Levy

Since the introduction of the Apprenticeship Levy in 2017 training providers and large employers have found themselves working closer in partnership to define the needs of their people, and learning strategies, through quality, value adding apprenticeship programmes.

The Apprenticeship Levy means that all employers with a PAYE of over £3million operating in the UK are required to invest in apprenticeships. The monetary amount paid to the government can then be re-invested back into the business, supporting both new or existing employees on recognised apprenticeship programmes.

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52% of organisations struggle to recruit for digital roles.

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Government funding is available to support employers.

FOUR KEY APPRENTICESHIP LEVY TIPS FROM CODE

What is your Levy spend?

Coming Soon – You can calculate your levy spend using this tool from the Education and Skills Funding Agency. This should be straightforward; simply calculate 0.5% of your gross annual payroll and divide by 12. If your organisation is affected by the Levy the money will already be entering your digital account.

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What are your business requirements?

Where can your company benefit from entry level talent? What digital skills do you need to build for the future success of your organisation? Make sure this is included in your resourcing strategy and should be linked to your business strategy.

Take a phased approach

If you don’t already have apprentices in your organisation, make sure your structure and people are ready to support and benefit from the scheme. Start with a small number to make sure your resourcing and onboarding processes are fit for purpose. 

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Measure your success

Make sure you have measurement points in the recruitment and onboarding process. Take on and share feedback from managers, apprentices and your training provider to make sure your processes are working effectively, your apprentices are well supported and most importantly that the apprentices are able to have a positive impact within your organisation.

A QUICK GUIDE TO THE APPRENTICESHIP LEVY

What is the Apprenticeship Levy?

The Apprenticeship Levy came into effect on 6 April 2017. The purpose of the levy is to encourage employers to invest in Apprenticeship Programmes and to raise additional funds to improve the quality and quantity of apprenticeships. The levy is set to raise £3 billion with a view to funding three million new apprenticeships by 2020. All businesses – whether they pay the tax or not – can access the Apprenticeship Levy.

Who needs to pay the levy (and when)?

If you’re an employer with a pay bill over £3 million each year you will need to pay the levy (this applies to around 2% of employers). The threshold means only larger organisations need to pay.

The levy amount is 0.5% of a company’s payroll, and every employer who pays is also eligible for an allowance of £15,000 to offset against the amount of money they owe. HM Revenue and Customs (HMRC) collects the levy on a monthly basis through Pay as You Earn (PAYE).

What happens with the funds paid into the levy?

Your levy payment is then paid into an online Digital Apprenticeship Service (DAS) account (similar to online banking), which receives a 10% ‘top up’ from the government. So for every £1 paid in, a levy paying business can access an additional 10p to spend on apprenticeships.

Like any other tax, the Apprenticeship Levy funds you pay become public funds the moment they leave your bank, and because of this, are subject to complex rules about how they can be used.

(The levy is part of the devolved funding to Scotland, Wales and Northern Ireland and is calculated on UK wide payroll costs. The proportion of the levy that can be spent in England is based on the size of the English payroll for any particular business. If a levy-paying company operates in England only, then it is able to spend 100% of its levy contribution on the training and assessment of apprentices, plus the additional 10% added by the government.)

“The levy is set to raise £3 billion with a view to funding three million new apprenticeships by 2020. All businesses – whether they pay the tax or not – can access the Apprenticeship Levy.”

Do marginal levy payers get their funds back?

It depends. The levy is payable by employers with an annual payroll of £3m or more, which equates to a monthly payroll of £250,000. If for a single month, the payroll exceeds £250,000, then the levy should be paid to HMRC for that month. If however, at the end of the tax year, the payroll is less than £3m, then the employer will be able to claim back the monthly payment made earlier in the year.

How can funds be accessed?

All levy-paying employers can access funding via a Digital Voucher Scheme. Funds (including ‘top ups’) that businesses accrue in their Apprenticeship Service account expire after 24 months unless spent on apprenticeship training.

If you are a levy-paying employer, you can now create an account on the Digital Apprenticeship Service to:

  • Receive levy funds for you to spend on apprenticeships.
  • Manage your apprentices.
  • Pay your training provider.
  • Stop or pause payments to your training provider.
  • Transfer your levy funds to another employer.
Can employers share funds with other employers?

If you are in a group of companies paying the levy together, your group can set up a single shared apprenticeship account and pool your funds. Since April 2018, if you are a levy-paying employer, you can transfer up to 10% of the annual value of funds to other employers through the Apprenticeship Service. Transfers can be made to any employer, including smaller employers in the supply chain, and apprenticeship training agencies. Before transferring funds, you will need to agree the individual apprenticeships that will be funded by a transfer with the employer receiving the funds. Employers receiving transferred funds will only be able to use them to pay for training and assessment for Apprenticeship Standards (not frameworks). The transfer counts as state aid, so the maximum amount that an organisation can receive through a transfer of funds is 2 million euros over three years.

SMall or Medium employers

Not a Levy Payer?

Employers with an annual wage bill of less than £3m do not pay the Apprenticeship Levy.

Instead, 95% of each apprenticeship is funded by the government with a low 5% investment from the employer.

Government incentives

Additional incentives may also be available to employers;

  • A £1000 government incentive when employing an apprentice aged 16 – 18.
  • Employers with less than 50 employees and where the apprentice is aged 16 – 18, the government will fund 100% of the apprentice and are eligible for a £1000 incentive payment.
Only looking to recruit one or two apprentices?

Code havee expertise in offering dedicated recruitment support to small or medium businesses. Our team will support you through the process of attraction, recruitment and selection before your new apprentices enrols upon their programme and enters into your workplace.

Additional support includes

  • Drafting job descriptions
  • Candidate sift and shortlist
  • Role advertisement on the National Apprenticeship Service

Ask us anything