The Apprenticeship Levy should be a boon for small and medium-sized enterprises (SMEs). Introduced in 2017, the levy requires all employers with a wage bill of £3m or more to pay into a fund financing the cost of apprenticeship schemes; these firms then reclaim government vouchers that help them meet the costs of their own apprenticeship initiatives.
Firms with lower wage bills are not required to pay the levy but can still claim funding for apprentices often as much as 95% of their costs.
Unfortunately, the levy hasn't matched expectations. Many SMEs are now reluctant to run apprenticeship schemes because accessing funds from the levy is so complicated.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Nor do the finances of the scheme stack up. According to the Association of Employment and Learning Providers, which represents apprenticeship scheme providers, one in four of its members have had to turn away SMEs looking for funding to take on apprentices.
The problem is that the sums claimed by large levy-paying employers do not leave enough to finance the ambitions of smaller non-levy-paying businesses.
The funding crunch comes at a difficult time. The Department for Education is shortly due to begin a £500,000 campaign to promote the take-up of apprenticeships by SMEs. Ministers insist they are committed to providing additional funding for apprentices, and to reforming the Apprenticeship Levy to simplify it.
That would be welcomed by SMEs. The Federation of Small Businesses has found that 24% its members already employed at least one while a similar number were keen to do so.
It's worth pointing out that many small businesses are still making great use of apprentices and benefiting from reforms to the system, with the fees charged when they take on apprentices having been halved last year. Most SMEs applying for funding from providers are succeeding.
Where to find help
Selecting the right training partner is crucial. These providers are responsible for delivering the training apprentices will receive and also play a vital role in advertising vacancies and recruitment. Some can also take on all the administration involved in running an apprenticeship scheme.
-
What will the unravelling of US-China trade mean for the economy?What will a US-China decoupling mean for the global economy?
-
Scottish Mortgage: why we’re turning to private companies and China for exceptional returnsWhen it comes to delivering growth, Scottish Mortgage will stop at no end in its hunt for exceptional long-term returns - this includes China, unicorn companies and sectors such as space exploration
