Apprenticeship Levy – What does it mean for Wales?
In the July 2015 Budget, the Chancellor of the Exchequer and the Department for Business, Innovation and Skills announced the introduction of a new levy on all ‘large employers’ to fund apprenticeships in the Spending review and autumn statement 2015. Kevin Howell has spent some time trying to find out the impact of the apprenticeship levy on organisations working solely in Wales. This is what we know so far:
So what is it?
The CBI has stated, ‘The levy will come into effect in April 2017 and be applicable to all employers across all sectors.’ The levy is only payable by employers in the UK at 0.5% of pay bill in excess of £3m per year, through Pay As You Earn (PAYE), alongside income tax and NI. All employers will then give an allowance of £15,000 to offset against payment of the levy.
In England the levy goes into a digital account. Funds in the digital account can pay for apprenticeship training and assessment (with an approved provider and assessment organisation, up to its funding band maximum). These funds cannot pay for apprentices’ wages, travel or subsidiary costs, managerial costs, work placements, traineeships, or the costs of setting up an apprenticeship programme.
Example 1: an employer who would pay the levy
An employer with an annual pay bill of £5,000,000:
- Levy sum: 0.5% x £5,000,000 = £25,000
- Subtracting levy allowance: £25,000 - £15,000 = £10,000 annual levy payment
Example 2: an employer who would not have to pay the levy
An employer with an annual pay bill of £2,000,000:
- levy sum: 0.5% x £2,000,000 = £10,000
- subtracting levy allowance: £10,000 - £15,000 = £0 annual levy payment
The Department for Business, Innovation and Skills says that less than 2% of UK employers will pay the Levy.
How will it work in Wales?
It is understood that the Barnett formula will be used to allocate the funding back to Wales, but it seems unclear if the cash would end up being passed back to the businesses in Wales that are required to pay the levy. The picture in England is starting to become a little clearer, with an Institute for Apprenticeships being set up to oversee the levy and apprenticeship standards. However, skills are devolved in Wales and the detail is still being worked through.
Julie James, Minister for Skills and Science, recently said, (14th June 2016):
‘The levy is a matter of fundamental concern for the Welsh Government. Today, I regret to say that we still do not have complete clarity from the UK Government about how the planned apprenticeship levy scheme will operate in England and the impact in Wales. While things remain unclear, they should not and do not remove the need for us to seek greater certainty and to begin to plan apprenticeship provision here in Wales in more detail for the first and subsequent years of this new Assembly term.’
As further information becomes available we will be updating members.