The government has confirmed £2.5 billion will be invested in apprenticeship training within the next four years by imposing a levy on large employers.
Under the plans for the levy, the government has proposed that employers that are too small to pay the levy, around 98% of employers in England, will have 90% of the costs of training paid for by the government, reassuring millions of small businesses.
Employers with an annual bill of over £3 million will be imposed with 0.5 per cent payroll tax from April 2017.
Ministers have proposed that smaller firms with fewer than 50 employees, which take on a 16 to 18-year-old apprentice, will not be required to make any financial contribution towards the cost of training.
Businesses which take on younger apprentices will also benefit from a cash incentive of £1,000 per apprentice.
New research by the Federation of Small Businesses (FSB) demonstrates how vital this will be for small firms, as a quarter already have an apprentice and 70% have an apprentice between the ages of 16-19.
This will also be crucial in achieving the Government’s target of reaching three million new apprentices by 2020.
Mike Cherry, FSB national chairman, said: “This announcement sends a clear signal that Ministers are listening to our members’ concerns. Smaller businesses are taking on more apprentices than ever before.“While many small firms are committed to apprenticeships, many more continue to be worried about the time and personal commitment required. Getting apprenticeship reform right, including changes to existing funding arrangements, is key to apprenticeship growth among small businesses and the Government achieving its target of three million new apprenticeships over the course of this Parliament.”
The new funding model proposes extra support will be available for employers and training providers, worth £2,000 per trainee, for those that take on young apprentices or care leavers.
Employers with fewer than 50 employees will also have all training costs paid for by government if they take on these apprentices.
The government has made the right call in not delaying next April’s start of the apprenticeship levy, but ministers should review the negative impacts of the insistence of a cash contribution from larger SMEs, says the Association of Employment and Learning Providers (AELP).
Mark Dawe, chief executive of AELP said: “Apprenticeships must be at the heart of the Prime Minister’s social mobility agenda and this is why it’s vital that incentives are maintained for smaller businesses to offer young people a high quality start to their careers”.
Retailers are concerned that the current proposals to introduce the levy in Spring 2017 is too soon and comes at a difficult time for the industry.
Helen Dickson, CEO of British Retail Consortium, said: “There is widespread concern in retail and other industries that had an over-hasty introduction of the Apprenticeship Levy and the design of its current proposals will fail to create apprenticeships at scale and drive up the quality of training.
“Retail is undergoing extensive change and that change is having a dramatic impact on our workforce. It is essential that future jobs in retail offer high-quality, rewarding employment. That requires taking the time to design an employer-led solution to the levy so as to encourage employers to spend on high-quality training.
“As it is, there is a risk the Levy fails both to realise its potential and reach the growth rates required in apprenticeship starts. That is why the Government should delay its introduction to 2018, allowing more time to design a truly viable system that delivers high-quality training”.