The Apprenticeship Levy

What you need to know...

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.

The government is introducing the apprenticeship levy on 6 April 2017. The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships.

Who does this guidance applies to?

This guidance is for all employers operating in the UK, whether you pay the apprenticeship levy or not.

The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017. You’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.

Key Points

  • The government is reforming the way Apprenticeship Training is handled moving all emphasis from Training Providers, Colleges and Awarding Bodies and placing control of the process into the hands of the employers
  • The government will introduce an employment Levy of 0.5% based on an employer’s wage bill, if over £3m, to fund Apprenticeship Training from April 2017
  • The Government will top up levy by 10% each month
  • Unspent money will lapse after 18 months
  • Employers design Apprenticeship Standards replacing current frameworks
  • Creation of an Institute of Apprenticeships to oversee the regulation, design and delivery of apprenticeships overseen by a board made up primarily of employers
  • A Creation of a Digital Apprenticeship Service (DAS) for employers to simplify the process of finding apprentices and training providers

What will this mean for you?

Starting April 2017 a levy will be introduced of 0.5% of your annual wage bill and will be collected via the PAYE system by the HMRC and placed into a Digital Account – there will be an allowance of £15,000 to offset against the planned Levy Payment, this in effect offsets the payment of employer with a PAYE bill of less than £3m. an example of how to calculate your levy is below:

Examples:

A. Employer of 250 employees, each with a gross salary of £20000
Wage bill: 250 x £20000 – £5,000,000
Levy Sum: 0.5% x £5000000 = £25000
Allowance: £25000 – £15000 = £10000 annual Levy Payment

B. Employer of 100 employees, each with a gross salary of £20000
Wage bill: 100 x £20000 – £2000000
Levy Sum: 0.5% x £2000000 = £10000
Allowance: £10000 – £15000 = £0 annual Levy Payment

The new proposals affect both levied (levy payers) and non-levied employers (non-levy payers) equally. Efforts have been made to simplify the currently complex funding system to make it easier to understand for employers and give better transparency to the apprenticeship funding process. This proposal is being reviewed across the summer and will be finalised following feedback and consultation in October 2016.

 

Apprenticeships have been split in to 15 “bands” which determine their value-

Number Band Upper Limit Number Band Upper Limit
1 £1,500 9 £9,000
2 £2,000 10 £12,000
3 £2,500 11 £15,000
4 £3,000 12 £18,000
5 £3,500 13 £21,000
6 £4,000 14 £24,000
7 £5,000 15 £27,000
8 £6,000  

Provisional bands have been aligned to the existing Standards & Frameworks which can be viewed here. Where new style apprenticeship standards are not available existing frameworks have transitioned to this model and will continue to be available until suitable standards have been built through industry trailblazers and agreed by the department for Business Innovation and Skills (BIS). Standards are being built to be more robust than the current Frameworks and consequently are worth more than the equivalent Framework.

These amounts are the upper limit and can be negotiated with Bright Direction Training as a provider. When we enter these negotiations you should consider what CPD you require for these staff members to have them fully fit for purpose.

Other key changes to the current system include-

  • You will now be able to enrol staff on to an Apprenticeship scheme at a lower level than their prior attainment so long as they are acquiring significant new skills. In essence this means you could enrol a graduate to your apprenticeship scheme so long as they are entering a new role.
  • All employers regardless of size will need to enter in to a financial arrangement with their chosen provider (Bright Direction Training)
  • 20% of the training value will be held back until the learner achieves or completes. (Subject to an end point assessment for Apprenticeship Standards)
  • Further Government updates will follow in October 2016 & December 2016 following which we expect the full process to be finalised in preparation for April 2017

Estimate your levy contributions here.