Should the apprenticeship levy apply to temps as well?

Jo Faragher

There was obviously a positive intention behind the introduction of the new apprenticeship levy, which will apply to larger employers from April 2017.

The idea is that employers set aside funds to support training up young people in vital skills, rather than relying on the Government to subsidise this without help from the industries that benefit.  

But understandably recruitment companies are wary of the payroll tax, which will require companies with more than £3m in turnover to pay 0.5% of that payroll into a national apprenticeship ‘pot’. They worry that temporary agency workers are unlikely to ever qualify for an apprenticeship of any quality because of the shorter length of their assignments. They also fear that they’ll be forced to pay the tax for thousands of temps on their payroll who aren’t substantive employees of the business.

The REC and its members also point out that fewer than 5% of all assignments last for 52 weeks or more, while the Government claims that a ‘quality’ apprenticeship must last for a least a year. They want to be able to have the levy worked out based on permanent staff that work in recruitment, rather than just anyone on their books.

You could argue that temporary workers by their nature are after less commitment, or have a more transient view of their career, but that’s not the case any more. The emerging ‘gig economy’, where companies can hire labour as easily as calling for an Uber car, has turned many workers into freelancers who can pick and choose jobs. 

The REC claims that recruitment companies can better offer flexible workers like this training opportunities if they do not have to fund the apprenticeship levy for temps as well.

This is a valid argument, but there will be employers in other sectors who find other ways to avoid the levy, or rechannel the money. It will be those that enter the spirit of the new levy, and ringfence those funds to build up skills in the areas their business needs them, that will get a return on their investment.