Growth and Skills Levy: Opportunities and Challenges for Employers

Understanding the Apprenticeship Levy

Introduced in April 2017, the Apprenticeship Levy was designed to boost the quality and quantity of apprenticeships in the UK. It required larger employers, with an annual pay bill exceeding £3 million, to contribute 0.5% of their payroll to fund apprenticeship training. This initiative encouraged investment in apprenticeships and workforce upskilling while providing employers with greater control over their training budgets.

However, the Apprenticeship Levy faced criticism over its rigidity. Employers found it restrictive, as funds could only be used for specific, year-long training programs, limiting opportunities for broader skill development. This led to a call for reform, with businesses urging the government to make the system more adaptable to meet today’s workforce challenges.

The New Growth and Skills Levy

Though details are still emerging, the Growth and Skills Levy is expected to focus on supporting young people at the start of their careers. This shift means businesses will need to allocate a portion of their funding specifically to younger employees. Notably, Level 7 apprenticeships will no longer be funded by levy contributions. Employers will need to cover these costs directly, as the government sees these qualifications as serving older, more experienced workers.

While this focus on younger talent could strengthen early-career training, it may also create challenges for individuals looking to retrain or shift careers later in life, particularly in a rapidly evolving job market shaped by advancements in Artificial Intelligence and the changing economy.

New Flexibility for Shorter Training Programmes

In a welcome change, the Growth and Skills Levy will allow employers to use funds for shorter training programs. This removes the existing 12-month minimum requirement, providing businesses with greater flexibility in how they upskill their teams. This change reflects employers' needs for more adaptable training solutions and could enhance skill development across a range of industries.

What’s Next?

Many details about the Growth and Skills Levy are still pending, and we await further guidance from the Department for Education. In the meantime, businesses should consider how these changes may impact their training strategies and levy contributions.

Apprenticeships will continue to offer a cost-effective solution to staff training and development (even with the coming changes to the Levy) thanks to the government funding covering a significant portion of apprenticeship training costs. 

Also, with employer National Insurance contributions rising to 15% in April 2025, apprenticeships present a compelling option for businesses, as employers are exempt from Class 1 NICs for new apprentices under 25 earning less than £967 per week. 

If you’d like guidance on the apprenticeship funding and how the upcoming Growth and Skills Levy could impact your business, please reach out to our Employer Training & Apprenticeships Team at Gloucestershire College. We’re here to help you navigate the changes and develop a strategy that aligns with your workforce needs.

Employer.training@gloscol.ac.uk

0345 155 2020