How the apprenticeship levy will affect your business

An apprenticeship levy will be introduced in April 2017, despite concerns from retailers about the financial impact it could have on their businesses. Vanessa Kingsbury, managing director of Buttercups Training, and Tony Allen, chief executive of apprenticeship and skills consultants at AAS Ltd, outline how the pharmacy sector can see this levy as an opportunity.

What does the apprenticeship levy replace?

The apprenticeship levy represents a new way of funding apprenticeship training in the UK and marks a major departure from the existing system.

Currently, employers contribute towards the costs of training programmes directly to their chosen training provider. The contribution made by the government is related to the size of the employer — it contributes less for employers with more than 1,000 employees and so these employers are charged a higher fee towards training.

With some exceptions, funding is currently only readily available for the two pharmacy apprenticeship frameworks at level 2 and 3. This is the Level 2 Certificate in Pharmacy Service Skills (dispensing assistant training) and the Level 3 Diploma in Pharmacy Service Skills (preregistration pharmacy technician training).

How will the new apprenticeship levy work?

The levy has been set at 0.5% of an employer’s total annual UK pay bill. Employers will, however, receive an annual allowance of £15,000 to offset against the levy they must pay, which is why, in practice, the levy will only be payable by those businesses with payrolls of more than £3m per year.

Employers who are eligible to pay the levy will also receive a 10% top-up to their total monthly contributions from the government in England. So, for every £1 an employer pays in, it can draw out £1.10 to spend on apprenticeship training and assessment.

Across the rest of the UK, skills policy is devolved, and so Wales, Scotland and Northern Ireland will receive a share of the expected apprenticeship levy, which will be adjusted to actual levy revenues when the data are available. Devolved administrations will decide how the cash will be allocated, assuming they do not reject the deal.

On account of the size of its workforce, the pharmacy sector’s levy bill will be sizeable — the introduction of the levy will cost pharmacies an estimated £25m annually. If your payroll is more than £3m there is no escaping the levy — there is no opt-out and the levy is even payable by the public sector, including the NHS.

The government is also proposing that levy-paying employers from 2018 will be able to transfer up to 10% of the funds in their digital account to another employer’s digital account. This would allow, for example, larger pharmacy businesses to reach an agreement with another business in their supply chain and pass on the benefit of its investment in the levy to them.

How can pharmacy employers access the funds?

Employers in England will be able to access the funds they have paid into the levy via a new online portal called the Digital Apprenticeship Service. From January 2017, they will be able to register online and use the service to find accredited training providers and assessment organisations, pay for training and assessment, and find external candidates who are seeking apprenticeship training.

Employers will be responsible for choosing training providers and negotiating (within a pre-set funding band) the cost of the training, including any end point assessment with them.

What about employers who do not have to pay into the levy?

For the majority of non-levy paying pharmacies (those with an annual payroll of less than £3m), support from the government for apprentice training will still be available. Under the new proposals, these businesses will be required to contribute 10% towards the cost of funding an apprenticeship, with the government picking up the tab for the remaining 90%.

Why are businesses concerned about the levy?

Many organisations are understandably concerned about the financial implications that the new levy will have on their business, especially those who do not have a need for the sort of structured training that will fall within the scope of an apprenticeship scheme. The levy comes at a time when pharmacies are still dealing with the implications of the national living wage and it is another business cost for those with small margins.

How can businesses benefit from the levy?

Levy-paying pharmacies will only benefit if they train apprentices — for example, dispensing assistants and technicians. These businesses should therefore be reviewing their current and proposed training arrangements to find out what could be provided and accredited under the new arrangements so that they make full use of the available apprenticeship funding.

Although the focus of many apprenticeships is on younger people entering employment, the levy could be used to fund other schemes, as well as entry-level qualifications. It can be used to train your existing pharmacy staff, too, using apprenticeship qualifications, who may have only completed the mandatory courses related to their role in the pharmacy or whom you wish to progress to become registered pharmacy technicians.

There is likely to be a sharp increase in the demand for higher level and degree apprenticeships as employers seek to spend their levy contributions on programmes of higher value, such as management or business-related qualifications. There is also likely to be an increase in demand for the talents of young people as employers seek to get a return on their levy “investment”.

Ultimately, pharmacies should not just write off the levy as an “employment tax”, but should investigate how an apprenticeship programme may work for them and how it might fit with their existing recruitment and training strategies.