A Bright Future for Small Businesses: UK Government's New Plan for Young Apprentices
Prime Minister Rishi Sunak, announced a game-changing plan last week aimed at breathing new life into apprenticeships, focusing on small and medium-sized enterprises (SMEs) and young people under 22. Set to kick off in April 2024, this isn't just another policy update; it's a strategic move to inject vitality into apprenticeships, especially for SMEs.
Making Apprenticeships More Accessible for SMEs
Central to this new initiative is the government's plan to scrap the co-investment payments required from SMEs for apprentices under 22. In reality, any new apprentices aged 16-21 will, for the first time, have their training costs FULLY FUNDED by the Government regardless of the business size. Until now, SMEs had to foot 5% of the training costs for their apprentices, with the government covering the rest. This requirement has often been seen as a stumbling block, making it tougher for SMEs to take on apprentices. By removing this cost, the government aims to encourage SMEs to embrace the opportunity to nurture young talent more freely.
Boosting Support Through Levy Fund Transfers
Alongside eliminating co-investment fees, the government intends to make the apprenticeship levy system more flexible.
The Apprenticeship Levy is paid by employers with a wage bill of over £3 million and is charged at 0.5% of their annual wage bill to fund apprenticeship programmes. Employers receive a levy allowance of £15,000 to offset against the levy they owe. This means that employers who are required to pay the Apprenticeship Levy get a £15,000 allowance to reduce the amount they have to pay. This means the first £15,000 of the levy is essentially given back to them. Any levy payments they make can fund apprenticeship training and assessments. These payments are managed through a digital account, which employers can use to pay for training costs directly. However, there's a catch: if the funds in this account aren't used within 24 months, they expire and can no longer be used. This incentivises employers to actively engage with apprenticeship programmes and use their funds efficiently, either upskilling existing employees or hiring new apprentices.
Previously, small businesses not paying the levy could also receive funding for apprenticeships, covering most of the training costs. From April 2024, the Government will now allow businesses paying into the levy to transfer up to 50% of their funds to other businesses, a significant jump from the current 25%. This move is designed to create a more supportive environment where bigger companies can aid SMEs in training the next wave of skilled workers. It's expected to lead to smarter use of the funds, channelling more resources into developing apprenticeships in various sectors.
Expecting a Wave of New Opportunities
With Prime Minister Sunak's announcement, an extra £60 million is projected to flow into apprenticeship funding, raising the Department for Education’s budget for 2024-25 to £2.729 billion. This influx is predicted to create 20,000 additional apprenticeships, significantly boosting apprenticeship opportunities within SMEs and for young people.
More Than Just Funding
This initiative goes beyond financial aid; it represents a comprehensive approach to revitalising the apprenticeship system. By fully funding apprenticeships for young individuals in SMEs, the government is not just addressing skill gaps; it's laying out a clear path for young people to begin their careers. This strategy aligns with the broader objective of boosting the UK's competitive edge through a skilled, flexible, and innovative workforce.
A Wake-Up Call for SMEs
This announcement serves as a powerful nudge for SMEs to rethink their participation in the apprenticeship programme. Removing co-investment payments and the ability to receive more funds from levy transfers open up a golden opportunity for SMEs to engage in apprenticeships without the financial burden that held many back. It's an open invitation to tap into the potential of young talents, setting the stage for a skilled workforce that will propel the UK economy forward.
VQ Solutions is a Government-funded training provider offering apprenticeship programmes in Human Resources, Marketing, Network Cabling, Business Management, and IT/Network support. For more information, see the catalogue of programmes here or contact us on 01423 740006.
