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Government outlines plan for apprenticeship levy

Employers too small to pay the apprenticeship levy will have 90% of costs paid by government

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The Department for Education (DfE) will introduce the apprenticeship levy by May 2017 but has announced support for small businesses that cannot afford to pay the apprenticeship levy.

The levy – a tax that will apply to all UK employers in both the private and public sectors who pay annual pay bills of more than £3 million – was initially suggested by former chancellor George Osborne to raise the £3 billion a year needed to support the creation of three million new apprenticeship roles by 2020.

The levy will be calculated at 0.5% of a business’s annual payroll bill, minus an allowance of £15,000.

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.

Extra support - worth £2,000 per trainee - will also be available for employers and training providers that take on 16-18-year-old apprentices or young care leavers. Employers with fewer than 50 employees will also have 100% of training costs paid for by government if they take on these apprentices.

The DfE will introduce the new funding system on 1 May 2017. All apprenticeships started before 1 May will be funded through to completion according to the existing rules.

Employers will be able to choose the training they would like their apprentice to receive, an approved training provider and an assessment organisation using a new digital register available on the digital apprenticeship service. Employers will be asked to make a contribution to the cost of this training and government will pay the rest, up to the maximum amount of government funding available for that apprenticeship. Every individual apprenticeship framework and standard will be allocated to a funding band. The upper limit of the funding band will cap the maximum price that government will ‘co-invest’ towards. It is currently seeking views on proposals for these funding bands.

Apprenticeships and skills minister Robert Halfon said: “Our businesses can only grow and compete on the world stage if they have the right people, with the right skills. The apprenticeship levy will help create millions of opportunities for individuals and employers. This will give our young people the chance they deserve in life and to build a highly-skilled future workforce that the UK needs.”

The government is inviting employers and training providers to have their say on the initial funding proposals via an online survey, to try to ensure final plans fully meet the needs of all those involved in the apprenticeship programme.

The proposals also include plans to give employers the chance to use levy funds to retrain workers in new skills, even if they have prior qualifications.

A new register of training providers will be introduced from April 2017 in a bid to improve the link between training providers and employers.

Petra Wilton, the Chartered Management Institute’s (CMI) director of strategy, said: “Apprenticeships are a proven route for raising business productivity. Leading employers are already adopting the new professional pathways such as the chartered manager degree apprenticeship, and the new generous levels of government co-investment announced today are welcomed by many businesses, especially those smaller organisations outside the scope of the levy.”

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