From May 2017 the way the government funds apprenticeships in England changed. Some larger employers now contribute to the apprenticeship levy, but there are changes to the funding for apprenticeship training for all employers.
The apprenticeship levy requires all employers operating in the UK, with a pay bill of over £3 million each year, to make an investment in apprenticeships. The levy is charged at a rate of 0.5% of an employer’s pay bill and is collected through PAYE. There is a levy allowance worth £15,000 for each tax year which is off set against the levy. This means the levy is only payable on pay bills over £3 million (because 0.5% x £3 million = £15,000).The pay bill will be based on total employee earnings subject to class 1 secondary NICs.
Employer of 250 employees, each with a gross salary of £20,000 would pay:
Pay bill: 250 x £20,000 = £5,000,000
Levy sum: 0.5% x £5,000,000 = £25,000
Allowance: £25,000 – £15,000 = £10,000 annual levy payment
Employer of 100 employees, each with a gross salary of £20,000 would pay:
Pay bill: 100 x £20,000 = £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000
Allowance: £10,000 – £15,000 = £0 annual levy payment
The government has confirmed that it will apply a 10% top-up to the monthly funds entering levy paying employers’ apprenticeship service accounts. So for every £1 entered through the levy the government will add £0.10.
What if my organisation has a pay bill of less than £3 million?
Employers who are not eligible to pay the apprenticeship levy will be able to access government support and funding for their apprentices (subject to eligibility). The government has confirmed that employers with no levy pot (or those that have run out of levy) will need to make a contribution to the cost of training and the government will pay the rest, up to the maximum funding cap. This contribution will have to be paid direct to the training provider.
To support smaller employers, the government has confirmed that employers with fewer than 50 employees will not have to pay anything towards the cost of training a 16 to 18 year old apprentice (or for apprentices 19 to 23 years old who have been in care or who have an Education and Health Care (EHC) plan).
Who will pay for any English and Maths training?
Apprentices have to meet a minimum standard in both English and Maths. If an apprentice doesn’t already have these, they may need to do an English and maths qualification. These qualifications will be fully funded by the government for both levy and non-levy payers. The government will pay providers directly for the Level 1 and 2 English and Maths training they provide to an apprentice.
Apprentices aged between 16 and 18 will attract an incentive payment of £1,000 to the employer and £1,000 to the Training Provider. This will also be payable for apprentices 19 to 23 years old who have been in care or who have an Education and Health Care (EHC) plan. For further information download the Babcock Apprenticeship Levy and Funding Guide.