Why organisations should be thinking about apprenticeships in 2017
A new levy will apply to all large companies, including those without apprentices
The government is keen to ensure that more high-quality apprenticeships are created, both to meet the needs of employers and the apprentices themselves.
With this in mind, a significant change to the existing system for next year is the introduction of a new apprenticeship levy, which will hit many employers from 6 April 2017. The new levy will be imposed on all organisations, not just those that have, or intend to use, apprentices. The funds generated will be used by the government to help pay for the cost of apprenticeship training.
Employers will need to assess whether they will be liable to pay this levy and, if so, whether they can derive any benefit from it. Organisations that are in scope will have to pay 0.5 per cent of their total payroll bill. This will include basic salary but also things such as bonus, commission and pension contributions. However, organisations will receive an allowance of £15,000 to offset against their apprenticeship levy costs (where companies are connected together in a group, this allowance will be awarded to the group as a whole, not to individual companies). This effectively means that only those with a payroll bill of more than £3m will be liable to pay the new levy (because the levy of 0.5 per cent is totally offset by the £15,000 allowance below this level).
The good news is that if an organisation has, or takes on, apprentices, it is likely to be able to claw back at least some of this levy, because the amount owed can be put into a digital apprenticeship service account. The funds in that service account will also be topped up by 10 per cent by the government (amounting to an extra 10p for every £1 going into the account). Additional government top-ups may also be available, for example, to those organisations that employ apprentices who are under 18 years old.
The funds in the account can be used to pay for approved training for apprentices although they need to be used within 24 months of being deposited in the account, otherwise they will be returned to the government.
Essentially, an apprenticeship is a formal relationship between an individual apprentice and an employer, in which the apprentice undertakes a combination of work and training. There are many different types of apprenticeship and, in most cases, an apprentice must not only be given on-the-job training but spend a proportion of their time (usually around 20 per cent) doing approved off-the-job training, too. They are now not only found in traditional sectors such as in plumbing or construction work, but also in professional services firms, working alongside accountants or solicitors.
In many ways, an apprentice is just like any other employee although there are special rules governing the relationship. In some situations, they can have additional rights, for example, enhanced dismissal protections where an employer cannot dismiss an apprentice unless there has been a very serious breach of the apprenticeship agreement, or it has been ‘frustrated’ in such a way that the employer’s ability to teach the individual is fundamentally undermined.
From an organisation’s perspective it is, therefore, important to categorise and document the form of the apprenticeship correctly, to ensure that such enhanced protections are not provided inadvertently and it is clear what form the apprenticeship takes and the rights that attach to it. It is also important to remember that apprenticeships should not just be offered to young people, as this could lead to age discrimination claims.
Somewhat predictably, the apprentice levy has been surrounded by controversy. Critics argue that it is effectively a payroll tax that will put pressure on wages and employment. Given that the funds put into the digital apprentice service account have to be used within 24 months, it is also possible that funds intended by employers for apprentice training will go to waste.
Nevertheless, the levy should at least focus attention on apprenticeships and may encourage those employers liable to pay it, but which traditionally have not used apprentices, to now consider the merits of doing so. Only time will tell whether the levy is an effective tool for meeting the government’s aim of improving the availability and quality of apprenticeships in the UK.
Story via – http://www2.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2016/12/15/why-organisations-should-be-thinking-about-apprenticeships-in-2017.aspx