Your organisation and the apprenticeship levy

Research has found that a third of UK businesses are confused or unaware of the financial implications of the new apprenticeship levy. This is worrying as the levy comes into force in April, giving us just over a month to get our head around this. In the words of Destiny’s Child, ‘I don’t think we ready for this levy’. The UK-wide research also found that only 31% of respondents are planning to increase their number of apprentices, with 15% claiming they would be forced to cut other recruitment schemes in order to offset the costs of the levy.

This is a significant amount of organisations and a substantial amount of money for our sector

This is something that’s come out of a couple of events I’ve attended, with organisations stressing that the money they’ve put aside for training will now be going to the levy, limiting their budget for recruitment and training. While the Skills Development Scotland (SDS) contribution covers training – organisations are still required to pay apprentice wages. When the levy was announced last year, SCVO research found that there will be around 75-80 third sector organisations paying the levy in Scotland. The estimated value of the levy from the third sector is £2.3 million. This is a significant amount of organisations and a substantial amount of money for our sector. So what does it mean for your organisation? Here are some key considerations.

Will I have to pay the levy?

All employers will a payroll totalling £3 million or more will have to invest 0.5% of their pay bill into apprenticeships via the levy. This tool enables you to estimate the cost of your levy. If you will not be paying the levy, you can still get funding for apprenticeships.

How will the levy be paid?

The Apprenticeship Levy will be paid each month through the PAYE process in the same way you pay Income Tax or National Insurance contributions. You can find out more about the payment process here.

Do I get a digital voucher?

Not in Scotland. In England organisations will be given a digital voucher where they can track their money but the money is not ring-fenced in this way in Scotland. This means that the money will go in to the SDS Budget and apprenticeship funding will continue to be administered by SDS. Cross-border organisations will not be able to spend their digital voucher in Scotland. There are fears that this will lead to significant economic and bureaucratic burdens for cross-border organisations and for organisations not currently involved in apprenticeships, there are questions about how employers can ensure they recoup their levy money. In some cases, it won’t be possible to recover the full levy contribution.

What will the levy money be used for in Scotland?

Following a consultation last year, the Scottish Government decided to use the £221m of levy funding over 2017/18 to support skills, training and employment in Scotland. This means using the money to meet the 30,000 apprenticeship starts target and continuing the extension of the ‘apprenticeship family’ through Graduate Apprenticeships and Foundation Apprenticeships.

I’ll be paying the Levy, but don’t currently employ MAs. How can I get involved?

SDS have informed us that if you would like to get involved in the Apprenticeship programme or have any questions, you can make an employer support request and find out more via the The Our Skillsforce.   There are also going to be a number of employer information sessions.

What next?

While the policy is not ideal, and perhaps the process even less-so, this may be a good opportunity to get involved in apprenticeships and workforce training. Also, despite increasing attention given to improving underrepresentation in MAs, the figures remain poor. Greater involvement of the third sector could further drive this agenda. If your wage bill is over £3m, it’s time to start thinking about how the levy will impact your organisation. As a starting point, it might be worth assessing your workforce needs and any skills gaps. I’m aware that there will be some third sector-specific questions, for example around funding. If you have any queries, or want to chat about the levy, please feel free to get in touch with me.