How to invest and spend the apprenticeship levy
There are three main ways you can spend your apprenticeship levy funds:
- Invest in development training for existing staff
- Hire new apprentices
- Use the levy to fund training in your supply chain
In this article we also cover:
- What the apprenticeship levy is
- What you can't spend your apprenticeship levy on
- Understanding the apprenticeship levy
The Apprenticeship levy was introduced by the UK government to fund apprenticeship starts and encourage more people to take vocational and professional development courses. It's paid by all companies with an annual UK pay bill of £3 million or more.
Employers eligible to pay the Levy can spend their Levy funds on apprenticeship training. The government will also contribute additional funding based on the apprenticeship training standard they have selected. Find out more about apprenticeship funding.
One of the first things that's important is understanding the apprenticeship levy and what you can and can't spend it on.
The Apprenticeships Levy cannot be spent on:
- Statutory licences to practice
- Travel and subsidiary costs
- Work placement programmes
- The cost of setting up an apprenticeship programme
And the good news is that more businesses than ever understand the apprenticeship levy. According to the Institute of Directors, over half the employers who are using the apprenticeship levy system say that they now understand the levy completely - which is an increase from just 36% in March.
IoD’s Director General Stephen Martin commented that “the Government deserves the credit for listening to the concerns of business” and introducing reforms in the autumn. Mr Martin has urged “larger employers who aren’t currently using all of their levy funds to talk to smaller suppliers to see if they could use an apprentice.”
A major barrier to companies fully embracing the potential of the Apprenticeship Levy is the misconception that apprentices can only be entry-level school leavers. From the outset, it's important to reiterate that this is wrong: apprenticeships are open to people of any age.
We should also bear in mind that some individuals may be deterred from applying for an apprenticeship in the first place, because they feel they are too old or are put off by the connotations of inexperience that come with an apprentice title. The interpretation of the word needs to fully evolve if both individuals and companies are to make use of the opportunities the levy can offer.
Another popular myth that needs debunking is that apprentices are only for entry-level roles. In truth, apprentices can be taken on at any career level - which is particularly useful for companies looking to promote existing employees or appoint them to a new role - and invest in their training.
The government knows some employers will prefer to take on apprentices with more experience in the workplace or to train existing employees for new roles. This is why it is offering additional funding for companies who take on 16-18-year-olds, to help maintain the balance.
The benefits of hiring young people are huge - often they can encourage cross-generational learning, bring new ideas and skills to the table and help businesses maintain knowledge, which is especially important for industries with an ageing workforce.
Whilst hiring school leavers can be seen as labour intensive on behalf of the employer, this isn't always the case. While a degree demonstrates significant knowledge in a specific sector or area, it doesn't guarantee the successful practical application of said knowledge, and employers will still need to train new staff to adapt to real-world scenarios.
Apprenticeships are becoming increasingly common in industries such as business, finance and management, as employers better appreciate the benefit of training apprentices in line with their company standards, in the hopes that the investment will result in a fully-trained, full-time employee.
A recent survey by the Institute of Directors highlighted that only one in three business leaders was aware that you can spend the apprenticeship levy by transferring funds to smaller businesses.
As of October 2018, businesses are now permitted to invest up to a quarter (25%) of their levy fund into their suppliers. This means that your levy can fund training for people working for your supply chain.
You can also transfer a proportion of your levy funds to other employers. According to the government's website, "transfers can be made to any employer, including smaller employers in their supply chain, and apprenticeship training agencies."
Not only will this help big businesses invest the full amount of their levy, but it also mutually beneficial, making both businesses more sustainable in the long-run.
How to spend the apprenticeship levy on your supply chain
The UK Government states that in order for businesses to transfer a portion of their Levy, they must "agree the individual apprenticeships that will be funded by a transfer with the employer receiving the funds."
Employers receiving transferred funds will only be able to use them to pay for training and assessment for apprenticeship standards.
Employers also have to note that transferred funds cannot be used to pay for training and assessment for apprenticeship frameworks.
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