Growth and Skills Levy

The growth and skills levy helps businesses fund apprenticeships and training programs to develop their workforce. Introduced by the government, this initiative ensures companies can meet the evolving skill demands of today’s economy. By understanding how to utilise the levy, businesses can strategically invest in their future.

Key Takeaways

• The Growth and Skills Levy enables employers to allocate funds towards both apprenticeship and non-apprenticeship training programs, thus broadening the skills base of the workforce.
• Large employers contribute 0.5% of their annual pay bill to the levy, which supports skills development and facilitates financial transfers to other businesses, fostering industry collaboration.
• Government support for non-levy paying employers, especially SMEs, includes substantial co-funding for apprenticeship costs and initiatives to enhance access to training, ensuring broad participation in workforce development.

Labour Party

The Labour Party has been vocal about the need for reforming the apprenticeship levy to better align with the evolving skills requirements of the modern workforce. By proposing to ring-fence a larger portion of the levy for entry-level apprenticeships and extending the levy’s scope to cover training costs for the 16-25 age demographic, Labour aims to ensure that the levy supports a broad spectrum of training needs. These reforms are a part of Labour’s vision to drive opportunities in every sector, equipping young people with the skills necessary to thrive in a rapidly changing job market.

Labour’s plan, supported by the shadow skills minister, includes:

• Collaboration with a new entity, Skills England, that will play a pivotal role in identifying key skills and labor needs
• Ensuring that the levy funds are directed towards areas with the highest demand for skilled workers
• Creating a targeted and responsive skills training system that benefits both employers and employees

This strategic partnership is instrumental in implementing these initiatives.

Industrial Strategy Council and Skills England

The Industrial Strategy Council plays an integral role in shaping the UK’s long-term economic growth strategy, with Skills England positioned to support this vision by managing the list of eligible non-apprenticeship qualifications. This management ensures that the focus remains on providing training in skills areas that are most pertinent to the UK’s economy, such as digital skills and social care. With a clear directive to match skills training with labor market needs, Skills England is poised to make a significant impact on workforce development and the effectiveness of the skills levy.

The collaborative efforts of these entities and government departments highlight the dedication to build a skills system that is resilient and adaptable. By identifying and addressing the skills needed today and in the future, these initiatives will play a vital role in securing the UK’s competitive edge in the global market.

Flexible Growth and Modular Courses

The landscape of the modern workforce is continually shifting, with emerging industries and technologies demanding new skill sets. Herein lies the value of the Skills Levy in funding modular courses in priority areas like digital and green skills. These courses offer targeted skill development, allowing businesses to adapt quickly to market changes and maintain a competitive edge.

Levy-paying employers are empowered to use up to half of their funds to support non-apprenticeship training, including these modular courses, which provide greater flexibility and a wider range of training options. By embracing a strategy that includes a blend of apprenticeship and non-apprenticeship training, businesses can ensure that their workforce is equipped with a diverse set of skills, ready for the future’s challenges and opportunities.

Understanding the Growth and Skills Levy

The Growth and Skills Levy stands as a testament to the shared commitment of businesses and the government towards fostering a thriving, skilled workforce.

At its core, this initiative is designed to:

• Create a sustainable funding model for apprenticeships
• Enable employers to harness up to 50% of their levy contributions for non-apprenticeship qualifications
• Reflect a growing recognition that the skills needed to propel the economy forward extend beyond traditional apprenticeship frameworks.

The levy goes beyond merely funding apprenticeships; it serves as a strategic tool, enabling employers to invest in diverse training opportunities. With the ability to allocate funds towards other skills programmes, the levy serves as a versatile instrument, fuelling the growth and development of essential skills across various sectors. This mechanism allows businesses to adjust their workforce’s capabilities to meet the changing demands of today’s economy.

The Purpose of the Skills Levy

The Purpose of the Skills Levy is to:

• Ensure that the workforce is equipped with a broad range of skills, transcending the four walls of any single employer
• Address the pervasive skills gap
• Increase the employability of the learner
• Enhance the collective capability of the industry
• Invest in the future
• Commit to encourage labour mobility
• Foster a robust skills system.

More than just a financial mechanism, the levy embodies a vision where employers collectively finance skill development programs that go beyond their immediate needs. This strategic move prevents the poaching of trained staff from other companies, safeguarding the investment in human capital across the board. It’s a reflection of Labour’s plan to create a cohesive, forward-thinking skills ecosystem - one that is resilient, adaptable, and poised for long-term success.

How the Levy Works

The mechanics of the skills levy are straightforward yet impactful. Large employers with a pay bill over £3 million contribute to the levy at a rate of 0.5% of their total annual pay bill. This creates a pool of levy funds that are then directed towards apprenticeship and training programmes, ensuring that employers who invest in their workforce are rewarded with a skilled, competent workforce.

For employers, grasping the levy payments and their efficient utilisation is key. Paying the levy is only a part of it; the real aim is to transform these contributions into strategic investments that deliver substantial returns through a more capable and agile workforce.

The levy is not a tax but a transformative investment in the skills needed to drive businesses and the country forward.

Impact on Employers

The advent of the skills levy has created ripples across the business landscape, impacting employers of varying sizes in distinct ways. For larger corporations, the levy presents both a financial obligation and a potent opportunity to enhance their workforce development. On the flip side, small and medium-sized enterprises (SMEs) grapple with accessing similar levels of support, often navigating a separate system tailored to their needs.

The dichotomy between levy paying employers and non-levy paying employers is pronounced. While the former must navigate the complexities of levy payments and funding bands, the latter can benefit from employment support mechanisms with less financial strain. This bifurcation has led to a landscape where some employers are better positioned to take advantage of the training opportunities that the levy unlocks.

Levy Paying Employers

For levy-paying employers, the process is marked by monthly reporting and payments, with a £15,000 annual allowance to offset the cost. However, this allowance is not cumulative, emphasising the need for strategic planning to ensure funds are utilised within the fiscal year. Moreover, employers must be astute in aligning their apprenticeship training costs with the funding bands set by the government, ensuring the optimal use of their total levy contributions.

The digital apprenticeship service account is the gateway through which employers can access their funds, paying for training and assessment not just for their employees but also for others in their supply chain. With the government’s move to increase the funding transfer from 25% to 50%, there’s a clear incentive for employers to share their unused levy with other businesses, as seen with the £35.39 million pledged by 530 employers for supporting apprenticeships. This not only amplifies the reach of the levy funds but also fosters a spirit of collaboration and shared growth within the industry.

Non Levy Paying Employers

On the other end of the spectrum, non-levy paying employers, who typically have a pay bill under £3 million, are not required to pay the levy. Instead, they can tap into government co-funding, where up to 95% of apprenticeship training costs are covered, leaving a minimal 5% to be shouldered by the employer. This co-investment model opens doors for smaller businesses to invest in apprenticeships without the financial burden faced by their larger counterparts.

The government’s commitment to supporting SMEs is further evidenced by the recent announcement of a £60 million investment to create 20,000 more apprenticeships, directly benefiting young people and small businesses. Additionally, the full funding of apprenticeship training fees for small businesses hiring apprentices aged 16 to 18, and up to 21 starting from April 2023, underscores the government’s focus on nurturing the next generation of skilled workers.

Maximizing Levy Funds for Training

In a world where the only constant is change, businesses are challenged to develop a long-term strategy to maximize the use of apprenticeship levy funds. The initial step involves pinpointing the main drivers and objectives for apprenticeship programs, thereby establishing a clear roadmap for training investments. Strategic analysis of the organization’s skills gaps is imperative to allocate funds effectively and ensure that the training opportunities are well-aligned with business needs.

Partnering with training providers to design tailored programs is another strategy that can make levy funds go further. By aligning internal training programs with the guidelines set out by the levy, businesses can fully utilize the available funds and build a workforce that is prepared to meet the demands of today’s market. The focus should be on wise investments and prioritizing quality for sustainable growth.

High Quality Apprenticeship Programmes

The quality of apprenticeship programs is paramount, as they have the potential to significantly improve retention rates, productivity, and employee satisfaction. By combining classroom learning with on-the-job training, these programs create a holistic learning experience that fosters genuine skill development. However, the landscape is not without its challenges, as some employers have faced issues with the quality of apprenticeship training, necessitating a sharper focus on program standards and outcomes.

For these programs to be effective, the involvement of both employers and workers in crafting the training content is essential. Collaborative strategy workshops are instrumental in tailoring apprenticeship programs to the specific needs and aspirations of a business. This level of engagement ensures that the apprenticeship training is relevant and that the funds invested yield tangible and long-lasting benefits.

Government Initiatives and Support

The government has taken a proactive stance in ensuring that businesses are equipped with the tools they need to access training and upskill their workforce. Through various funding initiatives, employers can tap into the pool of resources made available through the effective use of the skills levy. These measures aim to boost the availability of high-quality apprenticeship schemes and offer incentives for businesses that are committed to hiring and developing apprentices.

For non-levy paying employers, the government provides substantial support, enabling access to training without the hefty price tag associated with levy payments. This approach is designed to encourage businesses of all sizes to invest in the future of their workforce, contributing to economic growth and the development of a skilled labor pool.

Small and Medium-Sized Enterprises (SMEs)

Small and medium-sized enterprises (SMEs) are the backbone of the English economy, supporting over 60% of employment and playing a crucial role in driving economic growth. The importance of their access to apprenticeship programs cannot be overstated, as it directly impacts the ability of these businesses to innovate, grow, and contribute to the wider economy. Programs like the Hospitality Guild’s initiative to broker new apprenticeships, with a strong focus on SMEs, exemplify this support.

Success stories, like that of Katie Wilcox at the Society for the Environment, highlight the transformative power of apprenticeships funded by the levy. Through her apprenticeship, Katie not only developed valuable skills but also contributed to her company’s performance by enhancing their digital presence. Elaine Rutherford’s assertion that the apprenticeship funding helped bridge the skills gap and improve company performance reinforces the tangible benefits that SMEs can reap from the levy.

As Katie’s experience shows, apprenticeships can significantly boost individual capabilities and promote a culture of self-improvement within the organisation.

Challenges and Solutions

While the apprenticeship system and the skills levy offer extensive benefits, they are not without their challenges. Employers often find the system complex and difficult to navigate, which can lead to underutilization of the funds available. Furthermore, a significant amount of levy funds have gone unused, with reports indicating that £1.28 billion of the funds were unutilized in the 2019-20 period. This points to a pressing need for enhanced guidance and support, enabling businesses to fully capitalize on their investment returns.

A pragmatic solution to these challenges is to offer comprehensive training to human resource personnel on the intricacies of the apprenticeship system and the funding mechanisms at their disposal. This ensures better utilization of the skills levy and helps businesses make the most of the training opportunities available to them. By equipping HR teams with the knowledge and tools they need, businesses can navigate the apprenticeship system more effectively and secure the full benefits of their investment.

Addressing Training Costs

Despite the availability of levy funds, many employers have only utilised an average of 55.5% of their available apprenticeship levy funds over the last five years. This underutilisation may be due to a lack of understanding of how to access funds or a perception that the training available does not meet their specific needs. To address this, businesses must recognise that leveraging the levy effectively can support product development and market penetration while managing and reducing overall training costs.

Natalie Lane from Chamber Training points to the significant impact that accessing apprenticeship levy funding can have on the success of SMEs. By formalising employees’ knowledge through qualifications like the Chartered Management Institute levels, and negotiating the cost of apprenticeship training with providers, employers can ensure they get value for money and invest in the transformative potential of their workforce. Additionally, the government’s efforts to simplify regulatory requirements for SMEs are expected to yield considerable savings, further motivating businesses to invest in training.

Ensuring Access to Training Providers

The role of experienced training providers is crucial in helping businesses navigate the apprenticeship system and fully capitalize on their levy funds. By forming partnerships with organizations that offer professional and knowledgeable coaches, businesses can ensure that leadership and management training is impactful and aligned with their strategic objectives. Initiatives like the partnership between Coventry & Warwickshire Chamber of Commerce Training and Coventry City Council to promote the CCC Apprenticeship Levy Fund Transfer are exemplary in connecting eligible SMEs with quality training providers.

To ensure access to quality training and support, it is vital for businesses to engage skilled Personal Learning Advisors and attend informative workshops. These resources can provide the guidance and expertise necessary to navigate the often complex apprenticeship system and identify the most beneficial training opportunities for their employees. In doing so, employers can ensure they are not merely spending their levy funds, but rather investing them strategically for substantial returns in workforce capability and business growth.

Summary

As we draw this exploration to a close, the impact of the Growth and Skills Levy on the fabric of business and training in the UK cannot be overstated. From the fostering of a skilled workforce to the strategic investment in apprenticeship and training programs, the levy presents a unique opportunity for businesses to propel themselves forward in a competitive market. The government’s role in supporting SMEs and the collaborative efforts of the Labour Party and Skills England are critical in ensuring that the Levy’s benefits are realized across the board.

Employers are encouraged to take a proactive approach in maximizing the use of their levy funds, partnering with quality training providers, and engaging in government initiatives to develop a robust and skilled workforce. The success stories of those who have capitalized on these opportunities serve as a beacon for others to follow. Let this be a call to action for all businesses to embrace the levy as a means to invest in their future, for it is through continuous learning and development that we can ensure the sustained growth and prosperity of our industries.

Frequently Asked Questions

What is the Growth and Skills Levy?

The Growth and Skills Levy is a funding initiative in the UK that aims to create a sustainable model for apprenticeships and skills development by allowing employers to use up to 50% of their levy contributions for non-apprenticeship qualifications. This funding initiative addresses skills gaps and aims to enhance workforce development.

How does the apprenticeship levy work for large employers?

Large employers with a pay bill over £3 million pay the apprenticeship levy at a rate of 0.5% of their total pay bill. They can access the funds through a digital account to pay for training and assessments for apprenticeships.

Can non-levy paying employers access apprenticeship funding?

Yes, non-levy paying employers can access government co-funding for apprenticeship training, with the government covering 95% of the costs and the employer contributing the remaining 5%. For small businesses and apprentices aged 16 to 18, the training can be fully funded by the government.

What role does the Labour Party propose in the apprenticeship levy system?

The Labour Party proposes reforms to the apprenticeship levy system, including ring-fencing more funds for entry-level apprenticeships and extending the levy to cover training costs for individuals aged 16-25. They also plan to work with Skills England to address skills needs.

What are some challenges employers face with the apprenticeship levy, and how can they be addressed?

To address challenges with the apprenticeship levy, employers can train HR personnel on navigating the system, partner with quality training providers, and engage in government initiatives to ensure effective use of the levy funds. This will help in overcoming complexity and underutilization issues.