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The way that apprenticeships are created and funded in the UK has recently undergone a significant Government overhaul. The new apprenticeship levy was first announced in the summer budget in 2015 and came into force on 06 April 2017. It follows the Government’s commitment to have 3 million new apprentices by 2020.
Who has to pay the levy?
The levy applies to UK employers with an annual pay bill of above £3million. The pay bill is defined as “employee earnings subject to Class 1 secondary NICs”.
How is it calculated?
The levy is 0.5 per cent of the annual pay bill.
All employers will receive a £15,000 annual allowance, to be offset against the bill. This effectively means that employers with an annual pay bill of £3m or less pay no levy.
How will it work?
The levy is collected by HM Revenue and Customs monthly via Pay as You Earn (PAYE). Employers can access and monitor their funding through an online Digital Apprenticeship Service (DAS) account.
To qualify for apprenticeship training, an apprentice must work for at least 50 per cent of their time in England, which will be limited up to certain maximum funding bands (see below).
The funds must be used for training only and does not cover associated costs, for example; personal protective clothing and safety equipment.
Payment to training providers will be made through the online digital account, by way of vouchers.
What about apprenticeships funding for businesses that do not have to pay the levy?
From May 2017, employers not paying the levy, but offering apprenticeships to 16 to 18 year olds, will receive 100 per cent of the cost of the training from the Government, up to the maximum funding bands.
Employers will have to pay 10 per cent of the cost of the apprenticeship training for those aged 19 and over and the Government will pay the remaining 90 per cent, up to the maximum funding bands. This support applies to all age groups.
For non-levy businesses with less than 50 employees there will also be a new £1,000 incentive towards apprenticeships for taking on someone aged 16 to18.
Funding bands
Each apprenticeship framework/standard is allocated a funding band which will set the maximum amount that can be paid for that training from the employer’s digital account.
There are 15 bands that run from £1,500 to £27,000. Examples of agricultural bands are as follows:
Apprenticeship standards
Apprenticeship frameworks, which were regarded as overly long and complex, are being replaced gradually by apprenticeship standards. Apprenticeship standards are employer-designed, are higher quality and more rigorous. Essentially they show what an apprentice will be doing and the skills required of them, by job role.
There are apprenticeship standards covering over 120 different sectors including: accountancy, actuarial, agriculture, business, construction and digital industries.
The old regime
For all apprenticeships in place before the 01 May 2017, employers will need to continue funding the training for these apprentices under the terms and conditions that were in place at the time when the apprenticeship started. They will also continue to be governed by their existing apprenticeship agreement.
What does this mean for local farming communities?
Well, whilst the majority of farmers will not be liable to pay the levy, all farmers will be at liberty to claim money from the levy to subsidise the hire of apprentices. This can be a significant benefit to which many farmers did not realise that they had access.
Technological growth in the farming industry has resulted in the need for a higher level skillset amongst farming employees, than there might have been in the past. An apprenticeship is an attractive option to attract and retain new talent and the use of apprentices has a proven track record in the fields of agricultural engineering and poultry.
Historically, the farming industry has also relied on high levels of migrant workers; with Brexit looming, this may leave a gap in the workforce, and farmers will need to look at new ways to recruit. It is vital, therefore, that farmers recognise the value of home grown talent as a way of securing a highly skilled workforce.
For further information please contact the Employment team.
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