Our Managing Director, Jenny Patrickson was interviewed by WorkOut UK magazine for her views on the Apprenticeship Levy. which came into effect on the 6th of April. The Levy affects businesses in all industries, with the goal of improving the quantity and quality of apprentices within their workforce.
Active IQ Managing Director Jenny Patrickson
Can you tell us more about the Apprenticeship Levy and how it will work?
It comes into effect on April 6th and is being introduced to all types of businesses – not just our favourite active leisure industry – that have a pay bill of £3m or more. Those businesses will be obliged to spend 0.5 percent of their total pay bill to help fund apprenticeship training moving forwards. When a business pays the levy, they’ll receive the value of the money they’ve paid in the form of vouchers into a digital account. When the business comes to paying for apprenticeship training – be that in-house or externally – they take the funds from this digital account where, effectively, apprenticeship funds have been ring-fenced. This ensures that the money is both prioritised and protected, ready to be spent on the training of apprentices, but there are also financial benefits. Employers will benefit from a 10 percent top up to monthly funds that enter this digital account, so for example, for every £100 that a company pays, the Government will top this up by £10. The funds, or, ‘vouchers’, in the digital accounts will expire after 24 months – so organisations should use them while they can otherwise they will simply be a ‘tax’.
How is the new format different to the existing system?
Previously, employers didn’t contribute from a cash perspective to apprenticeship training, as the training was funded by the government, with funds transferred directly to the training providers that were involved in the delivery of training for the employers that they worked with. Moving forwards, employers will need to negotiate the price of training and assessment for apprenticeships with any training providers they wish to use. The Government will pay 80 percent of the negotiated price on a monthly basis, and the remaining 20 percent of each month’s cost will be paid at the end of the apprenticeship.
What are the key points/timescales which employers need to be aware of?
The Apprenticeship Levy is being introduced on April 6 2017 and the new apprenticeship funding system will be implemented from May 1 2017 – this will apply to all employers, both those paying the levy and those that do not.
How will the changes affect businesses in the fitness industry?
A number of the larger operators within our sector will fall into the levy paying category, so they need to prepare themselves for this in advance. Employers should register for a digital account with the Digital Apprenticeship Service and once they have declared the levy to HM Revenue and Customs (HMRC) they will be able to access funding for apprenticeships through their digital account. As many of the larger operators already employ apprentices, they should be well briefed in terms of what they need to do from April onwards. However, the change they’ll face is the need to engage even more closely with training providers to negotiate the price of training and assessment moving forwards to ensure that it falls within the government’s new funding bands.
Will the changes affect smaller, independent operators in a different way to the larger chains? What do they need to be aware of?
Smaller independent operators, with a pay bill of less than £3m will not be required to pay the levy. However, they will still benefit from government funding to support their commitment to apprenticeships. Smaller operators who employ more than 50 people will not pay the levy. If they would like to train an apprentice, they will need to co-invest 10 percent and the Government will fund the remaining 90 percent of the cost. Even smaller operators with fewer than 50 people working for them will be able to train 16 to 18-year-old apprentices without making a contribution towards the costs of training and assessment (as long as the costs don’t exceed the Government funding band maximum). The Government will pay 100 percent of the training costs for these individuals as part of its commitment to supporting smaller businesses. All that said, the smaller operators should engage with training providers that have expertise in the area of apprenticeships to ensure that they fully understand what funding is available from the May 1 2017 for the range of apprenticeships available within our sector.
What opportunities will the levy bring to the sector?
The Government sees an employer cash contribution towards the costs of training as an essential part of apprenticeship reform, designed to increase the quality of apprenticeships and the engagement of employers. For our sector, as with any other, this means that employers should have a greater say in how apprenticeship training is delivered and as they are contributing financially throughout the process, there should be more incentive to be involved in the training of apprentices throughout their organisation. It’s also possible for employers to become ‘employer-providers’ to deliver their own apprenticeship training in-house, so our fitness industry employers have the opportunity to create their own tailored apprenticeship programmes in a way that is cost effective for them to deliver without the need to outsource training.
Why should operators of all sizes consider apprenticeships? What are the benefits to a gym or fitness business of taking on and developing staff in this way?
The main aim of the Apprenticeship Levy from the Government’s perspective is to support employers in growing the quality and number of apprenticeships in their own workforce. Apprenticeships can benefit both employers and individuals, and by boosting the skills of the workforce they also help to improve economic productivity. From an operator perspective, offering apprenticeships enables a business to attract new talent, and provides individuals with the opportunity to pursue a successful career in the active leisure sector, whether that’s a first step on the employment ladder or as a progression with a current employer. It also gives employers the opportunity to develop staff in a way that enables individuals to ‘learn on the job’ and to apply their own look and feel in terms of the culture of the organisation to the training that each apprentice undergoes. For those large employers that are required to pay the levy from April onwards, it would be a real shame if those funds were not used for the purpose for which they’ve been designed and just lost in the system as a tax; and for small employers it would also be a shame for those businesses not to take advantage of the co-investment pledged by Government for apprenticeship training. Employers and employees in our sector stand to benefit from this combining of work with education and should embrace this change, whatever initial complexities they may face.