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In April 2017, the Apprenticeship Levy was introduced to ensure that there is a long-term investment in high quality apprenticeship training. Under the levy, large employers – those with the wage bill of more than £3 million per annum – pay 0.5% of their total wage bill into a training fund. It is hoped that the levy will raise £3 bn a year. This fund is then accessible by smaller employers to cover much of the cost of apprenticeships, with a view to remedying the skills gap, recruiting new talent and improving the abilities of current and future staff through work-based learning. Smaller employers contribute 10% of the cost of an apprenticeship, with the Government making up the other 90%. The levy, and the fund it creates, was intended to create 3 million new apprenticeships by 2020.

However the rollout has been far from problem free. Larger firms who have to pay the levy consider that it is an unfair tax on them. Employers who are entitled to funding through the levy system have been daunted by its complexity, and the regulatory requirements. Communication has been a problem too, with a survey of smaller and medium employers revealing that only 34% were aware of their entitlement to apply for apprenticeship funding.

Far from boosting apprenticeships, the number of new apprenticeships since the introduction of the levy have dropped significantly, with latest figures showing apprenticeship starts fell from 36,400 in June 2017 to 21,800 in the same month this year. This has led to considerable criticism from business groups, who point to complexity and inflexibility within the system. Apprenticeships must meet a Government “approved apprenticeship standard”, must take at least 12 months and must involve at least 20% of time on offer job training. Evidence suggests employers find the structure too rigid.

In response, the Department for Education, conscious of avoiding apprenticeships becoming a “race to the bottom” in terms of salary and quality of training, state that although the numbers of new apprenticeships has dropped, the levy has been successful in providing long-term opportunities by placing more people in higher quality apprenticeship rules for a longer period of time. The Skills and Apprenticeship minister, Anne Milton says that the Government will not sacrifice quality for quantity, and she continues to promote the higher quality apprenticeship model.

However, business leaders say that there is consensus across the UK business community that the Apprenticeship Levy needs reform, in particular giving employers more flexibility in investing in courses tailored for their businesses.

More information is available from the Government website: www.gov.uk/take-on-an-apprentice

Meanwhile, any employer taking on an apprentice needs to ensure that a modern Apprenticeship Agreement is used, rather than an old-style contract for apprenticeship. An Apprenticeship Agreement operates like an employment contract, and gives the employer flexibility if things don’t work out with the apprentice. On the other hand, the old-style contract for apprenticeship entitles the apprentice to enhanced compensation for early termination, and is much more difficult for the employer to terminate, should the need to do so arise.