How the apprenticeship levy has affected employers and smaller businesses.
Maintaining the support of the business community for any major reforms to Apprenticeships is paramount, yet business leaders have shared serious concerns in recent months about the approach of the apprenticeship levy.
The difficulties facing employers of all sizes since the introduction of the levy partly derives from it’s complex process, and the administrative burden it creates for businesses.
Steve Nash, Chief Executive of the Institute of the Motor Industry, said that the slump in apprenticeship starts under the levy was caused by “a combination of confusion amongst employers about the new processes and reluctance by smaller employers to take on what they see as an increased administrative burden”.
If you’re an employer with a pay bill over £3 million each year, you must pay the apprenticeship levy if you employ apprentices, and you will report and pay your levy to HMRC through the PAYE process.
For those employers using the new HMRC digital accounts, the task facing them is adaunting one. Although large companies with sizeable HR departments will presumably find a way to navigate this new regime, that does not excuse its complexity or onerous nature. Levy-paying employers must now take responsibility for the following tasks through their digital accounts:
- Constantly monitoring the amount of levy funds they have available in total and for each apprentice in their organisation.
- Monitoring their transactions with training providers for each apprentice on a monthly basis.
- Keeping track of the expiry dates of all the levy funds they currently have available.
- Adding, reviewing and checking the status of all their current contracts with training providers for each apprentice.
- Searching for, and updating the status of, each apprentice in their organisation.
These tasks are all on top of the requirement for employers to search for, and then engage in price negotiations with, training providers and assessment providers for each apprentice as well as organise and sign contracts. Large employers may be able to handle these extensive duties, but the plan to bring small and medium-sized employers into the same system by April 2019 are concerning in light of these new responsibilities.
In February 2018 Dame Judith Hackitt, chair of the EEF manufacturing group, described the levy’s impact on employers as “disastrous” because “it is complex, companies are unable to access their funds and many view it as another tax on business.” Such is the degree of complexity and bureaucracy associated with the apprenticeship levy, she added that employers were “near breaking point” and consequently the Government must “rethink the entire levy system from top to bottom.”
Independent Think Tank, Reform has produced a report to assess the first year of the apprenticeship levy and have provided some recommendations to hopefully ease the burden on businesses. These include:
- removing the requirement for 10% employment co-investment towards the cost of training apprentices, to avoid employers disengaging from apprenticeships.
- replacing the existing HMRC digital payment system with a simpler ‘apprenticeship voucher’ model.
It is right to focus on apprenticeships and up-skilling our workforce, but it is important to fine the balance and not approach it in the wrong way and draw a negative impact on businesses in the long run.