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Fay Gibbin, at Busy Bees Early Years Training Academy, offers her views on the incoming changes to the way the government will fund apprenticeships and how the land lies for smaller businesses.

From April 2017, the government is changing the way it funds apprenticeships. This will impact both large and small businesses. Those with an annual wage bill of over £3million will pay into an apprenticeship levy at a rate of 0.5% of their total payroll. Those companies below the threshold will not pay into the levy, however, there will be further changes and incentives for smaller companies to invest in young people and apprenticeship programmes.

The benefits

There’s no doubting the multiple benefits the apprenticeship levy will bring to young people, providing more opportunities and helping to plug a growing skills gap for many industries. However, those with a wage bill less than £3million will not be paying into the levy and therefore need to be aware of the other incoming changes. There are additional incentives for small businesses looking to recruit apprentices and it’s positive that the government has recognised this, but more needs to be done to make smaller employers aware of how the changes will affect them.

A recent City & Guild report cited the government “has not yet succeeded in generating sufficient support and ownership from employers for the apprenticeship scheme.” There is sure to be more discussion that takes place between industry and government ahead of next April, but businesses need to weigh up their options now as the New Year draws ever closer.

The levy explained

The main changes regarding the levy will mean that employers can access cash directly and essentially take control of finding the skills they require most and choosing the training provider they want to work with, which will be beneficial. Under the previous system, money would be paid directly to the training provider by government, which then businesses could only access after making enquiries with the provider.

As part of the new system, those businesses paying into the levy will claim vouchers from the government to support with the recruitment of new apprentices. From there, organisations can speak directly to training providers to find the people and skills they need most. This is a huge plus for the economy and for companies in industries where finding the right talent has been difficult. The levy will also further incentivise companies to invest in training and apprenticeships outside of their current offering or boost that investment.

So in the main, yes, the fact that the government is committed to developing the UK workforce via the apprenticeship programme is certainly a huge plus, but more explanation is needed around the additional changes to apprenticeship funding for smaller employers.

Changes for small businesses

First and foremost, companies with much smaller manpower and an annual wage bill below £3million will not pay into the levy. However, there are incoming changes in April 2017, which means that the way apprenticeships are funded for smaller companies will change.

Individual apprenticeship programmes will be assigned a funding band and for those apprenticeships that fall in the higher end of the band, the government will cap its investment at the maximum price its willing ‘co-invest’. For example, the government will fund 90% of the agreed price for training and the employer will pay the remaining 10%. To make this more manageable, smaller businesses will be able to spread the payments of the 10% co- investment over the life span of the apprenticeship. The process will work by employers paying their co-investment share directly to training providers.

Further incentives

Small businesses have historically played a pivotal role in helping to advance young people into work and the government has recognised this by continuing to pay a grant to those businesses taking on new apprentices aged 16 – 24 years-old. Otherwise known as the Apprenticeship Grant for Employers (AGE), this scheme will be a welcome incentive for companies with fewer than 50 employees. The government is committed to covering 100% of the costs for training and developing that young person via an apprenticeship programme.

In summary, the apprenticeship levy is being introduced to ensure large employers are financially contributing to growing the UK workforce and investing in apprentices, as the lifeblood of the UK economy. As a collective, we need to continue to invest in people and skills to ensure businesses across the country can increase productivity and compete on a global scale.

Fay Gibbin is training manager at Busy Bees Training, a national provider of training and apprenticeship programmes across the childcare, management and catering sectors.