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Apprenticeship Levy


In April 2017, the way government finances apprenticeships in England will change. Some employers will need to contribute to an apprenticeship levy, and there will be changes in funding for apprenticeship training for all employers.

How the Apprenticeship Levy affects medium-to-large Employers

Which employers pay the apprenticeship levy?

This will not affect small businesses only employers that operate in England and whose pay bill is £3 million or more, e.g. schools who employ their staff through Cumbria County Council. 

How much will the levy cost?

The government imposes a 0.5% levy on your pay bill when you pay £3 million or more (collectively) to your employees. The government gives a £15,000 allowance to contribute to the levy, so you pay less. The government pays an extra 10% on top of your levy contribution, so you get back more than you pay. 

You pay the levy as part of PAYE on a monthly basis, so this means if your wage bill varies each month then some months you may pay the levy and some months you won't.

Illustrated Examples

  1. You employ 150 staff at £25,000 per annum:
    • Wages bill is 150 x £25,000 =  £3,750,000;
    • Levy of 0.5% = £18,750
    • Subtract £15,000 allowance
    • You actually pay £3,750
    • Government adds 10% = £375 to your funds
    • Total funding available to you
      £4,125 for apprenticeship training
  • You employ 200 staff at £20,000 per annum:
    • Wages bill is 200 x £20,000 =  £4,000,000;
    • Levy of 0.5% = £20,000
    • Subtract £15,000 allowance
    • You actually pay £5,000
    • Government adds 10% = £500 to your funds
    • Total funding available to you
      £5,500 for apprenticeship training
  • You employ 195 staff at £15,600 per annum:
    • Wages bill is 195 x £15,600 =  £3,042,000;
    • Levy of 0.5% = £15,210
    • Subtract £15,000 allowance
    • You actually pay £210
    • Government adds 10% = £21 to your funds
    • Total funding available to you
      £231 for apprenticeship training

What can I spend the Levy on?

The Levy can only be used towards the cost of apprenticeship training and assessment. This must be with an approved training provider and assessment organisation. It can't be used on wages, statutory licences to practice, travel and subsidiary costs, traineeships, work placement programmes or the costs of setting up an apprenticeship programme.

Is there a time limit on the funds?

Yes - Funds will expire 24 months after they enter your apprenticeship service account unless you spend them on apprenticeship training with a training provider. Whenever a payment is taken from your account, the service automatically uses the funds that entered your account first.

Will we need to pay more for an apprenticeship than the levy provides?

MaybeIf you pay the levy, you may find that over the course of an apprenticeship the funds in your account aren’t enough to cover the full cost of the apprenticeship training and assessment you’d like to buy. This may be the case for employers who only pay a small amount of levy or have a variable pay bill and pay the levy in some months but not others.

We pay the levy:
How do we pay for apprenticeship training?

Once you decide to buy apprenticeship training the funds will be taken from your apprenticeship service account each month to pay the training provider. You just need to have enough funds in your account to cover the cost of each apprenticeship you have chosen. You will see funds entering your account each month as you pay the levy, and funds leaving the account each month as you pay for training.

We don't pay the levy:
How do we pay for apprenticeship training?

If you do not pay the levy, you won’t need to use an apprenticeship service account to pay for apprenticeship training and assessment until at least 2018. 

The government will ask you to make a 10% contribution to the cost of apprenticeship training and the government then pays the rest (90%), up to the maximum amount of government funding available for that apprenticeship. You need to pay this directly to the training provider. As both you and the government are making a payment: this is called "co-investment".

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Hayley Hall,
13 Feb 2017, 06:43
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Hayley Hall,
11 May 2017, 07:42