The Apprenticeship Levy: What hospitality employers need to know

Last week the Government published its proposals for a new funding model for apprenticeships and details around its controversial Apprenticeship Levy. 

Apprenticeship and Skills Minister Robert Halfon said the Apprenticeship Levy - a 0.5 per cent tax on companies with a wage bill of over £3m - would 'help create millions of opportunities for individuals and employers'. 

"This will give our young people the chance they deserve in life and to build a highly-skilled future workforce that the UK needs," he said.

However, the Association of Licensed Multiple Retailers (ALMR) believes the levy will place 'severe burdens' on hospitality employers at a time of economic uncertainty post-Brexit and could harm investment. 

"Licensed hospitality has already doubled the number of apprenticeship starts and is investing on average over £1,000 per employee per year in in-work training – this could well be jeopardised by a blunt additional tax on employment," said ALMR chief executive Kate Nicholls.

"The timing of the levy, coming shortly after the EU referendum and while business and consumer confidence still needs a boost, could scarcely be worse. This is a time of economic uncertainty for UK businesses, not a time to be introducing significant additional costs at such short notice. 

“The ALMR has liaised with the Government to voice its concerns and business leaders in hospitality and retail have been united in telling Ministers as part of the Brexit dialogue to delay the levy. We urge them to rethink the introduction of a measure that will place added strain on employers at such an uncertain time.”

While the Government is welcoming views on its plans, the changes are scheduled to be introduced in April, so hospitality employers are being urged to get planning now to benefit fully. 

"Love it or loathe it, it is now a reality. Yes, it will be a big financial investment for many businesses, but used judiciously it will offer a great opportunity for employers to up-skill their whole team, from new starters right thought to senior management," said HIT Training managing director Jill Whittaker. 

With the help of training and apprenticeship supplier HIT Training find out what the Apprenticeship Levy and other changes will mean to your business and how you can start planning: 

  • Levy employers (those with a wage bill of over £3m) will pay 0.5 per cent of their payroll over £3m on a monthly basis. The Government will also top up the funds by 10 per cent.  
  • The levy can be used to fund apprenticeships for new or existing employees of any age or position, as long as there is a need for training.  If employers wish to spend more on apprenticeships than their Levy fund, then they will be asked to make a 10 per cent contribution from May onwards.
  • The levy will be paid on payroll from April 2017, so the first levy payment for employers will be in May. Employers will then be able to purchase training, with a registered training provider, through a new digital system.
  • The levy will need to be calculated, reported and paid to HMRC through the PAYE process alongside tax and NICs by the 19th (or 22nd if you report electronically) of the following month. The first submission in which you will declare that you will pay the levy will therefore be in May.
  • Each apprenticeship framework will have a maximum funding band and the Government has set 15 different bands. Employers can then negotiate an appropriate price with their training provider - for many larger businesses, if the employer has a training department they may be able to make the levy go further by offsetting some of their own training input.
  • Non-levy paying businesses with over 50 employees, or businesses that have used up their levy pot, will have to make a contribution of 10 per cent towards the cost of apprenticeships. Smaller businesses will not have to make a contribution for apprentices up to the age of 23.
  • For all employers which take on an apprentice between 16 and 18 years old, they will receive a bonus payment of £1,000 from the Government.
  • If you use an apprenticeship training agency (ATA) who employ apprentices themselves they will pay the levy if their wage bill is higher than £3m a year. If they don't pay the levy, employers may be able to transfer 10 per cent of their funds to an ATA's account from 2018.