How Will the Forthcoming Apprenticeship Levy Impact the Recruitment Industry?
More apprenticeships are one of the intentions of the government and their goal is to have 3 million apprenticeships in place from 2020. From 6th April 2017, apprenticeships will be funded differently as the government are introducing a new apprenticeship levy. This levy is a way of raising funds to cover the costs of apprenticeship training via one central pot. It aims to ensure the benefits of apprenticeships are reaped by companies of all sizes. This levy requires all employers operating in the UK with a payroll of over 3 million a year to invest in apprenticeships. Those in this category are automatically classed as a ‘levy paying employer’ and will pay a levy of 0.5% of their total annual pay bill. Businesses that pay into the account will receive a 10% top up on the funds. For every £1 that gets paid in the employer will get £1.10 to spend on apprenticeships. They will then have 24 months to spend the funds before they expire.
Eligible employers will be able to use money from the levy fund to pay to train their apprentices. Smaller employers will remain outside this system until 2018/19 and will continue with the current scheme. Employers who choose to take on apprentices aged 16-18 and whom employ less than 50 will have 100% of the training costs paid by the government. Ideally, this new scheme will encourage more 16-18 year olds into the workplace and give employers more control over the training of their apprentices.
For the recruitment industry, this levy will certainly have a negative impact. The Association of Recruitment Consultancies (ARC) have asked the government to reevaluate the way the apprenticeship levy is charged as the current policy has a disproportion impact on recruitment supply agencies. The levy will be calculated not just on the payroll for an agency’s internal staff but it also considers the payroll supplied for agency workers. For most agencies, 80%-90% of their turnover consists of the agency worker payroll, whereas for a regular employer the payroll may only represent 33%. Therefore, for recruitment agencies, their contribution to the levy will be considerably higher than other types of businesses. Adrian Marlowe, Chairman of ARC, explains: “Whilst we welcome the government’s intention to increase funding to boost the number of apprenticeships in the UK, we believe in its current form the levy penalises supply agencies. It is disproportionate, unfair and threatens to distort the way recruitment supply agencies operate.” Whilst the recruitment industry may fare worse with the introduction of the new levy, many businesses have not had the opportunity to train any temporary workers. The UK recruitment industry has seen a significant growth in temporary workers so this apprenticeship levy may help businesses to develop and retain their higher skilled apprentices.
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