9 November 2016

How will the apprenticeship levy affect businesses?

David Moxon, Head of Apprenticeships at Southampton Solent University, explains what the apprenticeships levy means for your business.

David Moxon, Head of Apprenticeships at Southampton Solent UniversityFrom April 2017, the apprenticeship levy is going to affect all businesses with a wage bill greater than £3million per annum; if this is you, you will be paying a 0.5% levy above this figure, calculated against monthly payroll. You have two choices – use it or lose it! If you don’t spend the money within 24 months on apprenticeships standards or frameworks, the money will be lost and it will become an extra cost (or tax). There are proposals to allow levy payers to transfer 10% of their funds to other employers, but not until May 2018.

There are also changes for the non-levy paying businesses (i.e. payroll of less than £3million per annum) with the two-thirds/one-third scheme with incentives going. Details of the scheme are given further down this article.

If you think these changes mean apprenticeships are not for you, regardless of the size of your business, think again. You may well miss out on the apprenticeship agenda and associated funding, especially with new Higher and Degree Apprenticeships intended to assist with filling the skills gap in a number of sectors.

This agenda is not new, and come next April will have taken nearly five years since the Richard Review of 2012. The Richard Review proposed all current apprenticeship frameworks to be replaced by standards and the date for achieving this is by 2020, although some frameworks have already been given the six months’ notice that they will cease. The review put employers in the driving seat, in control of the funding and designing. It gives employers the purchasing power, as they are the customer, and perhaps provides a shift in the old relationship between employer and training provider.

The writing of standards is employer driven, something Southampton Solent University, as an employer, is jointly leading on for the Higher Education sector; the University will be a levy payer and will wish to utilise its levy pot. Standards are intended to be a two-page document on knowledge skills and behaviours, short and simple but based on what the sector requires. There may well be professional accreditations, with higher diplomas or degrees within the apprenticeship. There is also an end point assessment to provide a testing and grading at the end of an apprenticeship. For quality, this will fall under the newly formed Institute of Apprenticeships. No longer will employers be able to say that the skills being taught are not what they asked for because the standard has been written by industry.

Responses to the August 2016 consultation provided the final policy. It is believed there will be £2.5billion per annum raised by this levy for spending in England via the Digital Apprenticeship Service (“DAS”). All those levy paying businesses will have need to procure through DAS from April next year in order to utilise the levy they have paid. 

For every £1 paid in levy, a business will have £1.10 to spend. If a business wishes to spend more than what is in their levy pot, then Government assistance is available for at least 90% of the cost, meaning that a business co-invests 10% of the cost. The 10% co-invested is also the new funding rules for non-levy paying businesses from April next year. In the first year, non-levy businesses will have to procure via a new register with the likelihood that they will also move to DAS from May 2018.

An additional incentive for small businesses (less than 50 employers) is 100% funding, available if they take on 16-18 year olds, or 19-24 year old care leavers with a Local Authority Health and Care plan. In addition, £1,000 is paid both to employers and training providers to help with the extra costs for these individuals.

Following the August 2016 consultation, providers will also receive a payment from government equivalent to 20% of the funding for that framework. This is, however, seen as a transitional measure and suspect as more frameworks move to standards, this will be withdrawn.

Other proposals from the consultation included restrictions for subcontracting being relaxed, but kept under review. The consultation found employers and providers agreed with the need to control subcontracting in the levy system, but asked for time to be taken to find the best way of doing this without unduly restricting employer choice and preventing good practice. One other part that came from the proposals, and a change for apprenticeships, was the ability to undertake an apprenticeship at a lower level than the apprentice had previously been educated, providing it was not a duplication of previous skills attained. For example, a person with a degree in zoology may wish to undertake a Chartered Manager Degree Apprenticeship for the role they were looking to move in to.  Likewise, there is a good story in the telecom industry of engineers moving to Digital and Technology Solutions Professional Degree Apprenticeships rather than take redundancy. A cost saving to business both in terms of redundancy, subsequent pension top-up, and recruitment. 

The Government will keep under review the types of training where upskilling applies. For businesses and employees, the concept around apprenticeships needs to be centred on the meaning of the word apprenticeship; of someone learning, which is associated through work. Age and past experience is not necessarily a factor within this and given the way career directions change, some re-skilling and/or up-skilling is likely to occur where training and development is required.

Southampton Solent University’s higher and degree apprenticeships will apply for both the young learners and those re-skilling and up-skilling. Eighteen-year-olds may well be studying for their degree while undertaking an apprenticeship, creating new pathways for school leavers to obtain degrees. It comes with the benefit of the apprentice not needing a student loan and instead earning a wage while studying. The challenge is to find the apprenticeship vacancy, apply, and be recruited; current vacancies are competitive. It is important to note as well that it is the employer who chooses who is going to deliver their programme, so a person recruited on to an apprenticeship with the work part based in London could be studying at Southampton Solent University.

This also offers the opportunity for mature students to achieve a degree or higher qualification. Higher and degree apprenticeships provide the university level qualifications and can include apprenticeships at Master’s degree level (Level 7).

Solent University has experience in the delivery of apprenticeships, such as the health sector. It has been involved in the trailblazer development of standards for health, leadership & management, and construction, as well as the employer role for higher education. As businesses engage, more will follow in any number of areas, be it engineering, maritime, business, digital, arts, technology, media, etc.

The demand has to come from employers though, and this is the current conundrum. Businesses are split between those who are engaged with spending the levy; and those where it may not yet have reached the board table agenda and is perhaps caught between finance and HR.

Southampton Solent University will work as the main provider for employers, and will work in partnership with further education colleges and/or private training providers to deliver the whole solution for employers. There will be some small individual requests, potentially from non-levy paying businesses, however the infrastructure being created is one that looks to serve all these needs. 

So the message to levy paying businesses is spend it or lose it – and Southampton Solent University would like to help you spend it.

For non-levy paying businesses; why look away from the creation of new opportunities that are Government funded and support training and development? These have been developed by industry for industry.

Solent University is looking to be a major regional provider of apprenticeships, and so is keen to engage with all businesses on this agenda.

If you would like to find out more about apprenticeships and the opportunities available for your business, please contact David Moxon, Head of Apprenticeships at Southampton Solent University on 023 8201 3155 or





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