† Excerpt taken from the October edition of The Retailer magazine, produced by the British Retail Consortium (BRC)
APPRENTICESHIP REFORMS: A STEP CHANGE IN TRAINING AND DEVELOPMENT
By Matt Robinson, Operations Director – Retail, Lifetime Training
- The retail sector has a three million-strong workforce, which sees
- Between 2013 and 2020, the retail workforce as a whole is projected to grow by 54,800*
- The UK’s fashion industry alone contributes £28 billion to Britain’s economy and supports nearly 900,000 jobs**
The retail sector is a vital component of the British economy and only by maintaining and growing the knowledge and skills of its workforce will the industry continue to thrive. The fact that apprenticeships offer flexible eligibility criteria, a range of qualifications, and a clear career pathway through to management makes them an excellent accompaniment to in-house recruitment and talent development programmes.
It’s critical therefore that the latest trends in apprenticeship policy are followed closely. Right now, apprenticeships are about to go through their most significant period of reform in their history. Apprenticeships have been re-aligned within government to sit under the Department for Education, which will result in a dramatic step change in how work-based-learning is both funded and delivered.
These reforms put employers in the ‘driving seat’, as they’re the ones who understand the skills their businesses need most. Employers have been working together to design new apprenticeship standards that will develop suitable skills, knowledge and behaviour. A number of apprenticeship standards have already been developed by employer Trailblazer groups. Each new standard has its own assessment plan in place. In addition to the new standards, the reforms will see a new funding model implemented in April 2017. On Friday 12th August the government released a long-overdue proposal detailing how exactly levy implementation will work.
How the levy will impact retail businesses
- Retailers who have a pay bill in excess of £3 million will be required to pay an apprenticeship levy amounting to 0.5% of their annual pay bill. This will sit in a digital account that can only be utilized for apprenticeship training through a recognised training provider.
- Retailers with a pay bill under £3 million will be required to contribute 10% of all apprenticeship training costs and are exempt from the levy.
- For those retailers who find they exceed their levy funds, they will be expected to contribute 10% of all apprenticeship training costs while the government subsidise the remaining 90%.
- Retailers who pay the levy will receive a levy allowance of £15,000 over the course of the year to offset against their levy contributions.
- The government will provide a 10% top up on all levy contributions, so for every £1 that enters your digital account you’ll receive £1.10.
- Levy funds can be spent on employees working in England. The devolved assemblies of Scotland, Wales and Northern Ireland will decide on how the remaining funds will be spent in their countries.
- Although levy payments will start from 1st April, the new funding system will come into effect on 1 May 2017. All apprenticeships starting after this date will be funded according to the new rules. Up until this date the current system remains in place.
- When you employ an apprentice who is aged between 16 and 18, or a 19 to 24-year-old who has been in the care of a local authority or has an Education, Health and Care Plan; the government intends to offer you £1,000 to help meet the extra costs of employing them.
When funds will appear in the digital account
The apprenticeship levy will be introduced on 6 April 2017. Retailers will have to
declare their liability to HMRC in May 2017 for any levy payments due on the April payroll. The corresponding funds will appear after an employer’s final declaration to HMRC - so after 22 May.
National Insurance employer contribution for apprentices under 25
The National Insurance employer contribution for apprentices under 25 was abolished in April, monies which can now be re-routed into the training pot. Retailers that employ an apprentice below the age of 25 now won’t be required to pay employer National Insurance contributions. To qualify, the apprentice’s wage must be below £827 a week (£43,000 a year) and they must be on an approved apprenticeship framework. This change presents a saving to retail businesses, for example a member of staff earning a £16,000 salary who is studying an apprenticeship but under the age of 25 would equate to a £1,000 NI saving. The apprentice will continue to pay NI through their salary, and it won’t impact on their state pension or statutory entitlements.
Now is the time to start thinking and planning ahead because we know the levy isn’t going away. Consider how you establish an apprenticeship training programme that delivers what you want and how you can get the best return on investment.
One thing we’re doing with our larger employers is setting up apprenticeship levy strategic planning sessions. This is where we help them to develop programmes that deliver real return for their businesses, while providing exceptional career opportunities to attract and retain top talent within the retail sector.
*People 1st, Retail Sector Labour Market Review, 2013
**Prime Minister Theresa May, London Fashion Week welcome reception, 15 September 2016
Employer of 250 employees, each with a gross salary of £20,000
Pay bill: 250 x £20,000 = £5,000,000
Levy sum: 0,5% x £5,000,000 = £25,000
Allowance: £25,000 - £15,000 = £10,000 annual levy payment
Employer of 100 employees, each with a gross salary of £20,000
Pay bill: 100 x £20,000 = £2,000,000
Levy sum: 0,5% x £2,000,000 = £10,000
Allowance: £10,000 - £15,000 = £0 annual levy payment
For more information about the apprenticeship reforms and how this will impact employers visit our employer page.