importantly, being able to draw back down your funds in a way that benefits your organisation? I'm sure you are aware that if you don't use the funds deposited within 24 months then you will lose them.

If you already use apprentices in your organisation, then you will be able to recoup your levy payment against the cost of their training - and there is a healthy scope around what you can claim for so ensure you claim for everything you are eligible to. What you might experience is some extra administration burden (and an associated extra cost) as part of the registration, examination and end point assessment. This extra work can seem a bit of a challenge and so if you need assistance, we can help - Instep is an ILM Accredited Centre after all.

What if your Levy payment is more than you expect to spend on Apprenticeship training?

The broad range, both in terms of age range and training requirement, means that you still have scope to address broader training needs under the banner of Apprenticeships. The SFA rules around examination and assessment will mean that the training will likely be more expensive than perhaps you would traditionally spend on such training (and time consuming to administer) and so you will have a decision to make about whether to use the money in your Levy account for such training. Remember, you have 24 months to access the money before it goes into the bigger pot for any organisation to access.

Will it last?

Perhaps the more cynical people will see this as just another Government scheme to address shortfalls created by poor planning in years gone by, or a way for the 'consultancy big boys' to leverage money from the Government and large corporates. Have they grossly over-estimated what money the Levy will raise and so see the numbers of new apprentices fall sharply below the Government 'promise'? What would happen if there was a change in Government (perhaps the least likely outcome at the present day!)?

Unless more practical support (an endless supply of website publications doesn't address this) is provided to employers on how they can use the funding, and more effort is put into explaining and simplifying the assessment and examination processes (and costs) then employers could well just start to see the Levy as a tax and so raise prices to pass the cost on - and then who wins?

For the foreseeable future the Levy is here to stay and so the challenge is to ensure you get the very best return on your investment. There is lots of information already out there on how to access training through the apprenticeship framework (check out the Skills Funding Agency website for example) but if you start to see the fog descending as you are reading it all, get in touch and we'll do our very best to help you.