Legal Guides

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How the apprenticeship levy has affected employers and smaller businesses?

The difficulties facing employers of all sizes since the introduction of the apprenticeship levy (in April 2017) is partly due to its complex process, and the additional admin burden it creates for businesses.

Who must pay the levy?

Any employers with a pay bill over £3 million each year must pay the apprenticeship levy if they employ apprentices. This will be reported, and the levy paid, to HMRC through the PAYE process.

For those employers using the new HMRC digital accounts, the task facing them is a daunting one. Although large companies with sizeable HR departments will presumably find a way to navigate this new regime, that does not excuse its complexity or onerous nature.

Levy-paying employers must now take responsibility for the following tasks through their digital accounts:

  • Constantly monitoring the amount of levy funds they have available in total and for each apprentice in their organisation.
  • Monitoring their transactions with training providers for each apprentice on a monthly basis.
  • Keeping track of the expiry dates of all the levy funds they currently have available.
  • Adding, reviewing and checking the status of all their current contracts with training providers for each apprentice.
  •  Searching for, and updating the status of, each apprentice in their organisation.

These tasks are in addition to the requirement for employers to search for, and then engage in, price negotiations with training providers and assessment providers for each apprentice, as well as organise and sign contracts.

Large employers may be able to handle these extensive duties, but the plan to bring small and medium-sized employers into the same system by April 2019 is concerning in light of these new responsibilities.

The independent think tank, Reform, has produced a report to assess the first year of the apprenticeship levy and have provided some recommendations to hopefully ease the burden on businesses. These include:

  • Removing the requirement for 10% employment co-investment towards the cost of training apprentices, to avoid employers disengaging from apprenticeships.
  • Replacing the existing HMRC digital payment system with a simpler ‘apprenticeship voucher’ model.

It is right to focus on apprenticeships and upskilling our workforce, but it is important to find the balance and not approach it in the wrong way and draw a negative impact on businesses in the long run.

Article provided by Max Tebbitts, Commercial Solicitor at Tebbitts & Co

Published on 1st May 2018
(Last updated 7th May 2021)