One of the government’s stated policy objectives is to boost productivity through investment in human capital. Apprenticeships appear to be a key part of this strategy. In its Autumn Statement 2014, the government announced the abolition of employer Class 1 National Insurance Contributions for apprentices under 25 years of age on earnings up to the weekly limit of £827 from 2016 to 2017. The government is now consulting on its draft proposals for the Apprenticeship Levy. The consultation is open until 2 March 2016.
The government has pledged to create an additional 3 million apprenticeships by 2020. In order to fund this and ensure the quality of the scheme, the government intends to introduce an apprenticeship levy which will come into force from 6 April 2017. It will be payable by employers across all sectors and will be calculated at 0.5% of the gross annual wage bill excluding benefits in kind. Each employer will receive an allowance of £15,000 to offset against the Levy therefore only those with annual pay bills in excess of £3 million will be affected. The Levy will be collected through PAYE and a separate body – run by employers and employers’ organisations - will be set up to manage the money raised. Connected employers or those with multiple payrolls will only be able to claim the allowance once.
The intention is that the Levy will encourage training thereby increasing productivity and profitability for businesses in the long term. In theory, those employers offering the most training will benefit more, as the intention is that they will be able to access good quality training through the scheme. Whether the Levy achieves the government’s goal will not be known for some time. Presumably most employers will be supportive of the government’s aims but some will undoubtedly see this as an unwelcome “tax” on business at a time when the economic outlook remains uncertain.
If you would like further information or advice, please contact Debbie Sadler on 0118 955 9607 or at email@example.com.
Published on 08/03/2016