What the new apprenticeship levy means for you

Firms with salary bills over £3m will have to pay the apprenticeship levy but small practices can benefit from 90% of their training costs paid by government

Last week the government launched its apprenticeship levy of 0.5% of employee salaries where these exceed £3m. This is intended to promote the use of apprenticeships and to assist the government in reaching its target of three million or more apprenticeships by 2020. 

The scheme has three main parts: the introduction of the apprenticeship levy; the launch of the online apprenticeship service; and a restructuring of the existing apprenticeship training framework.

The apprenticeship levy

Much of the attention so far has focussed on the apprenticeship levy. As the levy doesn’t apply to businesses with annual salary costs under £3m most architectural practices will be exempt.

However, larger practices need to assess the impact of the levy, which will have the same effect as a 0.5% increase in employers’ national insurance contributions unless they can offset the cost against their existing training spend.

The levy will generally be calculated as part of the monthly payroll and practices will report and pay the levy to HMRC at the same time as their PAYE. 

Benefitting from the levy

Where the levy differs from a tax is that it is allocated to an online apprenticeship account and practices can spend the levy funds on qualifying apprenticeship training. Furthermore, the government adds a 10% top up to the funds paid into the account; so, for every £1 of levy paid into the account, £1.10 is available to spend on training.

Through the online account, practices can select and pay approved training providers, choose assessor organisations and post apprenticeship vacancies. Each qualifying apprenticeship course has a maximum amount of levy funding that can go towards the total cost. It works on a use-it-or-lose it basis, so it is in the interest of the employer to use up their levy pot if possible.

So how can smaller practices benefit? While smaller practices do not have to pay the levy and, for the time-being, will not have online apprenticeship accounts, they can still benefit from the new system.  Provided that they also choose qualifying apprenticeship courses, the government will pay 90% of the training cost up to the maximum available for that particular course, so the practice will bear just 10% of the cost.

The catch

Levy funds or government funding are only available for qualifying courses, most of which are referred to as Trailblazer apprenticeships. In time, these are designed to replace the various apprenticeship-type courses and qualifications that have developed over the years.

All Trailblazer apprenticeships involve an individual being employed within a company and gaining a mix of technical knowledge, practical experience and wider business skills. These are learnt through a combination of on-the-job training and formal tuition from an approved training provider. The apprentice must be paid at least the minimum wage and must be given paid leave for their time spent studying. Each Trailblazer scheme is developed in conjunction with a group of employers on top of a consistent framework. The aim is to ensure that they meet the needs of the businesses that employ the apprentices while maintaining consistency of difficulty and learning achievement. 

What is available for practices?

18 practices have come together with the support of RIBA to develop an Architecture Trailblazer. These include Foster + Partners, AHMM, Grimshaw, BDP and Stanton Williams. In March, the group received approval from the government to design two apprenticeship routes and the intention is that these will be available from 2019 and open to all. 

The first is a level 6 qualification and it is proposed that this will be equivalent to the RIBA Part 1.  The apprenticeship is expected to last four years with formal tuition accounting for 20% of the apprentice’s time. The student will have to pass a formal assessment at the end of the scheme.

The second is a level 7 qualification and the proposal is that this will be equivalent to the RIBA Parts 2 & 3. Again, the majority of the training will take place on-the-job, with formal tuition expected to make up 20% of the total. The intention is that the apprenticeship route will have equal status with the traditional study approach and ARB and RIBA have agreed in principle that, on successful completion of the level 7 end-point assessment, the individual will be able to register as an Architect with no further study.

Until the architecture trailblazer is available, practices will need to look to other members of the team in order to use their levy funds on apprenticeships that have already been approved for delivery. Importantly, existing staff can be enrolled onto an apprenticeship as well as new joiners. There are also cash incentives for small employers and those taking on 16-18 year old apprentices.

Multi-disciplinary practices, for example, may also be able to take advantage of the surveying apprenticeship offered by RICS - and businesses should also consider the benefits of up-skilling their support teams. Trailblazer qualifications are offered at a variety of levels from GSCE equivalent to postgrad and already exist for accountancy, facilities and bid/proposal team members, for example.  Practices large and small can benefit from a better trained and, hopefully, more engaged workforce.

So what should you do now?

1.      Practices with an annual salary bill in excess of £3m must register for the apprenticeship service at https://www.gov.uk/guidance/manage-apprenticeship-funds

2.      All practices should review their existing training offering to see whether there are Trailblazer schemes that offer similar or improved training outcomes which will attract funding

3.      Consider whether there are benefits to offering new training to existing staff or employing new staff under a Trailblazer apprenticeship.

Postscript:

Mark Twum-Ampofo is a business adviser and partner at chartered accountant Kingston Smith

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