The apprenticeship levy is a new tax on businesses that was introduced in April 2017 to help support the government’s target to fund three million, high quality, new apprenticeships by 2020. The levy will be applied to all employers, both public and private, in the UK who have a payroll bill of £3m or more and will replace the current apprenticeship funding model in place by the government.
The levy is part of the overall apprenticeship reform by the government, where employers are being put in the driver’s seat not only with the creation of the new standards through the Trailblazer groups but also in control of apprenticeship funding enabling them to select the training that best meets their skills needs and will drive up the quality of apprenticeships.
All UK employers whose payroll bill is £3 million or more will be liable to pay the Apprenticeship Levy. The levy will apply to all sectors, including those already covered by statutory levy arrangements.
The levy rate is set at 0.5% of your pay bill and will be collected monthly via PAYE. There will be a £15,000 fixed annual allowance to offset against their levy payments.
|Levy Paying Employer||Non-Levy Paying Employer|
|Employer of 250 employees, each with a gross salary of £20,000||Employer of 100 employees, each with a gross salary of £20,000|
|Pay bill: 250 x £20,000 = £5,000,000||Pay bill: 100 x £20,000 = £2,000,000|
|Levy sum: 0.5% x £5,000,000 = £25,000||Levy sum: 0.5% x £2,000,000 = £10,000|
|Allowance: £25,000 – £15,000 = £10,000 annual levy payment||Allowance: £10,000 – £15,000 = £0 annual levy payment|
The government will apply a 10% top-up to each company’s monthly funds entering, levy paying, employers digital accounts, for apprenticeship training in England. From April 2017, all funds entering accounts will be increased so every £1 will be increased to £1.10 in value.
The levy will be collected automatically through Pay As You Earn (PAYE) alongside income tax and National Insurance.
You will have access to your company’s digital voucher scheme through the Digital Apprenticeship Service (DAS). You will be able to use this system to pay for apprenticeship training and keep track of all of your funds entering and leaving the system.
The DAS system will also allow you to see all approved training providers or providers and all the qualifications they deliver so you can be in full control of the selection process. Once you select your training provider or provider you will negotiate the price of training and use the voucher system to make monthly payments to them.
Levy funds will expire in 18 months after they enter your digital account unless you spend them on apprenticeship training. Money is spent when it leaves your digital account as a payment to a training provider or provider. The account will work on a first-in, first-out basis, so when you make a payment it will automatically use the funds that entered into your account first.
The levy funds are available to spend only on apprenticeship training. This means employers can use it to support recruiting new apprentices into their company or for training existing staff members. All training needs to meet approved standards or framework and the individual meets the apprentice eligibility criteria.
Companies who spend more then what is allocated to them by the levy will be required to pay for the cost of the apprenticeship in a co-investment model where the government will pay 95% of the cost of the apprenticeship training and your company will be responsible to pay the provider directly for the rest of the 5% of the negotiated price of the training.
For smaller employers, with a pay bill of less than £3 million, that do not pay the apprenticeship levy, use of the digital account service during the early transition is optional except if you are trying to claim the new government incentive for employers taking on new apprentice until the 31st of January 2021.
Following this transition, the intention is by March 31st 2021, all apprenticeships will be arranged through the apprenticeship service.
All employers can use the service to tailor apprenticeship training to meet their business needs, filling skills gaps and boosting productivity. With training provider agreement employers can set permissions to allow training providers to undertake some actions on their behalf.
The government will contribute 95% of the training fees towards you taking on a new apprentice and the employer contribution is 5%. This fee is waved if your company has less than 50 employees and you take on an apprentice that is either;
When you take on an apprentice who is aged between 16 and 18 at the start of their apprenticeship, you will receive a payment of £1,000 that will help meet the extra costs of employing them. This will be paid to you through the training provider in two payment; £500 after the first 90days and another £500 after they have been on programme over a year.
If you recruit an apprentice with additional learning needs (such as dyslexia), or other learning difficulties or disabilities, the government will make a payment directly to the training provider to help them with the extra costs of supporting the apprentice’s learning.
The current proposal is that training providers could claim up to an additional £150 each month these apprentices. We are hoping to have this confirmed in October 2016.
Recognising the value that apprentices bring to the economy, the Government’s Plan for Jobs includes updates to apprenticeship funding policy, with incentive payments for employers who hire new apprentices before the end of January 2021.
The purpose of these incentives is to support employers to build capacity and capability following the disruption of Covid-19, while creating high quality opportunities for individuals and equipping them with skills that are in demand.
The incentive payments apply to employers with a workforce in England who recruit an apprentice between 1 August 2020 and 31 January 2021. Provided the eligibility criteria are met, there will be no limit on the number of incentive payments you can claim.
There will be two levels of payment based on age:
As the only official further education college on the island delivering the widest range of apprenticeships, the Apprenticeship Team has been keeping a close eye on all the up and coming changes to do with the apprenticeship reform. This puts us in a great position to advise employers on how best to implement and manage their apprenticeship programme.
For employers who are new to apprenticeships we can take care of everything from the advertisement and recruitment of suitable candidates, to funding arrangements and provision of all necessary training.
For employers with an existing apprenticeship programme we can advise you on how to keep ahead of the changing standards and funding models.
Our friendly team of apprenticeship experts offer a free Training Needs Analysis service to help employers like you prepare for the Apprenticeship levy.
We will help and support you every step of the way, just get in touch.