In the news: government details changes to Apprenticeship Levy

We previously wrote about the Apprenticeship Levy, which was announced in Autumn Statement 2015, discussing who would foot the bill and how it might affect contractors and freelancers who choose to work through umbrella companies.

To recap, the Apprenticeship Levy will be a duty that employers in large companies will need to pay to help subsidise apprenticeships in the UK. The levy is proposed to come into effect in April 2017.

The levy will be set at 0.5% of an employers’ wage bill and is only applicable to employers whose wage bill is over £3 million. Those employers who do not qualify to pay the levy will continue to receive government support to fund apprenticeships and training.

Despite several business groups’ pleas to delay the introduction of the levy to due economic uncertainty resulting from Brexit, the Apprenticeship Levy will be going ahead as planned, with a few changes made to the proposals.

In the Department for Education’s statement issued on 25^th October, some key features and changes to the Apprenticeship Levy announced were as follows:

• Employers will have 24 months to spend funds in their digital accounts on apprenticeship programs, rather than the originally proposed 18 months;
• There will be an extra 20% payment required where training providers take on apprentices aged 16 to 18;
• The government will contribute 90% to the cost of apprentice training for employers who will not pay the levy;
• The government will contribute 100% to the cost of apprentice training for small employers who don’t pay the levy, and who take on apprentices of a certain age, such as those who are 16 to 18 years old.

According to Steve Hill, external engagement director at The Open University, nearly 17% of 16 to 24-year-olds in the UK are not in employment, education or training.

Robert Halfon, apprenticeships and skills minister, was also quoted as saying: “Apprenticeships give young people, especially those from disadvantaged backgrounds, a ladder of opportunity. That’s why we continue to work tirelessly to deliver the skills our country needs. The apprenticeship levy is absolutely crucial to this.”

The changes to the Apprenticeship Levy come after other proposals allegedly suggested funding cuts of 30-50% next year for some colleges and training providers.

It will be crucial for employers to focus on developing high-quality apprenticeship and training programs to equip young adults, graduates and employment seekers with the right tools to be able to succeed in a competitive job market and to help them develop their professional skill set via education. This applies to individuals from all walks of life, from those who are from low-income backgrounds to those who have experienced a more affluent upbringing.

Britain apparently lags behind when it comes to providing opportunities for those who are leaving school and university, and high youth unemployment is currently costing the British economy £45 billion per year.

More and more graduates are also looking to other employment options to meet their career goals and find jobs straight out of university. Graduates now see contracting and freelancing as a viable alternative to the traditional 9 to 5 office role, and many young adults are realising the increased potential for skills development and experience that contracting can offer.

If you are or will be a university graduate looking for work, read our Graduate’s Guide to Contracting, which provides insight on the benefits of becoming a contractor after graduation, and tips on how to begin contracting and freelancing as a graduate.