With the launch of the Apprenticeship Levy drawing ever nearer, much has been made of its impact on businesses, but its impact on educational institutions has been somewhat overlooked.
In this guide, we’ll take an in-depth look at the effects of the Apprenticeship Levy on schools and trusts in England.
The Apprenticeship Levy, multi-academy trusts and large schools
As covered in our detailed Apprenticeship Levy Guide, the legislation will affect any organisation that has a payroll of more than £3 million. Those who fall into this bracket will be required to pay 0.5 per cent of their annual pay bill into the Levy fund (minus a £15,000 allowance).
For organisations like multi-academy trusts, which may encompass several schools, this also means that they’ll only get one £15,000 allowance to share between their constituent parts. While there is a degree of flexibility in terms of how this can be used, it puts connected organisations like these at something of a disadvantage when compared to stand-alone conventional educational institutions.
The government has enacted this initiative as part of its target of generating three million apprenticeship starts by the end of the decade. It’s a response to the findings of the Richard and Sainsbury reviews, which highlighted a lack of productivity in the UK, as well as an developing skills gap that extant apprenticeships were failing to address.
Although the Levy aims to get employers to contribute to apprenticeship training, those that pay in will be able to access their funds, plus a ten per cent top-up from the government, via the Digital Apprenticeship Service and spend this sum on apprenticeship-based training.
A raft of new apprenticeship standards are also being unveiled, which aim to better-meet the needs of employers and are being designed with direct input from industry bodies. Similarly, previous barriers to eligibility (like age and prior qualifications) are being broken down, which means there’ll be a wealth of ways to utilise apprenticeship training across a variety of fields.
Public sector apprenticeship targets
In addition to the Levy, schools and multi-academy trusts with 250 or more staff will also be required to take on new apprentices, or utilise new standards to upskill existing employees via apprenticeship-based training each year.
These regulations, which are part of the Enterprise Act and were confirmed following a consultation last year, will come into force in April 2017 - coinciding with the launch of the Levy - and will require organisations within their scope to employ the equivalent of 2.3 per cent of their workforce as apprentices each year.
This target will apply to all bodies that are classed as being within the public sector, however, there are some notable exceptions, including the BBC, Channel 4 and the Post Office. Financial institutions are also exempt from the rules although it’s not clear what exact definition the government is using on this front.
The consultation also omitted colleges from its list of public sector organisations, since these were reclassified in 2012 from government-controlled bodies to non-profit institutions.
What educational institutions will be affected by the Levy?
Any organisation with more than £3 million in annual payroll will have to contribute to the Levy. The government estimates that this will only affect around two per cent of employers in the UK, however, it’s likely that the majority of maintained schools, whose employer is classed as the local authority, multi-academy trusts and stand-alone academies at the larger end of the scale will be affected.
As detailed in our Apprenticeship Levy Infographic, affected organisations will have to work out what they need to pay and let HMRC know on a monthly basis before contributing via PAYE. The first payment will be due in May 2017, although depending on exact payroll figures, it’s possible that some organisations won’t have to pay the Levy consistently month on month.
What options do schools and trusts have?
While this double whammy of legislation comes at a time when many educational institutes are already tightening their fiscal belts, the Levy could present a cost-saving opportunity for at least some schools.
However, the NAHT union warned that many schools were not aware that they fell within the scope of the Levy and emphasised the need for them to take action:
“With this new obligation on schools and academies, it is critical that they mitigate the impact by ensuring that the money they’re paying out comes back into their institution. Schools and academies need to start thinking now about how they can best utilise the apprenticeship levy,” it said.
By fully engaging with the Levy and using funds paid in to offset current training spend, it’s possible for educational institutes to get out more than they put in. Levy payers will have 24 months to use their funds, which will sit in their Digital Apprenticeship Service account, and can direct these to the training provider of their choice via the platform.
Levy funds can be used to cover any apprenticeship-related training costs (subject to an upper limit on each standard set by the government), however, they will not cover salaries. There’s also a range of additional incentives and funding additions available for taking on younger apprentices, those from deprived areas or troubled backgrounds.
As mentioned, barriers to eligibility are also being broken down, which means that taking on an apprentice doesn’t necessarily mean hiring new entry-level staff. There’s already a variety of apprenticeships that schools can utilise to train up non-teaching staff, like business managers, teaching assistants and custodial employees - and more of these Trailblazer standards are currently in development, with all existing frameworks set to be replaced by 2020.
Hopefully, we’ve managed to shed some light on how the Apprenticeship Levy will work for schools and academies, but if you’ve got any specific questions - be sure to let us know via Twitter or LinkedIn.
And if you’re a Levy payer in the public sector looking for further advice, be sure to get in touch with our team of Levy experts for an obligation-free chat today: