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The apprenticeship levy, which the Government hopes will help create three million new apprentices by 2020, is due to come into force in April 2017. But ahead of implementation, there are a number of key questions that employers should be asking. Matthew Lewis, employment partner at Squire Patton Boggs, explains.
There is no doubt that apprenticeships are a valuable part of the UK economy, with much of the business community initially welcoming a chance to develop this route into the workplace.
The apprenticeship levy is, though, a misnomer, with many placing the focus of "apprenticeships" on young people entering employment, whereas this opportunity could, and should, benefit learning and development as a whole.
The levy, which will raise an estimated £3 billion by the end of this Parliament, could have serious consequences for employers, many of whom see it simply as an additional tax.
What is the apprenticeship levy?
In April 2017, the Government will introduce the apprenticeship levy, with a view to creating millions of apprenticeships across the UK.
While many employers are pleased to see that apprenticeships have become an area of increased importance, others argue that it should not be up to them to foot the bill if they do not have any need for apprenticeships within their own organisation. Regardless of their opinion, employers have just under six months to prepare for the levy coming into force.
How much will employers have to pay?
If businesses have an annual payroll cost of less than £3 million, then they will not be required to pay the levy. For employers that have more than this, however, there will be a 0.5% tax on the total pay bill, which will be paid through Pay As You Earn.