Apprenticeships: what’s next?

With the levy coming into force this April, employers should consider the legal aspects of taking more apprentices, writes Stephen Foster

It’s that time of year where we have made our new year resolutions and are planning for the 12 months ahead, and this year sees a major step in the implementation of one of the government’s electoral resolutions – three million new apprenticeship starters by May 2020.

While separate measures will be considered for Scotland, Wales and Northern Ireland, the new approach to apprenticeships taking effect in England from April 2017 is likely to have a significant impact on how employers will recruit and develop staff, as well as on the quality of apprenticeships provided.

The aim of this new approach is to ensure employers have access to new talent that can develop relevant skills and experience that benefits both the apprentice and the employer at a reasonable cost. This will be achieved by establishing agreed standards determined by businesses within various sectors, through the use of training providers and the introduction of the apprenticeship levy.

Finding an apprentice and drawing up contracts

Companies interested in employing an apprentice can register their interest with the National Apprenticeship Service (NAS). NAS will support and coordinate the delivery of apprenticeships and training throughout England. It can also advertise vacancies should employers wish to do so.

Once an organisation has identified an apprentice, both parties will enter into an ‘apprenticeship agreement’ or ‘apprenticeship contract’. This will determine the terms of the relationship and rights of the apprentice. It’s therefore important that employers ensure the most appropriate agreements or contracts are drafted before anything is agreed.

While apprentices will be subject to the same policies and procedures as other employees, one notable difference is that the ability to terminate an apprenticeship contract early is limited. Employers should seek legal advice before any steps are taken to terminate early; if the company gets it wrong and breaches the contract, an apprentice could claim compensation not only for loss of earnings over the remaining term of the agreement but also for the lost opportunity to qualify into their chosen career. Naturally, this could increase the compensation significantly.

Apprenticeship levy

From April 2017, employers in both the public and private sectors with an employee payroll of more than £3m will be required to pay a levy to HMRC through PAYE of 0.5 per cent of the payroll bill (less an allowance of £15,000) into the employer’s digital account. For every £1 paid in by the business, the government will contribute 10p to the account. Additional contributions may be available; for example, if the apprentice is under 18. The employer can then access these funds within 24 months from when they are paid into the digital account, to spend on accredited apprenticeship programmes for training and assessment. The funds cannot be used for additional expenses such as wages or other similar overheads.

For organisations with a payroll of less than £3m, the government will continue to contribute towards apprenticeships using a system of co-investment.

Next steps

First, employers should determine whether they are subject to the apprenticeship levy and, if so, register for a digital account via the Digital Apprenticeship Service. Second, if they are interested in engaging an apprentice, they should register with NAS. Next, they must prepare appropriate apprentice agreements/contracts; and finally, check with their liability insurers whether they require notification if an apprentice is appointed and whether any premium or special terms may apply.

Stephen Foster is a partner in the employment team at SAS Daniels


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