The government aims to have 3 million apprentices working in Britain by 2020, by making it easier than ever for employers to design and select apprenticeships. To achieve this, they are introducing a levy on businesses with a wage bill of over £3 million, which will come into force in April.
All companies will be able to reclaim £15,000 of this funding in training, accessed through a digital portal. In addition, the Government will top up contributions by 10%, meaning that the employer gets more than they pay in. They will have two years to spend these credits before they expire.
The idea behind this revision is that apprenticeships will be employer-led, replacing the existing model which is driven by providers. The move to simplify the labyrinth system of funding apprenticeships is also welcome, given that it can currently cost employers more to take on apprentices from disadvantaged backgrounds.
However, organisations such as the CBI have voiced concerns about the levy, which does not account for the many different forms of training which companies provide besides apprenticeships. The one-size fits all approach also means that a great number of recruitment agencies will be forced to pay the bill, since internal payrolling for temps is a significant part of the industry’s service offering.
Businesses with an annual payroll exceeding £3 million will pay 0.5% of their expenses to the government. Unfortunately for companies which use recruitment agencies, these costs are unlikely to be swallowed by the larger firms. As you might expect, a number have indicated to clients that the levy will be passed on in the form of higher hourly charge rates (and possibly rounded up to generate extra revenue). Medium sized agencies are more likely to struggle, caught between the risks of increasing their client attrition rate or paying out more than they can afford.
On the other hand, the levy means that smaller recruiters will be uniquely placed to assist their clients. Agencies which fall under the £3 million bracket will be able to provide staff at a greater value than their bigger competitors, while retaining access to the scheme. By using credits to develop their temp staff on longer assignments, they could offer a highly skilled temporary workforce with the usual level of flexibility.
The levy is likely to cause sweeping changes for employers and recruiters. The businesses who will benefit will be those who properly assess how it can work for them.
Connections Recruitment are working with a number of national organisations and in 2017 will hire over 500 apprentices for businesses large and small.