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Apprenticeships levy : Eroding recruitment and umbrella company margins further?

With the pain of T&S review still to be fully clear, is there yet more financial pain on the way for Umbrella companies and larger recruitment companies alike? Having had a number of discussions this week with owners of larger UK recruitment companies and owners of the 'umbrella' companies providing services into that sector, its clear that the recent consultation has passed many people by. I was met with blank looks when I broached the subject, but once they realised the potential impact on P&L overhead then the ears pricked up and there was a more serious tone to the discussion. I think that there has been so many man hours spent on the whole T&S piece in recent months, that this more general piece of potential legislation has been overlooked.

Overlook it at your peril

Unlike auto enrolment, this won't hit every business but if you employ more than 250 people (that's the likely starting point), then it's highly like to affect your financials, and further erode already thin margins. I'm not wanting to be an alarmist but FDs/FCs need to understand this along with HRDs and get modelling it out, as the impact could be great or small but either way it will be cash negative to your business. So what's it all about. Well the consultation recently closed (2nd Oct 2015) to a proposal by Department for Business, Innovation & Skills to implement a 'levy' on larger businesses to cover costs of UK Apprenticeships. Although the consultation ran for 5/6 weeks and is closed, its worth reviewing the document, Apprenticeships levy: employer owned apprenticeships training , as its quite insightful.

Remember that this is early stages and the consultation was purely to seek business views on; how to pay the levy; how the levy should work for employers who operate across the whole of the UK; how to make sure that employers paying the levy have the opportunity to get more out than they put in; and how best to give employers control of apprenticeships.

The consultation covered the implementation of the levy. Now no one knows what the outcome will be but I have had my ear to the ground on this and rumblings are that anyone north of 250 employees is likely to be caught and that the percentage on PAYE cost could be anything from 0.5 to 1.5 per cent pa. As we know the government will already know what it really wants to do and how it wants to do it but let's hope that enough people with real vested interest from both UK recruitment and umbrella companies saw this and inputted into it.

More detail on the levy rate and scope will be provided later in the year by Department for Business, Innovation & Skills so keep it on a watch alert.

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