New Apprenticeship Scheme

Reform of the Government backed apprenticeship scheme has been underway for some time, with clarification on what this will mean only recently being published. What the scheme does is offer some incentives to the small business to take on apprentices.

The guidelines define an apprentice as;

• Aged 16 or over and combine working with studying for a work-based qualification – from GCSEs or equivalent up to degree level
• Can be new or current employees
• Grant or funding to employ an apprentice if you’re in England
• Must pay the apprentice at least the minimum wage during their placement with you

Your apprentice must;

• Work with experienced staff
• Learn job-specific skills
• Study for a work-based qualification during their working week, at a college or training organisation

In England you can obtain a £1,500 apprenticeship grant if you have less than 50 employees and the apprentice is aged 16 to 24. You can claim support for up to 5 apprentices.

Funding of Apprenticeships

Apprenticeships are to be funded via a levy imposed on a company’s salary bill. The levy will be 0.5% of your total payroll subject to an allowance of £15k, what this means is that for companies with a payroll of under £3m p/a then no levy will be payable, as an example;

An employer with an annual pay bill of £5m;

• Levy sum: 0.5% x £5,000,000 = £25,000
• Subtracting levy allowance: £25,000 – £15,000 = £10,000 annual levy payment

An employer with an annual pay bill of £2m;

• Levy sum: 0.5% x £2,000,000 = £10,000
• Subtracting levy allowance: £10,000 – £15,000 = £0 annual levy payment

The £15k allowance is equivalent to the 0.5% on a £3m payroll, hence companies with a payroll of under £3m will not be required to pay the levy. This starts from April 2017. HMRC have also clarified that the levy will be a taxable expense and can be paid before corporation tax.

HMRC have released a calculator for you to work out the cost of training, what you have to pay and what you can reclaim.

Paying for Training

The proposal from the Government is that they will cover 90% of the training costs of apprentices who have started before May 2017. Training will be provided by an approved panel of training providers (which is to be announced). The Government will pay 90% of the cost with the employer paying 10% direct to the training provider.

There remains a £2k incentive for taking on an apprentice, being £1k to the employer and £1k to the training provider.

Mike Cherry, FSB National Chairman, welcomed the news;

“This announcement sends a clear signal that Ministers are listening to our members’ concerns. Smaller businesses are taking on more apprentices than ever before. What’s more, a quarter of our members say they are considering employing an apprentice in the future, but only if they feel apprenticeships are affordable”

If the reforms are introduced as proposed then it offers the SME a chance to recruit apprentices, get their training funded and increase workforce at a sensible level of cost.

Remember that the minimum wage for apprentices is currently £3.30 per hour. This gives employers the potential to pay above the minimum wage. Packaging the offer for apprentices will doubtless be something that the forward thinking SME will be keen to do. The proposals for the apprenticeship scheme certainly seems to offer that adaptability.

Full details remain to be clarified but as it stands now, it is looking good for the SME.

By Dave Farmer

For any questions about this post please add your comments below or contact us direct.

Lime Consultancy are a commercial finance broker operating in the SME space.

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