The Government has pledged to deliver 3 million apprenticeships by the end of the current parliament in 2020. The main purpose of this initiative is to raise productivity by providing access to education and employment to a broader, more diverse pool of employees.
From April 2017, the Apprenticeship Levy will come into effect at a rate of 0.5% of an employer’s pay bill. The aim is to create an annual apprenticeship pot of £3 billion which can be used by employers to contribute to the cost of new apprenticeships.
Impact on housing associations
All housing associations will be impacted by the changes, primarily in relation to how learning and development programmes will operate and be structured to maximise entitlement to Apprenticeship funding. A £15,000 allowance for employers will mean that the Levy will only be paid when an employer has a pay bill of over £3 million. Therefore smaller housing associations do not have to contribute to the Levy, although they will be able to use the funds collected by it. Larger associations will need to plan for significant additional employment costs which could be incurred.
Further details and draft legislation were published in February 2016. This tells us more, but not everything about how the Levy will work in practice.
From April 2017, employers will be required to pay a levy set at 0.5% of their ‘total pay costs’. For this purpose total pay costs has been defined as the amount currently subject to Class 1 National Insurance Contributions (NIC). This is intended to fund the increase in the quantity and quality of apprenticeship training. The legislation will be introduced in Finance Bill 2016, and the Levy will be payable through Pay As You Earn (PAYE) via Real Time Information, alongside income tax and National Insurance.
The Government has stated that “employers who are committed to training will be able to get out more than they pay”; but we will need to wait to see how this will be achieved.
Housing associations should undertake a review of:
These steps will help housing associations to understand their financial contribution. They could also trigger a review of future skills needs, workforce planning and people strategies to make best use of the funding available. The landscape will become very complex for all employers; associations will need robust financial systems to track and monitor contributions to the programme.
Further information is expected in the coming months to provide clarity on how employers will be able to access and utilise the Levy funds. It is therefore important that all employers keep up to date with the changes as they are announced to enable training policies and learning and development programmes to be amended to maximise the available benefit.
KPMG’s employers club will be providing up to date articles and seminars as the position becomes clearer. If you would like to receive this information, sign up for free at https://kpmg-employers-club.co.uk.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.