In the most basic form, it’s an additional tax that all businesses will have to adhere to.
The levy will require all employers in the UK, with a payroll over £3 million, to invest 0.5% into apprenticeships within their organisation. It’s being introduced to help the government reach their target of three million apprenticeships by 2020. It’s also being used as a way of combatting skills gaps and increasing the quality of apprenticeships in general. According to the government, the levy will only affect 2% of businesses, and raise an additional £3 billion a year.
The levy will be introduced in April 2017, which is basically around the corner, so it’s time to fix up and look sharp.
What does it mean?
It means the government are creating a funding pot for businesses to draw down on to invest in training staff as apprentices. Businesses will gain access to the digital account system which will allow you to pay for assessments and training. However, many recruitment agencies are upset at the recent legislation as it will potentially have a bigger impact on the recruitment sector than others.
Currently, the levy is based on PAYE which means that for those recruitment agencies operating in temp workers, their payroll costs are always high and may exceed £3 million. Even small agencies, because of their contractor payroll, will be directly affected by this. Therefore, smaller businesses may find that an additional 5% costs can cause big ripples and change hiring patterns and other strategical and operational decisions. Such a change may change the way contract recruitment businesses operate in future, and many organizations are asking the government to rethink the levy.
What to do?
It seems unlikely that the government will revoke or make any changes to the legislation just yet. Since it’s likely to go ahead, researching apprenticeships and including them in your strategy is not a bad way to start. Typically, the recruitment sector has long complained about the distinct lack of training, and the new levy will add an emphasis on upskilling employees, which will benefit recruitment agencies in the long run.
With new generations entering the workforce, and less emphasis being placed on traditional educational routes, the statistics currently favour apprenticeships and work experience over university. According to TotalJobs, 34% of their jobseekers would choose and apprenticeship over going to university. There’s a clear advantage for recruitment agencies who are early adopters of the levy to upskill their workforce, close a skills gap and become gatekeepers for talent.
The war for talent becomes more competitive every day and changing sociological patterns will only increase this. While the new levy means logistical shifts and masses of research, it might not be such a bad thing for a sector screaming for talent. We’ve now got the opportunity, and the tools, to grow our own talent instead of hunting high and low.