Industry reacts to long-awaited apprenticeships guidance

The Apprenticeship Levy was first introduced by former Chancellor George Osborne in his 2015 Summer Budget.

It is designed to encourage larger firms to take on more apprentices and help bridge the skills gap.

High quality apprenticeships cost more and it’s good to see the government has recognised this

EEF chief executive Terry Scuoler

In Osborne’s 2015 Spending Review/Autumn Statement, he announced that the levy would stand at 0.5% of a company’s payroll and would affect businesses with a wage bill of £3 million and over.

As part of the levy, employers would receive a £15,000 allowance against the levy and those with a wage bill of less than £2 million would be exempt from the levy and will pay zero tax on it.

Employers will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process, the government said.

Earlier this month in a letter written to the government, a number of organisations representing industry warned that without adequate guidance, which was originally due out in June, employers would be unable to plan for the levy’s introduction, which would increase levels of uncertainty.

However, publication of the guidance this morning has gone some way to allay industry fears.

Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, said: “High quality apprenticeships cost more and it’s good to see the government has recognised this, particularly through the uplift of funding for STEM (science, technology, engineering and maths) apprenticeships.”

He said the manufacturing industry, which “punches above its weight” in both the quantity and quality of apprenticeships it provides, will see this as a green light to train even more people.

UK operation

The guidance stipulates that employers may fund apprenticeships based on their main place of work, as opposed to where they live.

“This will prevent them from being even further subjected to a cross-border penalty,” Scuoler said

“Manufacturers need to be able to spend their levy funds on apprentices and providers across the UK if they wish to do so,” he added.

'The big one'

The guidance also outlines the funding bands, which EEF senior employment and skills policy adviser Verity O’Keefe called “the big one”.

She said the government has opted for quality instead of quantity.

“One of our major 6 red lines, and arguable most important, was that the amount that manufacturers could draw down from the levy fund reflection the true cost of training. The truth is currently, public funding for manufacturing and engineering apprenticeships barely scratch the surface,” she said in a blog post.

O’Keefe pointed out that there are 15 funding bands, ranging from £1,500 to £27,000.

“On the whole, the provisional funding bands for manufacturing and engineering apprenticeships are a true and fair reflection of the cost of training. There remain a few apprenticeship standards that we would like to see knocked into a higher band and we’ll work with government, and supply evidence to argue that they deserve to be nudged up.”

Meanwhile, the government has also said that employers that are too small to pay the levy, which accounts for roughly 98% of employers in England, will have 90% of the costs of training paid for by the government, said the National Skills Academy for Nuclear (NSAN).

"Extra support - worth £2,000 per trainee - will also be available for employers and training providers that take on 16- to 18-year-old apprentices or young care leavers. Employers with fewer than 50 employees will also have 100% of training costs paid for by government if they take on these apprentices," NSAN said in response to the guidance.

Levy delay

Despite signs of optimism, however, there are still several question marks over the design of the new levy system.

“Employers will want to see a commitment from government that the system will evolve and respond to employer needs not just in the lead up to the implementation date but, importantly, also afterwards,” Scuoler said.

He added that delaying the introduction of the levy would buy the government “much-needed” additional time to work closely with industry to iron out some of the major wrinkles.

“This will be vital if the levy is to support the creation of more high quality apprenticeships.”  

Increasing the volume of high quality apprenticeships in food and drink manufacturing is vital to tackling our skills gap, which is why we need to get apprenticeship funding right

Tim Rycroft, FDF corporate affairs director

Meanwhile, as the UK’s largest manufacturing sector, food and drink businesses could be affected most severely by the levy.

Tim Rycroft, corporate affairs director at industry trade body the Food and Drink Federation (FDF), warned that the Apprenticeship Levy is not ready for implementation next year.

He said that in the wake of the UK’s decision to leave the European Union, there is no question that the levy would “add unwelcome additional burdens on hard-pressed industry at a moment of crisis”.

“We join other business voices in urging the new Secretary of State to listen to industry, delay the levy’s introduction, and work with us to make it fit for purpose.”

Both FDF and EEF were part of the group that co-signed a letter to government calling for a delay to the levy.

“Increasing the volume of high quality apprenticeships in food and drink manufacturing is vital to tackling our skills gap, which is why we need to get apprenticeship funding right,” Rycroft said.