Is your business ready for the Apprenticeship Levy?

According to a recent survey by City & Guilds, only 33% of employers liable to pay the new apprenticeship levy are aware of the plans, with 28% unsure about whether it would impact their business.  The upcoming apprenticeship levy is part of the Government’s plan to increase the number of new apprenticeships to 3 million by 2020, and here Sarah Whitemore, Employment Partner, explains what the levy will entail, as well as explaining the employment status of apprenticeships.

What is the apprenticeship levy?

The key points regarding the levy are as follows:

• From April this year, all employers with an annual wage bill over £3million will pay 0.5% of that total payroll bill into the levy, equating to at least £15,000 a year to invest in apprenticeships.
• While the apprenticeship levy starts on the 6^th April, the funding itself will operate from 1^st May for both levy paying and non-levy paying employers.
• The funding is only for new apprenticeships from 1^st May, and does not apply to existing apprentices within your business.
• The government will apply a 10% top up on the money raised within an employer’s online account.
• The money raised can only be used on the training of apprentices, and not on other aspects such as the recruitment process or their wages.
• A new digital apprenticeship service will be launched at the same time, which will allow employers to choose a training course, a provider and will be how payment for the training is made.
• After the first year, employers can transfer 10% of their apprenticeship levy funds to another employer in their supply chain to support them in their bid to recruit apprentices.

“In reality the apprenticeship levy will only apply to a small percentage of firms across the UK who fall into this wage bill bracket,” explains Sarah.  “For those employers who will not be required to pay the levy, their apprenticeship funding process is also changing.  The Government will pay a 90% contribution to the cost of any apprenticeship programme if the employer is able to contribute the remaining 10% of the cost.” 

The apprenticeship levy has been introduced to meet the government’s target of 3 million new apprenticeships by 2020 to address skills shortages in certain industries.  The new digital service will give employers, both levy paying and non-levy paying, more control over the training courses and the training providers they use. 

“The same City & Guilds survey that showed the lack of awareness amongst employers has also shown positivity amongst other employers,” continues Sarah.  “The survey included 500 senior decision makers and was conducted between November and December 2016.  47% of those surveyed felt the levy was a good way to encourage employers to pay for training, 34% believed it would improve quality of apprenticeships and 59% intended to recruit apprentices in the next year.”

What should an apprentice agreement include?

If you recruit, or are planning to recruit apprentices in your workplace, you will need to ensure you have the proper terms within some form of apprentice agreement.  An agreement should include details on the basic terms and conditions of their employment such as how long the apprenticeship is for, working hours and salary, as well as clarifying the qualifications they are working towards and the training that will be provided to them to help them achieve this.

There are two different arrangements for an apprentice; either an Approved Apprenticeship Agreement or a contract of apprenticeship, which has in the past been seen as having similarities to a fixed term contract.  This offers apprentices certain extra privileges, for example if they are dismissed there could be a possible claim for breach of contract, which would prove costly, or unfair dismissal.  “ Approved Apprenticeship Agreements are understandably the more favourable option for employers to use, as they have the same standard rules and regulations as other employment contracts,” explains Sarah. “This is not to say however that an employer cannot be taken to Court for unfair dismissal, and in certain cases, such as Neve v Brookway Engineering Ltd IT, it has been considered that employers should have higher standards and considerations when it comes to capability and performance.  In this particular case the employee was found to have been unfairly dismissed.” 

“We would advise that as well as the standard approved apprentice agreement requirements, you also ensure there are no references to guaranteeing employment once the apprenticeship finishes, and there are clear policies regarding misconduct, disciplinary and dismissal procedures and that they apply to any apprentice,” concludes Sarah.  “The new apprenticeship framework being introduced with the levy means that funding is no longer staggered by age and so this does reduce the risk of age discrimination, however employers should still take care as apprenticeships are traditionally younger employees.  Apprentices also have their own minimum wage, which is increasing in April from £3.40 per hour to £3.50 per hour; another factor employers should consider.”

Further details on the apprenticeship levy can be found on the government website here, alternatively for more information on the employment of apprentices you can contact Sarah or the team on 02380 717717 or email employment@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.