Eye on Law
The Apprenticeship Levy: why it pays to be prepared
From April next year, a new Apprenticeship Levy will be introduced in the UK, affecting hundreds of businesses across Northern Ireland. Emma-Jane Flannery, Employment Law Partner at leading law firm Arthur Cox, discusses the challenges posed by the levy and highlights the urgency for firms to take action now to ensure they are fully compliant.
T
he waves of uncertainty from the Brexit vote are still resonating, but businesses need to ensure they remain prepared for the new Apprenticeship Levy which will still be introduced in April next year. In November 2015, the former Chancellor George Osborne
announced the new levy which will require all employers operating in the UK with a pay bill exceeding £3 million per year, i.e. earnings subject to Class 1 secondary National Insurance Contributions, to invest 0.5% of their payroll in funding apprenticeships (a levy allowance
of £15,000 will be afforded to businesses to offset the reform). The reform aims to address and transform a perceived economic weakness in the skillset training of UK plc, through placing the burden of costs on large businesses. Addressing these skill shortages is undeniably important and has been welcomed by some business owners who have talked openly about the difficulties in finding a skilled workforce locally. However, for many, the levy is yet another unwelcome financial burden, particularly following the introduction of the new National Living Wage. Many ‘red tape’ measures have recently been lifted in GB, which has freed up HR budgets that had previously been allocated to defending employment claims and which can now be reallocated more strategic initiatives to include funding the impending levy. This isn’t the case in Northern Ireland which hasn’t had the same relaxation as GB, so the province’s employers will have to look elsewhere to find budget for the levy. Local business owners are urged to consult with the Executive to explain the challenges presented by the levy. Perhaps unsurprisingly, these revolve around its financial implications and effect on budgets, recruitment and staffing costs. A worry that employee headcounts will remain stagnant is another concern, as firms may be forced to upskill internally rather than hire new employees particularly in the aftermath of the Brexit vote. The referendum result means that a skilled UK workforce will be needed more than ever, so the target of 3 million apprenticeships by 2020 takes on a new significance. However, perhaps the biggest concern for local business owners is whether or not it is guaranteed
the levy will be spent exactly as it is intended. The available information is focused on England; in Northern Ireland, employment law remains a devolved matter for which the Assembly has full legislative powers. The Assembly must therefore reassure the levy-paying business community with guaranteed access to these funds. It is imperative in the coming months that Ministers work collectively with businesses to address their concerns, and to provide not only answers but also guidance. In preparation, companies should consider conducting a full workforce audit to find and address skills gaps where potential new talent needs developed. Businesses should seek advice from professionals in order to discuss their individual requirements and to ensure they are prepared come April 2017. Whilst business groups are providing a much-needed platform for enterprises to discuss their challenges and concerns, this is just the beginning of what will be an ongoing consultation process to ensure employers are well placed to adopt the new levy. There are a number of unanswered questions regarding the introduction of the levy, but one thing remains certain and that is its introduction in April 2017. There will be no delay in its enforcement despite the Brexit vote, and local companies must prepare now to ensure the levy does not have a detrimental effect on their budget or business.
The wide range of advisory teams at Arthur Cox are well positioned to advise on all areas of employment law in Northern Ireland. For further information, please call EmmaJane on +44 28 9023 0007
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