Many large retailers have seen the benefit of apprenticeship schemes in recent years. One of those benefits has been the opportunity to obtain a grant or funding to employ an apprentice, however changes to the system are afoot that will increase some retailers' costs.

From 6 April 2017, all UK employers with annual pay bills of more than £3 million will have to pay an apprenticeship levy. The levy sum will be 0.5% of their annual pay bill and will apply whether the employer has apprentices or not, or whether it already pays into an existing industry levy scheme. In some cases, this could be a substantial amount so it is important for retailers to get to grips with the new system as soon as possible.

A 'levy allowance' of £15,000 will apply to each employer and will reduce the levy payment; the Government has confirmed that employers will also receive a Government top up equal to 10% of their monthly apprenticeship levy contributions. This will be applied by HMRC via PAYE. Employers will be able to spend the money on apprenticeship training and they will also be given the ability to choose and pay for the apprenticeship training they want, although they will have to use approved providers.

Employers will have an electronic account, called the digital apprenticeship service, to access and administer the money and will be able to transfer up to 10% of it to other employers, such as suppliers. If employers do not use the money in their account, they will lose it after 24 months.

Changes to the current apprenticeship framework will also be introduced, for example the restrictions that have prevented adults and graduates from undertaking apprenticeships will be removed and this could be beneficial to employers. There will also be incentives for smaller employers to take on apprentices.

The levy has so far been controversial, mainly because of the cost to employers. The Government response has been that all employers are required to make an investment in apprenticeships and that they can benefit by training apprentices. However, in the current (and uncertain) post-referendum environment, the levy is seen by many employers as an additional employment tax.

Further information about apprenticeships is available online via www.gov.uk, which includes more details of funding and support. Further guidance from HMRC on how to calculate and pay the apprenticeship levy is expected to be available in December.

Example calculation

A retailer has 7,000 employees, each earning £15,000 gross per year.

Total pay bill: 7,000 x £15,000 = £105,000,000

Levy sum: 0.5% of £105,000,000 = £525,000

Less allowance: £15,000 = £510,000

Annual levy to be paid by employer is £510,000

Government top up: £510,000 = £51,000 per year

Total available to spend: £561,000.