Lincolnshire businesses confused over benefits of Apprenticeship Levy

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Businesses across Lincolnshire say they are confused about the new Apprenticeship Levy, which was first announced by the former Chancellor of the Exchequer George Osborne in the 2015 Summer Budget.

The levy will take effect from April 6, 2017, when businesses with an annual paybill in excess of £3 million will be charged at a rate of 0.5%.

The move by the government is in a bid to help combat the national skills shortage by committing to an additional three million apprenticeship starts in England by 2020.

It is expected to impact less than 2% of UK businesses. However, despite the change only being a few months away, local firms say they are still confused about what it will mean for them.

James Pinchbeck, Marketing Partner at Streets Chartered Accountants

James Pinchbeck, Marketing Partner for Lincoln-based Streets Chartered Accountants, said: “For local businesses and organisations with £3 million or more payrolls, then as Apprenticeship Levy payers, the new apprenticeships schemes may be easier to get to grips with.

“The water does seem muddier for our small businesses which are in excess of 90%, who might be able to benefit from taking on an apprentice.

“The lack of clarity seems to be what constitutes an apprentice, what the costs are in relation to employing one and what training should and can be provided.

“The new scheme should provide employers looking to up skill and expand their workforce with the benefit of tailored and relevant work based or classroom style training.

“With the smaller businesses not expected to contribute to the overall levy, as per the large employer counterpart, but to receive support in part-funded training etc.

“Therefore the real cost for small businesses is the obligation to pay at least the minimum wage plus a contribution to the provision of training from an apprenticeship training provider.”

When taking on an apprentice, businesses will be expected to commit to employing them for a minimum of 12 months for 30 hours a week and paying them at least the apprenticeship minimum wage of £3.30 per hour.

Businesses will also be expected to coach and mentor the apprentice as well as allow them to undertake their qualification.

Working together

The Lincoln College Group have been working with businesses across the county regarding the apprenticeship reforms that are designed to stimulate investment in apprenticeship training, which is proven to increase productivity, staff loyalty, innovation and growth.

Lincoln College. Photo: Shooting Star PR

James Newall, Group Head of Marketing and Communication for Lincoln College Group, said: “The reforms will see the creation of new Apprenticeship Standards, which will be co-designed by employers, creating training that is closely aligned to specific job roles, further enhancing the benefits of apprenticeship training.

“Although smaller firms won’t pay the levy, the government will co-fund apprenticeship training for small and medium (SME) sized businesses.

The government will pay 90% and the employer will cover 10%.

“The employer will pay an amount upfront, with costs being recovered at various stages throughout the training.

“The changes also mean that employers will be able to choose their provider and negotiate a price directly with them.

“This should lead to a more competitive market and better value for money for employers. Apprenticeships will be employer-led – not provider-led.”

A welcome plan

For business organisations and different industries across the county, which requires skilled labour such as construction and manufacturing, the chance to recruit additional apprentices at a reduced cost is a welcome idea.

David Thorpe, Development Manager for the FSB

David Thorpe, Regional Development Manager for the Federation of Small Businesses (FSB), said: “The FSB believes apprenticeships are an effective way of preserving important skills, transferring knowledge and keeping key trades and professions alive.

“Recruiting an apprentice also makes good business sense, which is why a quarter (24%) of our members currently have at least one in their business and a further 24% are considering employing an apprentice in the future.

“However, there are still barriers that limit small businesses’ ability to take on apprentices, such as access to high-quality training and lack of information.

“Changes in the way apprenticeships in England are funded also means that small businesses will be asked to contribute towards the cost of training apprentices.

“FSB is working with the government to ensure that the new system will provide small businesses with an equitable, financially viable and straight-forward way to take on apprentices.”