Apprenticeship Levy in construction sector

The construction sector is in the midst of a skills crisis. Over 400,000 workers are expected to retire over the next 10 years. A restriction on the availability of EU labour can potentially have a significant impact and there are fewer apprenticeships available now to train new talent than before the crash. The sector needs to find a long term solution for the lack of skilled labour. Will the newly introduced Apprenticeship Levy help solve this?

The Apprenticeship Levy was launched on 6 April and there is much more to it than just an additional tax as commonly believed. Employers need to understand how the new levy will affect their business and how best to use the levy as an opportunity to up skill the future workforce.

How it will affect construction companies?

The  industry has been slow in setting an apprenticeship recruitment strategy to meet the skills gap and take advantage of the levy, however this is now changing and the sector is starting to lead the way. Around 700 contractors will now have to pay the levy, those with over £3m salary bill and how it will affect each will depend on the size of the company.

Opportunities also arise for large employers to support the supply chain with apprenticeship funding. We’re likely to see these companies bring apprenticeship training in house instead of outsourcing to bodies already funded and supported by Construction Industry Training Board (CITB).

Although the apprenticeship levy is a step to bridge the skills gap, there is a danger we could see less support for apprenticeships in SMEs as funding to the CITB is reduced.

Planning for the Levy

Employers need to understand what the financial impact will be and how the levy can be used as an opportunity. Understanding how they can access their contributions to benefit their workforce is an essential first step.

Employers who are required to pay the levy should certainly consider the following:

Creating an Apprenticeship Service (AS) account to manage their apprenticeship funds. This is the account which will receive their levy payments and can be used for apprenticeships. Employers will receive a 10 per cent top up from the government to this AS account, so employers can potentially recover more than the payments they make through the levy. Funds will expire 24 months after they first enter the AS account unless they are spent on approved apprenticeship training.

Assess current training arrangements and policies. Employers should consider whether current arrangements fall within the government’s requirement for a qualifying apprentice working towards an approved apprenticeship standard or within an approved apprenticeship framework. Where this is not the case changes to training programmes may need to be made to maximise use of funds in the AS account.

Consider whether they are part of a group. Grouped companies should consider how they can best utilise their levy funds and register their different PAYE schemes.

Approach apprenticeship training providers. This can be achieved via the AS account. Levy funds can only be used towards the cost of apprenticeship training with an approved training provider. Employers will negotiate the price for training with the provider. Each apprenticeship standard or framework will be placed into bands and these bands will determine the maximum amount that can be spent from the AS account on each apprenticeship.

For more information about the apprenticeship levy click here.

No matter what the sector view is, a sustainable supply of skilled workers is critical for the future competitiveness of firms and investing now in structured training is a great start to plugging the skills gap. 

Companies who grow their approach to training and use it to draw new and energised recruits to their firms will benefit most from the apprenticeship levy. Despite this, major reform is still required to CITB funding to avoid reducing the number of small and micro companies able to afford apprenticeships.