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Five myths about the apprenticeship levy

5 Mar 2018 By Sue Husband

On the first day of National Apprenticeship Week, Sue Husband challenges some common misconceptions of the scheme

National Apprenticeship Week 2018 begins today (Monday 5 March), and runs until Friday 9. It’s a celebration of apprenticeships in England, designed to showcase how they work for individuals, businesses, communities and the wider economy. This week, employers and apprentices from across England will come together to celebrate the success of apprenticeships while encouraging more people to choose one as the pathway to a great career.

With the apprenticeship levy scheme approaching its first anniversary, there are still many misconceptions around the scheme’s finer details that I believe require clarifying.

All businesses must pay the apprenticeship levy

Only employers that pay more than £3m in wages are liable to pay the apprenticeship levy. Levy-paying employers contribute 0.5 per cent of their pay bill into a fund each month, which can be reinvested in apprenticeship training for their business. And for every £1 contributed, the government adds 10p.

If you’re an employer with an annual pay bill under £3m then you don’t pay the levy – but the government will still fund 90 per cent of the cost of your apprenticeship training.

Levy payers must hire more apprentices

All employers with a pay bill of more than £3m pay the levy regardless of whether they employ an apprentice. You don’t have to reinvest your levy payments, but if you don’t then your business may be losing out. Some employers wrongly see the levy as a payroll tax, and are consequently forgoing access to a pot of money and new talent.

Apprentices enable employers to grow their own talent and develop a motivated, skilled and qualified staff in a cost-effective way in line with their workforce needs. It’s in every employer’s interests to use their levy payments to invest in the quantity and quality of apprenticeships that their business offers, to help them acquire new skills and stay future-fit. 

The levy gives employers less control

The levy makes it easier for employers to choose apprenticeship training that best suits their needs. Funding follows employer choice, moving away from the previous provider-led model, and meaning providers must be much more responsive to what companies need.

Employers’ levy contributions are paid into an apprenticeship service account that allows them to choose and pay for apprenticeship training more easily. If an employer is in a group of businesses paying the levy together, the group can collect their funds into a single account. Soon, the government will also allow levy-paying employers to transfer funds to other companies, through the apprenticeship service.  

Levy funds can’t be used to train existing staff

Anyone can start an apprenticeship at any point in their life, whatever their age, background or career level. With levy funds, employers can train and upskill their existing workforce as well as hire new recruits. Businesses can establish new apprenticeships and increase the number of apprentices they hire while also upskilling their existing workforce with higher or degree-level apprenticeships.

You can use the levy funds to train existing employees who hold prior qualifications so long as the apprenticeship they are taking is relevant to their role and the most appropriate way of progressing or developing their career. 

The levy doesn’t have any benefits

Through the levy, £2.5bn will be invested by 2019-20 to boost the quantity and quality of apprenticeships, benefiting people, businesses, communities and our economy. There have been more than 1.2 million apprenticeship starts since May 2015 and the government remains committed to reaching three million in England by 2020. With more money than ever, the government will be helping people of all ages and backgrounds to access better-quality apprenticeships and enabling the growth of opportunities.

Through the levy, the government is also investing £60m in supporting the training of apprentices from the poorest areas in the country and providing support for apprentices with learning or other disabilities, to ensure social mobility for all.

Sue Husband is director of the National Apprenticeship Service

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