Training that isn t taxing: the Apprenticeship Levy opportunity

Training that isn t taxing: the Apprenticeship Levy opportunity

Training that isn t taxing: the Apprenticeship Levy opportunity The Apprenticeship Levy: a new tax or an opportunity to find and nurture talent? For professional services firms, the consideration will be whether this is an operational burden or a chance to broaden their training programmes for future prosperity. Since the Levy came into force in England in April 2017, all employers with a pay bill exceeding 3m a year (on all earnings that are liable to Class 1 NICs) must now invest 0.5% of that figure in apprenticeships. However, as a sweetener, the scheme comes with a 15,000 offset allowance every tax year, so some firms will effectively pay nothing and receive funding for training. Use it or lose it The scheme funding for firms is managed through the Digital Apprenticeship Service online account, with the Levy calculated, reported and paid on a monthly basis to HMRC through the PAYE process (alongside tax and NICs). This money, paid into the account by firms, can then be spent on any qualifying apprenticeship training. But with this money having a 24-month shelf-life, firms are forced to use it or lose it. However, there is a rapidly growing roster of official apprenticeship schemes (over 200) covering a wide range of sectors to choose from although, naturally, there are rules about how the Levy funding can be spent: It must be spent on apprenticeship training (not apprentice salaries) Apprenticeships must be real jobs, lasting for a full year (or more), with 20% of time spent on training and including a programme of learning measured against an agreed standard Training must be delivered by a registered training provider, with apprentices assessed by a registered accreditor Apprenticeships can be at any level (from basic to postgraduate level), for employees of any age, and at any career stage Apprenticeships are governed by standards (usually employer-led). Accounting for success The Government has a target to reach three million new apprenticeships by 2020. It also wants to improve training quality, arguing that the new regime will form the bedrock of a new and sustainable workforce. This will not only bridge the UK-wide skills gap that is affecting many industries, but also reach out to a broader cross-section of people and drive true diversity in the workplace. It s easy to see why a firm such as EY is committed to the programme, both as Levy adviser to its clients and as a business seeking skills-driven growth for its own benefit. But given the challenges and uncertainty facing UK plc, there are some real headwinds around the economy, says EY Partner, 2 of 6

Simon Constance. Nonetheless, in the context of all these headwinds, he believes the Levy is going to be a fantastic opportunity. EY has been a part of the pathfinder group of UK businesses charged with establishing new apprenticeships in areas such as accounting and cyber. So, a major part of the Levy s attraction in this context, says Constance, is the breadth of coverage and flexibility it offers employers. Upgrading not deleting The market has traditionally been focused on level two and three apprenticeships equivalent to GCSE and A-Level standards respectively in sectors such as construction and hospitality. And while the Government is keen to maintain this, Constance says the financial dynamics of the Levy are intended to drive more employers towards the higher levels, pitched at graduates and beyond. This, he accepts, is a huge change. But the breadth of scope in the new apprenticeships for businesses that may, for example, be considering the return they get from their graduate schemes, holds genuine possibilities. Levy funds can be used to create learning programmes to fit the outcomes that businesses had been seeking through existing executive education programmes, he says. If cost has been an issue with these older schemes, Constance points out that, within the Levy framework, companies can submit claimbacks for each level of qualification. The higher levels (up to seven) attract up to 29,000. In this respect, he says companies are being urged to spend as much money as they can on complex skills acquisition, adding, this is very much intent on securing investment in some of the most productive and talented people. Consider the full talent lifecycle The Levy represents an opportunity and it is time for firms to consider whether to knock down a few barriers, says Constance. Perhaps the traditional graduate programme could in part be dissolved into the apprenticeship scheme. While there is an assumption that this may limit applications from the right calibre of people, Constance thinks this is an outdated view and suggests that employers use the Levy to fund degrees for their apprentices in order to give them an alternative route to qualifications whilst 3 of 6

simultaneously providing them with work experience in the business world. He warns companies not to turn their back on a potentially significant slice of funding for the sake of tradition. Interestingly, the Levy is effectively creating a new market where a number of business schools and universities are launching apprenticeships to meet professional needs. Programme flexibility also allows firms to build or even sell their own accredited courses. Having more control over content than in general education ensures that companies have training resources that suit their needs. And high-flyers who are funded and supported throughout their development are more likely to stay on-board. This could be an important tool for protecting your investment, says Constance. Businesses should be thinking about their entire talent lifecycle, and considering how it fits their learning programmes, says Constance. Only then should they restructure the components of their talent development strategy. A fresh approach The view that the apprenticeships can create advantage is shared by Mike Thompson, Head of Early Careers at Barclays. Thompson, a member of the Government s apprenticeship delivery panel representing the financial services sector, has helped drive Barclays own approach as part of its quest for employee diversity. Indeed, with the Apprenticeship Levy, Barclays has been able to move away from the restrictions of the old scheme (it was, for example, only available to the 16 to 24 age group). The bank had acknowledged some time ago that its employee demographics did not represent its customers and it needed people with more and varied life skills. The flexibility of the new apprenticeship allows it to consider anyone of any age, at any level. It makes a huge difference to us, notes Thompson. Strength through diversity The Levy has certainly helped Barclays to tap into a rich, underutilised vein of talent. With employment among the over 50s rising, for example, Barclays launched a tailored recruitment programme. Using the advantages of the Levy, it is bringing valuable skills both professional and personal back into the workplace. Even with its diversity count heading in the right direction, Thompson says that Barclays is aiming higher on diversity, and has introduced a pilot Able to Enable internship to help people with mental health issues back into the workplace. By not dodging the difficult issues and by leveraging the Levy, Thomson says the bank has on-boarded some highly intelligent and motivated employees who might otherwise remain unemployed. Employee retention and progress are key goals too. Thompson sees the wider apprenticeship scheme as an enabler for reskilling in the workplace. We have tried as much as possible to innovate and use the freedom that the Government has given us to introduce and keep hold of talent, he reports. 4 of 6

Furthermore, by working through the Levy with leading and diverse providers such as Manchester Metropolitan University, The Chartered Institute of Marketing, and Google, Barclays is assuring a whole new set of skills for its employees and, ultimately, putting itself in the strongest of competitive positions. It has been a huge win for us, says Thompson. Working on it There is work still to be done to change the perception of apprenticeships as one of low level attainment, Thompson admits. While it is a job for schools to introduce the idea to students, he says, the more that professional businesses espouse the idea, the more credibility it will gain, not least with smaller firms who must come on board for it to succeed in the longer term. So, the Levy can help pave the way. As university fees remain an issue for many students, employers offering a formal career path to them for free looks very attractive indeed. While new apprenticeships don t signal the end for traditional graduate schemes, they will continue to secure strong talent that might otherwise fall under the radar and that is to everyone s benefit. 5 of 6

Key takeaways All employers with a pay bill exceeding 3m a year must invest 0.5% in apprenticeships They will receive a 15,000 offset allowance every tax year valid for 24 months which can be spent on any qualifying apprenticeship training The Levy offers firms more flexible training opportunities and could help businesses to invest more in complex skills acquisition By addressing the difficult issues, the Levy can help businesses to onboard talented and experienced individuals who might otherwise remain unemployed But to ensure long-term success, it will be important to transform traditional perceptions of apprenticeships as a low level of attainment. barclayscorporate.com Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 122702). Registered in England. Registered number is 1026167 with registered office at 1 Churchill Place, London E14 5HP. Item Ref: BM412501. July 2017. 6 of 6