From 6 April, many employers will have to pay the Apprenticeship Levy, which has been referred to by some as a new payroll tax. However, at least some of this additional expense could be recouped if the employer employs an apprentice.
So while the introduction of the new levy could result in additional cost for a lot of employers, it hopefully provokes an opportunity for them to think creatively about their staffing structures and whether apprenticeships can be incorporated or further developed to allow the sums paid via the levy to be recouped for apprenticeship training costs. Apprenticeships can, after all, be a great way of attracting and retaining talent to help a hospitality business flourish.
Given the hospitality industry is one of the largest employment sectors, the scope for running apprenticeships is huge. Below are five things to note about the new levy and five things to remember about employing apprentices.
Five things you need to know about the new levy
1 The levy will be 0.5% of the employer’s total payroll bill.
This will include not just basic salary but also sums paid by way of bonus, commission, pension contributions and the like.
2 Only those with a payroll bill of more than £3m will effectively be liable to pay it.
This is because each group of employers will receive an allowance of £15,000 to offset against their liabilities.
3 The levy is payable by all employers.
This is regardless of their sector and irrespective of whether they have or intend to have any apprentices.
4 If an employer has or takes on apprentices, they can reclaim at least some of the levy they have paid and possibly even more.
The amounts paid by the employer must be put into a Digital Apprenticeship Service account and those funds will be topped up by a further 10% by the government. Additional governmental top ups may also be available, for example to employers who employ 16 to 18 year olds.
5 The funds in the Digital Apprenticeship Service account can only be used to pay for approved training for apprentices.
These funds need to be used within 24 months of being deposited in the account or else they will be returned to the government.
Five things you should know about employing apprentices
1 An apprenticeship is a formal relationship where the individual undertakes a combination of work and training.
In many cases, an apprentice must not only be given on-the-job training but spend a proportion of their time (usually about 20%) doing approved off-the-job training too.
2 Apprenticeships can take a variety of forms.
In the hospitality sector, common apprenticeships range from commis chef and silver service waiter to hospitality supervisor and hotel manager.
3 An apprentice is just like any other employee.
However, an apprentice can sometimes benefit from additional rights, like enhanced dismissal protections meaning the employer cannot dismiss them unless there has been a very serious breach or some form of frustrating event that seriously undermines the employer’s ability to teach them. It is therefore important for employers to correctly categorise and document the form of apprenticeship to ensure that enhanced protections are not inadvertently given.
4 There is no age limit on being an apprentice.
Employers would do well to remember that apprenticeships should not just be offered to younger individuals, as this could lead to age discrimination claims.
5 An apprentice who is under 19 years old or in the first year of their apprenticeship is entitled to receive minimum pay of £3.40 per hour.
Otherwise, the usual national minimum wage bands apply, currently £4.00 for 16 and 17 year olds, £5.55 for 18 to 20 year olds and £6.95 for those aged 21 and over. Also remember that the new Living Wage rate (currently £7.20) must be paid to those aged 25 and over. Of course, employers can elect to pay more if they wish.
Goodman Derrick LLP is a leading commercial law firm in the City of London that covers the hospitality sector