Organisations that fall under the scope of the Apprenticeship Levy have been paying their contributions for months now, however, it seems many are taking a relaxed approach when it comes to deciding how and when they’ll use their contributions.
In this guide, we’ll highlight why time might not be on the side of organisations in this situation and explore some of the issues that mean it’s a case of the sooner the better when it comes to tackling the Levy.
Recent figures released by the Department for Education showed that more than half of employers under the scope of the Levy had yet to set up their Apprenticeship Service accounts (ASAs).
Given the last-minute nature of many clarifications and changes to the Levy and associated apprenticeship reforms, it’s highly understandable that many organisations are still getting to grips with exactly how they’ll recoup money they're paying in via training.
However, this situation is a far cry from what the government is looking to achieve and could be considered somewhat disconcerting in light of the three million apprenticeship starts it seeks to generate before 2020.
The sun also sets
Under the ‘sunsetting’ process, employers have 24 months in which to spend their Levy funds before they leave their Apprenticeship Service account and are transferred into the general apprenticeship funding pot.
And while 24 months may seem a long way away right now, it’s important to note this ticking clock began when your first set of contributions arrived in your ASA.
As such, it’s necessary to factor in the 24-month time limit as part of a pipeline. You’ll pay into the Levy monthly, on a ‘pay-as-you-go’ basis and funds will be removed from your account 24 months after each payment is made.
Moving the goalposts
Given the somewhat tepid response of employers in engaging with the Levy, it’s well worth considering whether the government could seek to further dis-incentivise non-participation by lowering the time limit on using funds.
In its initial proposals, a fund expiry time limit of 18 months was specified before eventually being pushed back in the finalised legislation.
“We received feedback from employers and representative groups that a longer expiry period would help employers prepare for the new system and adapt and scale their training programmes. Employers also highlighted that many new high quality standards on which they would like to train apprentices are still being developed. Employers suggested that 24 months would be more consistent with an annual planning cycle,” said Education Secretary Justine Greening.
However, the fact that so few employers have even got their accounts off the ground sets a worrying trend that the government may seek to redress if take-up isn’t improved.
On the plus side, there’s an onward march in terms of standards being approved and even if you’re still waiting on the roll-out of industry or role-specific apprenticeships, there’s plenty of general standards available that’ll fit most types of business.
Pay as you go
Many employers we’ve spoken to have been understandably keen to recoup their Levy spend with the least hassle possible. To this end, they envision clawing back their funds by splashing out on a single (or handful of) higher-value standards.
However, many are shocked to learn that - as with most things Levy-related - training is also paid for on a piecemeal basis.
To use a very simple example, let's say you're an employer that's paying £9,000 a month into the Levy. You're looking to use your funds on the popular operational/departmental standard, which costs £9,000 and takes two years to complete.
If you work on the assumption that you'll need to pay 20 per cent of that to cover end point assessment - that means you'd be paying £300 per month for 24 months.
So if you waited until month 24 to begin and wanted to spend that £9,000 sitting in your account before it disappeared - you'd have to start 30 people on the standard in that month or risk losing most of that to sunsetting.
It’s the final countdown
And if you’re looking for bespoke support in setting up your Apprenticeship Service account or planning your Levy budget, don’t hesitate to get in touch with our team of Levy experts or read our free Apprenticeship Levy guide: