3. Apprenticeships


The apprenticeship levy


Reforming and expanding apprenticeships was a key feature of the coalition government’s skills strategy between 2010 and 2015 and this focus is being continued by the current Conservative administration. The Conservative government has pledged to recruit three million apprentices by 2020 which will be funded through an apprenticeship levy announced in the 2015 combined Spending Review and Autumn Statement. 


The government published draft legislation on the introduction of the apprenticeship levy as this booklet went to press. It confirms that from April 2017:


• employers with a wage bill of more than £3 million will have to pay a 0.5% levy to fund apprenticeships;


• the legislation will be introduced in the Finance Bill 2016, and the apprenticeship levy will be payable through Pay As You Earn (PAYE), alongside income tax and National Insurance;


• the calculation of the tax will be based on the same total employee earnings figure as the one that is used for class 1 National Insurance contributions;


• employers will receive a £15,000 allowance to offset the payment of the levy, which will be paid in vouchers; and


• there will also be a connected persons’ rule, similar to the employment allowance connected persons rule, so employers who operate multiple payrolls will only be able to claim one allowance.


• a new Institute for Apprenticeships will also be set up to regulate the quality of the positions being offered and to make sure employers are offering decent training and not just using them to get around the minimum wage.


The government estimates that the apprenticeship levy will be paid by around 2% of UK employers. In its policy paper introducing the draft legislation, it said: “For employers paying the levy, the measure is expected to have some impact on administration costs and the impact will vary by employer, depending on the size of their paybill.”


It added that there is likely to be a “near-term impact in reducing earnings growth”, but that increased productivity brought about by apprenticeship training will ultimately lead to increased profitability for businesses, and increased wages in the long term.


The government hopes the levy will raise around £3 billion for the Exchequer to spend on boosting the quantity and quality of apprenticeships.


However, there has been significant recent criticism of the government’s apprenticeship policy from employers, unions and Parliament, which raises the possibility of it being changed prior to April 2017. This Chapter looks at the concerns.