In spring 2017 the way the government funds apprenticeships in England changed. The apprenticeship levy requires all employers operating in the UK, with a pay bill over £3 million each year, to make an investment in apprenticeships. You can benefit from this investment by training apprentices for new recruits and existing team members that require training.
What is the Apprenticeship Levy?
Apprenticeship Levy Articles
Why I LOVE the Apprenticeship Levy – James O’Donnell
What is the Apprenticeship Levy?
The Apprenticeship Levy is now in place to increase the quantity and quality of Apprenticeships. It is a new tax which aims to fund three million new Apprenticeships in England by 2020.
When was it introduced?
In April 2017
Do all organisations need to pay the Levy?
All UK employers who have a total employee pay bill above £3m a year will pay the Levy. This includes public and private sector, charities and educational providers such as academy groups and universities. The Levy rate is set at 0.5% of your pay bill.
Your ‘pay bill’ is your total employee earnings subject to Class 1 secondary NICs.
Employers get a £15,000 fixed annual allowance to offset against the Levy payment. Employers who operate multiple payrolls can claim one allowance for the Levy.
An example: if you have a £3m pay bill, you have a Levy bill of £15,000 (at 0.5% of employer pay bill). The allowance is offset against this, so your Levy payment is £0.00.
How much of the Apprenticeship Levy do I pay?
Here are some examples of how much employers may pay for the Levy;
Employer A: 1,000 employees, each with a gross salary of £20,000
Annual pay bill: 1,000 x £20,000 = £20,000,000
Levy applied: 0.5% x £20,000,000 = £100,000
After allowance applied: £100,000-£15,000 means £85,000 Levy payment
Employer B: 500 employees, each with a gross salary of £20,000
Annual pay bill: 500 x £20,000 = £10,000,000
Levy applied: 0.5% x £10,000,000 = £50,000
After allowance applied: £50,000 – £15,000 means £35,000 Levy payment
Employer C: 100 employees, each with a gross salary of £20,000
Annual pay bill: 100 x £20,000 = £2,000,000
Levy applied: 0.5% x £2,000,000 = £10,000
After allowance applied: £10,000 – £15,000 means £0 Levy payment
What if there aren't enough Levy Funds in the DAS account?
Levy payers who use up the funding within their DAS account will be able to continue to upskill existing employees and recruit apprentices, but will pay a 10% contribution of the agreed price to The Tess Group. The remaining 90% will be paid by the government.
How does the government collect the Levy?
Payments are collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), alongside tax and National Insurance.
What happens to the money once it's paid?
The money is collected by HMRC and can be accessed via a new Digital Apprenticeship Service (DAS) account. This can be used to pay for apprenticeship training. On your DAS account you can see all the training providers you want to deliver the training, you then chose the appropriate Apprenticeship training courses.
What can the Levy be spent on?
You can spend your Levy funds on apprenticeship training for either existing staff or new recruits if the training meets an approved standard or framework and the individual meets the apprentice eligibility criteria.
Research current vacancies in your sector as a benchmark on the National Apprenticeship Service vacancy website. We would also recommend networking with your peers within the sector and sharing best practice. The current minimum wage rate for an apprentice is £3.40 per hour. This rate applies to apprentices aged 16 to 18 and those aged 19 or over who are in their first year. Apprentices aged 19 or over who have completed your first year must be paid at least the National Minimum wage for their age.
What types of programmes can be funded by the Levy?
A range of apprenticeship training programmes can be funded. At the Tess Group we specialise in Management, Team Leading, Customer Service, Recruitment and Business Administration however we can also offer many others.
What can the levy funds be spent on?
Funds can only be used towards the costs of apprenticeship training. They cannot be used on other associated costs such as apprentice wages, travel and subsidiary costs or the costs of setting up an apprenticeship programme.
How do I use funds from my digital account to buy training?
When an apprenticeship has started, monthly payments will be automatically taken from your digital account and sent to The Tess Group. This spreads the cost over the lifetime of the apprenticeship. You will see funds entering your digital account each month as you pay the Levy, and funds leaving the account regularly each month as you pay for training.
How do I get out more than I put in to the Levy?
Employers in England who pay the Levy will get a 10% top up to their digital accounts. This means every £1 will be increased to £1.10.
How long will my funds last?
Funds will expire 24 months after they enter your (DAS) account unless you spend them on apprenticeship training. Money is spent when it leaves your digital account as a payment to The Tess Group.
I have employees in Scotland, Wales and Northern Ireland. Does that make a difference?
The portion of your levy that relates to English workers will be paid into your Digital Account and topped up by the government by another 10%. The portion of your levy that relates to employees in the devolved nations will be paid directly to these governments and won’t go into your levy account. While this money is likely to be used for Apprenticeships it is unlikely to be identified as being for your organisation. The devolved authorities retain the right to continue with their own arrangements.
What does the Apprenticeship Levy mean for small employers?
If your organisation has a pay bill of less than £3m it will not have to pay the Levy. In England, organisations will still be able to access government support of 90% of the training costs. As a business we will ask you to contribute just 10% of the apprenticeship costs so you can still benefit from on going training with us.