By Seamus Nevin, Head of Employment & Skills Policy in the IoD Policy Unit in London.
The UK has a skills problem. Organisation for Economic Co-operation and Development (OECD) data shows that 21% of working age UK adults have an educational attainment level below that expected of someone with an upper secondary school qualification and the UK is ranked a poor 26th out of 33 OECD countries on the list for post-18 educational levels.
This failure of public policy has a real direct impact on the ability of firms to recruit the people they need. Well over half of young people in this country do not take A-levels each year. Furthermore, only about 35-40% of a typical cohort finishing their GCSEs can expect to go to university, on average. It is hardly surprising, therefore, that 40% of IoD members cite recruitment to fill a skills gap as their number one problem.
The Apprenticeship Levy was announced by the Chancellor in the summer of 2015 budget statement. Introduced on 6 April 2017, the levy aims to increase productivity and reduce youth unemployment through the expansion of vocational training.
Comprising a payroll tax of 0.5%, minus an annual allowance of £15,000, the levy applies to both public and private sector employers regardless of whether they employ apprentices or not. The annual allowance of £15,000 means that in practice it will only be employers whose payroll exceeds £3 million pa who will pay the levy. Levy payments will be payable alongside income tax and National Insurance through PAYE before being distributed to each of the devolved nations in accordance with the Barnett formula.
While employers with a payroll of £3 million pa or less will not contribute to the levy funds, they will still have access to the apprenticeship training available in the levy system. An employer whose payroll exceeded £3 million in the tax year preceding the implementation of the levy, or whose payroll is expected to exceed £3 million in a tax year commencing on or after 6 April 2017, must notify HMRC of the amount of their liability to the levy. Additionally, if an employer's annual payroll unexpectedly increases to more than £3m this should also be reported to HMRC as soon as possible.
Skills policy is a devolved matter, so each nation within the UK will manage their own apprenticeships programme and how the funding is to be spent.
Northern Ireland’s Department for the Economy conducted a consultation last year to gauge stakeholders’ views including employers and training providers in order to shape the design of the system.
While that consultation has now closed, no formal consultation response from the Department was published before the Assembly collapsed last January. To date, despite NI employers already paying the payroll tax, no announcement has thus been made as to how the levy and apprenticeships system will function in Northern Ireland.
Employers in Northern Ireland are still awaiting details of what systems will be put in place for accessing levy funds. The IoD is pushing the case for a decision and announcement to be made as soon as possible so our members can access the funds they need to help train and upskill their workforces.