On April 6th 2017, a new apprenticeship levy was introduced by the government to try to tackle a skills shortage problem in the job market, a problem supposedly costing the economy £2bn per year. The target of the new scheme is to create three million apprenticeships in the private and public sectors by 2020.

Employers with a wages bill over £3 million must pay 0.5% of their total wages bill into the government levy, and can then reclaim some of this fund (with an added 10% from government funding) to spend on providing apprenticeships. Companies with wage bills under £3 million do not have to pay but can still apply for funding for apprenticeships.

If the company is England, they can reclaim by creating an account and gaining direct access to levy funds which can be used to pay training providers and manage apprentices who work for at least 50% of their time.

If the company is in Scotland, Wales & Northern Ireland, the levy goes towards a central pot to support central apprenticeship schemes such as the modern apprenticeship system, rather than giving access to funds directly.

According to a number of reports, the impact has been pretty poor and there has been no increase in the uptake of apprenticeships so far. In fact, the number of new apprenticeships is reported to have fallen by nearly 60% since the levy was introduced.

Business understanding of the scheme has been reported as very poor and many businesses are apparently regarding the levy as ‘just another employment tax’, without fully understanding how they might be able to get a return on their payments.

Sadly it seems that smaller businesses (those under £3 million and not required to pay) are not as well informed about apprenticeship funding and what is actually available to them, largely because they are not required to pay and therefore have not been communicated with.

Apprenticeships are a fantastic way for young people to get into work on a ‘earn as you learn’ scheme and offer a prosperous alternative to further education. Apprenticeship schemes give students the opportunity to learn new skills whilst gaining invaluable experience on the job.

The government have also recognised that with Brexit comes a potential change in the labour market caused by tighter immigration controls and lower social mobility. As we get closer to Brexit, the need to tackle a potential skills gap becomes greater and apprenticeships are a good and accessible option for many.

It seems clear from the latest reports that the government needs to do a lot more to educate businesses on the scheme and improve uptake. With Brexit looming and an expected reduction in skilled labour, employers need to start training more people asap if they want to avoid a skill shortage and want to get a return on their levy payments!