In April 2017, the Apprenticeship Levy was introduced. This means that employers with a pay bill of more than £3 million per year are liable to pay the levy. The aim of the initiative is to raise money to meet the cost of apprenticeship schemes across the UK.
We have provided answers to a number of FAQs below to act as a guide for employers who are required to pay the levy and want to utilise the funding available.
What is the Apprenticeship Levy?
It’s a levy on UK employers to fund training costs. It is set at 0.5% of the employer’s pay bill. Only employers with a pay bill of more than £3 million will be liable to pay the levy and it is paid through PAYE on a monthly basis. Employers will have an annual allowance of £15,000 which will be offset against the levy. This will also be applied on a monthly basis, and any unused allowance can be carried forward to the next month.
How can employers access the funding?
Employers paying the Apprenticeship Levy can access funding through an online service account linked to their PAYE scheme. The government pays into the account on a monthly basis and tops up the amount paid into the account by 10%. Employers will need to spend the funds that are paid into the account within 24 months. After this time, the funds will expire.
In order to spend the funds from their accounts, employers first need to choose an approved training provider and agree a price for each apprenticeship. Once the training has started, monthly payments will be taken from the online service account and sent to the training provider.
If an employer doesn’t have enough funds in their account to pay for the training in a particular month, they will be asked to share the remaining cost of the training for that month with the government. This is referred to as ‘co-investment’. This will mean that an employer pays 10% of the outstanding balance for that month and the government pays the remaining 90% up to a funding maximum.
What can the Apprenticeship Levy funding be spent on?
The funding can be spent on apprenticeship training and assessment under an apprenticeship framework or standard with an approved training provider.
Employers can also fund apprenticeships for other employers, such as employers in their supply chain. Employers are permitted to transfer 10% of their funds to another employer, although this aspect of the levy will not be introduced until 2018.
It’s important to note that any apprenticeship that started before the introduction of the new funding cannot be paid for using the levy.
Can the levy funding pay for apprenticeship wages?
Employers are not permitted to use the funding to pay for:
- Wages
- Statutory licences to practice
- Travel and subsidiary costs
- Managerial costs
- Traineeships
- Work placements
- The cost of setting up an apprenticeship
What happens if we aren’t required to pay the apprenticeship levy?
As noted, only employers with a pay bill over £3 million will be liable to pay the apprenticeship levy. Employers that don’t pay the levy will therefore be able to access government funding towards the cost of apprenticeships. In this instance, the government will pay 90% of the price agreed with the training provider (up to the maximum funding band for the relevant apprenticeship framework or standard) and the employer will be required to pay 10%.
If a company doesn’t pay the levy, they won’t be able to use the online apprenticeship service to pay for the apprenticeship until at least 2018. Instead, they will be required to agree a payment schedule with the training provider and pay them directly. The training provider will then need to have confirmation that the employer has covered their 10% before the government will release the remainder of the funding.
Companies with fewer than 50 staff members will not be required to pay a contribution to the cost of the apprenticeship where the apprentice is aged 16 to 18, or aged 19 to 24 if he or she has previously been in care or has a local authority education, health and care plan. The government will pay 100% of the training and assessment costs in these circumstances.
How can I make the most of the apprenticeship levy?
The levy only covers apprenticeship funding. However, existing staff members can still receive apprenticeship training. At least 20% of their time would need to be assigned to study and this would need to be towards a qualification at the same or a lower level than qualifications that they already hold.
How much do I need to pay an apprentice?
Employers will be required to pay apprentices the National Minimum Wage. The apprenticeship rate is currently £3.50 per hour and this applies to apprentices who are aged under 19 or in the first 12 months of training. Apprentices who are aged 19 or over and not in the first 12 months of the apprenticeship are entitled to the relevant rate of the National Minimum Wage, depending on their age: £5.60 per hour for those aged 19 or 20; £7.05 for those aged 21 or over but under 25; and £7.50 for those aged 25 and over (the National Living Wage).
Where can I find out more?
Further details can be obtained from the the government’s publication on the apprenticeship levy, or if you have any questions, please do give us a call on 01271 859 267 or email office@fitzgeraldhr.co.uk.
