This month has seen two important developments in the Government's equality and skills agenda. The first is the publication of draft legislation regarding the apprenticeship levy. And the second (which we will report on tomorrow) is the publication of draft regulations on mandatory gender pay gap reporting.
These developments have been largely overshadowed over the last 10 days by the press coverage given to the Prime Minister's EU membership re-negotiations and the impending EU referendum, but they are worthy of attention, not least because they are likely to affect most medium size and large employers and will require considerable planning over the coming months.
As I set out at our 2016 Annual HR Planner event, the apprenticeship levy will come into force in April 2017. It forms part of the Government's flagship policy to create 3 million new apprenticeships by 2020 and it is expected to raise £3 billion a year by 2019 – 20 to help fund apprenticeship training.
The number of businesses that have recruited apprentices has increased enormously in recent years. But there are many businesses which do not currently employ apprentices and which may have paid little (or no) attention to the proposal to introduce an apprenticeship levy until now.
But why is it relevant to all businesses - particularly those with an annual payroll bill in excess of £3 million? It is relevant to businesses with a paybill in excess of £3 million because it is going to cost you money. How much? Well, for a business with a £30 million paybill, it will cost you annually £135,000. That's the average annual salary of 5 workers.
So, it is not something that can be ignored.
The draft legislation confirms that the levy will be payable by employers across all sectors in the UK (i.e. it is a universal levy and not industry specific). The levy is set at 0.5% of an employer's gross paybill and will be collected via PAYE. The reason why the £3 million paybill threshold is important is because there will be an annual allowance of £15,000, which can be applied against the levy, and so the levy will only be a cost to employers if their paybill is in excess of £3 million. However, the annual allowance is subject to a "connected companies" rule, so employers who operate multiple payrolls (for example, for other group companies) will only be able to claim one allowance.
But the good news is that you will be entitled to something in return, in the form of e-vouchers which can be used to cover the costs of training your apprentices. Funding for training will be accessible via a Digital Apprenticeship Service and each employer will be assigned a digital account. There will also be a "top up" mechanism, if other employers do not use their e-vouchers (the e-vouchers will expire after two years), which will mean that employers should be able to get out more than they pay into the levy.
The Government is also offering additional encouragement to recruit apprentices. From April 2016, no employer will pay secondary Class 1 (employer) national insurance contributions for apprentices under 25 up to the Upper Earning Limit. A grant of £1,500 is also available to small employers taking on apprentices aged 16 to 24.
It is hoped that through these added incentives, and the introduction of the apprentice levy, more employers will consider taking on apprentices. However, before you join the head long rush to recruit apprentices to your business, it is important that you check the terms under which you employ them. For advice and assistance on the appropriate terms under which you should employ new apprentices, and updates on the new apprenticeship levy and digital service, please do speak to your regular contact in the team.
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