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The Apprenticeship Levy: What You Need to Know

Apprenticeship levy

How does the Apprenticeship Levy affect you?

*This article is for employers and learners. Read how the levy affects training providers.* 

apprenticeship levyUK apprenticeships are undergoing a major reform. Quality standards and frameworks are being reformed to better meet employer and learner needs - and the way apprenticeships will be funded is changing.

Employers, training providers and learners alike are expected to significantly benefit from the initiative - but do you know exactly how it’s going to work? Findcourses has put together an overview of the proposed plans to help you get to grips with what’s to come.

Read through or click on the sections most relevant to you:

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Please note that some information contained in this article may change in future. Please visit GOV.UK for updated information.

What the numbers say!

  • Those who complete an apprenticeship at level 4 or above could earn an average of £150,000 more over their lifetime.
  • 83% of apprentices indicated that their career prospects improved*.
  • Over the past 5 years, between 53% and 54,7% of apprenticeship starters have been women*.
  • Employers with a pay bill of £3 million a year will pay the levy. This translates to fewer than 2% of UK employers.
  • More than £60 million will be invested in apprenticeship training in the poorest areas of the country.

Pencil and sharpener: Apprenticeship Levy

The Apprenticeship Levy: What is it and how will it work?

The Apprenticeship Levy is a new tax some employers in the UK will pay from spring 2017. It is a government initiative to proactively increase the quantity and improve the quality of apprenticeships across the country. The government, together with the private sector, aims to train 3 million new apprentices by 2020. The tax applies to employers with an annual pay bill of more than £3 million, who will need to pay 0.5% of their pay bill towards the levy. The pay bill refers to payments to employees that are subject to employer Class 1 secondary NICs. The government will help employers meet their commitment by providing additional funding.

When do eligible employers start paying the levy?

Levy payments are scheduled to commence in May 2017 and it will be up to employers to notify HMRC each month as to whether they are eligible to pay.

Government assistance on levy for eligible employers

Each employer will receive a £15,000 allowance to offset the levy payment. This equates to 0.5% of £3 million and means that the employers’ spend is on the portion of their pay bill that is over £3 million.

In addition, employers in the English apprenticeship system will receive a further 10% top-up added to the funds in their apprenticeship service account. So, for every £10 that is paid into the account to spend on apprenticeship training in England, the employer's account is credited with an additional £1.

Take a look at the Estimate my apprenticeship funding page to obtain a breakdown of your organisation's levy commitment.

Additional government contributions

Additional funds are available under the following conditions:

  • The apprentice is between 16 and 18 years old (or 15 years old and will be turning 16 years old between the last Friday of June and 31 August).
  • The apprentice is between 19 and 24 years old and has an education, health and care plan provided by the local authority, or has been in the care of the local authority.

Paying for apprenticeships

Levy-paying employers in England will access funding through their digital apprenticeship service account. The platform allows employers to select apprenticeship training from the list of approved training providers as well as to post apprenticeship vacancies.

Employers have a rolling 24-month window within which to spend their funds ('vouchers') before they expire. The service uses funds that have entered the account first whenever payments are made.

The digital apprenticeship service will only apply to employers in England. Separate measures will be in place for Scotland, Wales and Northern Ireland.

Card payment: Apprenticeship Levy

What all employers can spend apprenticeship funding on

Funds in the employer's apprenticeship service account, and any government funding through co-investment, must only be used towards the cost of eligible apprenticeship training and end point assessments.

Funding can be spent on

Employers can only use funds for approved apprenticeship training providers and assessment organisations. Funding is provided up to the limit of the funding band and the employer has to pay the full amount for any cost above this limit.

The list of apprenticeships eligible for funding can be viewed on the Hub.

The register of training organizations provides the list of approved apprenticeship training providers. Note that using the digital interface will direct your search to training providers within a chosen geographical area for the specific apprenticeship you are interested in.

The register of apprenticeship assessment organisations provides the list of companies approved to deliver end point assessments. Employers will use the register to choose their preferred approved end-point assessment provider for an apprenticeship, and employer's lead training provider will commence engaging with the selected provider.

Funding cannot be spent on

Funds cannot be used for other costs associated with the apprentice, such as travel and subsidiary costs, traineeships, statutory licences to practise, managerial or brokerage costs, work placement programmes or the cost of setting up an apprenticeship programme.

What if the employer has insufficient funds in their apprenticeship service account to pay for training?

If the monthly cost of the apprenticeship training is greater than the amount available in the digital account, the employer has to co-invest 10% of the outstanding balance and government will pay the other 90% up to the funding band maximum. The employer pays 100% of costs above the funding band maximum.

Requirements for employers to become approved apprenticeship trainers

Employers who have approved apprenticeship training capabilities can deliver this training to their own staff as well as the staff of other employers. Such a company is referred to as an employer-provider.

It is important to note that funds from their apprenticeship service account cannot be used to setup this capability.

There are three ways an employer can become a training provider and these are:

  1. To be an employer-provider that provides all, or some of the off-the-job training elements of an apprenticeship to their own employees.
  2. To be a training provider for their own staff as well as for other employers’ staff.
  3. To be a sub-contractor to a main provider.

Strict requirements govern the process of becoming an employer-provider as these employers are held to the same high standards as any approved training provider. This article provides more information about how to become a training provider.

*References

  1. Apprenticeship Evaluation: survey of learners (2014)
  2. English Apprenticeships:Our 2020 Vision - Executive Summary

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Last updated: 18 Jun 2018

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