In spring 2017 the way the government funds apprenticeships in England is changing. Some employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers.

Key Facts

How the Levy will affect your business

  1. The national Apprenticeship programme is being expanded from April 2017 through the Apprenticeship Levy.
  2. The Levy will apply to all large organisations with an annual payroll of over £3million per annum, regardless of whether they already employ Apprentices or not.
  3. It will be payable by employers in the UK at the rate of 0.5% of the payroll cost through PAYE alongside Income Tax and National Insurance.
  4. Employers will not pay the first £15k of the Levy, which effectively means that the Levy will only be payable on payrolls in excess of £3 million per year.
  5. All employers will be supported by the government with regards to the Apprenticeship training.
  6. Public sector organisations will also pay the Levy if their payroll meets the above criteria and in addition, 2.32% of their workforce must be Apprentices.
Introduction

The Levy

The Levy will be applied to all industries in the UK and will first come into effect on the 6th April 2017 at a rate of 0.5% of an employer’s wage bill and will be paid through PAYE. Each Employer will receive an allowance of £15,000 to offset against their Levy payment. The Levy payment will only be paid by Employers who have an annual payroll of more than £3 million, which represents only 2% of UK Employers.

Explained

Employers who pay the Apprenticeship Levy and provide Apprenticeships will be able to allocate their Levy contributions as digital vouchers to use to train their Apprentices. This voucher system only applies for Employers in England. Employers will be allowed to spend their digital vouchers within a period of up to 18 months.

All employers will also receive a 10% ‘top-up’ payment. The government is also considering further top- up support for those employers who want to invest in more Apprentices. The aim is that employers who commit to Apprenticeships will be able to get out more than they pay in to the Levy, using the top up payments.

The aim of the Levy is to increase the investment from UK Employers in training through Apprenticeships, making it a long term solution to support growth and commitment from our country’s Employers.

Digital Apprenticeship account

Once you have declared the levy to HMRC you will be able to access funding for apprenticeships through a new digital apprenticeship service account. You will be able to use this to pay for training and assessment for apprentices in England. The service will also help you find training providers to help you develop and deliver your apprenticeship programme.

Examples of what you will pay

Example 1: an employer who would pay the levy

An employer with an annual pay bill of £5,000,000

·         Levy sum:0.5% x £5,000,000 = £25,000

·         Subtracting levy allowance:£25,000 - £15,000 = £10,000 annual levy payment

Example 2: an employer who would not have to pay the levy

An employer with an annual pay bill of £2,000,000

·         Levy sum:0.5% x £2,000,000 = £10,000

·         Subtracting levy allowance:£10,000 - £15,000 = £0 annual levy payment

Use the indicative online tool for employers (https://estimate-my-apprenticeship-funding.sfa.bis.gov.uk/ to estimate your levy contribution, begin to plan your training requirements, and estimate your financial spending

What is an apprenticeship?

There are rules governing what an apprenticeship is. The main ones are:

  • the apprentice must be employed in a real job; they may be an existing employee or a new hire
  • the apprentice must work towards achieving an approved apprenticeship standard or apprenticeship framework
  • the apprenticeship training must last at least 12 months
  • the apprentice must spend at least 20% of their time on off-the-job training
Funding training and assessment costs

All existing and new apprenticeship frameworks and standards will be placed within a funding band. The upper limit of each funding band will cap the maximum amount of digital funds an employer who pays the levy can use towards an individual apprenticeship. The upper limit of the funding bands will also cap the maximum price that government will ‘co-invest’ towards, where an employer does not pay the levy or has insufficient digital funds and is eligible for extra support. It will be up to employers to negotiate prices with providers, within these funding limits.

The same funding bands will apply to all employers paying for apprenticeship training.

Levy-paying employers

You will be asked to negotiate and agree a price with the training provider you have chosen from the approved register. This price will cover the delivery of apprenticeship training towards a specific standard or framework, and the cost of assessing the apprentice at the end of their apprenticeship.

You can use funds in your digital account to pay your training provider, up to the maximum allowed by the relevant funding band.

For example, the apprenticeship standard you have chosen is in a funding band with a limit of £6,000 and you negotiate a price of £5,000 with your training provider. We will deduct this amount from your digital account, in monthly instalments, over the life of the apprenticeship.

If you negotiate a price with a training provider that is more than the maximum allowed by the funding band, then you must pay the difference between the band maximum and the agreed price, in full. You can’t make this payment from your digital account.

Employers that don’t pay the levy

You will negotiate and agree a price with the training provider you have chosen from the approved register. This price will cover the delivery of apprenticeship training towards a specific standard or framework, and the cost of assessing the apprentice at the end of their apprenticeship. You pay for this through co-investment with us.

Co-investment means that you and the government each pay some of the money to the provider. There will be a rate set each year, for the proportion of the money that you need to pay and the proportion the government will pay.

When further information will be available

October 2016

In October 2016 there will be information about apprentices starting from May 2017, including:

  • final levels of:
    • funding
    • government support
    • additional support for 16- to 18-year-olds
    • English and maths payments
  • final detailed funding and eligibility rules

December 2016

In December 2016 there will be information about further employer guidance from HMRC on how to calculate and pay the apprenticeship levy.

https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work#what-you-can-spend-apprenticeship-funding-on--all-employers