APPRENTICESHIP LEVY

The Levy Explained

The Levy is basically a training tax. This is being deducted from companies in the UK with a pay bill in excess of £3million. Government says this will affect less than 2% of UK Employers. The Levy is charged at a rate of 0.5% of an Employers pay bill. Each Employer will receive an allowance £15,000 to offset against their Levy payment.

How Much of the Apprenticeship Levy will you pay?


Here are some examples of how much employers may pay for the levy;


Employer A: 1,000 employees, each with a gross salary of £20,000

Annual pay bill: 1,000 x £20,000 = £20,000,000
Levy applied: 0.5% x £20,000,000 = £100,000
After allowance applied: £100,000 - £15,000 means £85,000 levy payment

Employer B: 500 employees, each with a gross salary of £20,000

Annual pay bill: 500 x £20,000 = £10,000,000
Levy applied: 0.5% x £10,000,000 = £50,000
After allowance applied: £50,000 – £15,000 means £35,000 levy payment

 

Employer C: 100 employees, each with a gross salary of £20,000

Annual pay bill: 100 x £20,000 = £2,000,000
Levy applied: 0.5% x £2,000,000 = £10,000
After allowance applied: £10,000 – £15,000 means £0 levy payment

Why is it being introduced?

The Government is committed to boosting productivity by investing in human capital. As part of this the Government are committed to developing vocational skills and increase quantity and quality of Apprenticeships. Government has committed an additional 3 million Apprenticeship starts in England by 2020. The Levy will help to deliver these and support quality training by putting Employers at centre of system.

When does it start?

The Levy comes into effect Friday 6th April 2017.

Who does this Levy impact?

Basically every UK Employer – whether they be a Levy paying business or not. The Levy is designed to help support quality training and those Employers committed to training will be able to get out more than they pay in Levy.

What is an Apprenticeship?

An apprenticeship is a genuine job with an accompanying skills developing programme. Through their Apprenticeship they will gain technical knowledge, practical experience and wider skills they need for their immediate job and future career.

The main rules Governing Apprenticeships are:

  • The Apprentice must be employed in a real job; they maybe an existing employee or a new hire.
  • They must work towards achieving an approved Apprenticeship Standards or Apprenticeship Framework.
  • The Apprenticeship Training must at last at least 12 months.
  • The Apprentice must spend at least 20% of their time on off-the-job training – this training must be directly relevant to the Apprenticeship standard or framework.

I am a Levy paying business, what do I need to do?

You will pay the Levy each month starting 6th April 2017, through your PAYE (contact HMRC for more info).  Once you have declared Levy to HMRC, you can access funding for Apprenticeships through a new Apprenticeship Service Account. Registration for the Apprenticeship Service is now open to all Levy-paying Employers.

Through the Apprenticeship service all Employers will be able to:

  • Select an Apprenticeship Framework
  • Choose the training provider or providers you want to deliver the training
  • Choose the organisation that will assess your Apprentices
  • Post Apprenticeship vacancies

As a Levy paying employer you can also:

  • Set the price you’ve agreed with your training provider
  • Pay for Apprenticeship Training and Assessment
  • Tell us to stop or pause payments (i.e. Apprentice stops their training, Apprentice takes a break or you have not received service agreed with provider)

You say all UK Employers are affected what does this mean?

The Levy applies to all UK Employers. Apprenticeships are a devolved policy, meaning that authorities in each of the UK Nations manage their own Apprenticeship Programmes, including how funding is spent on Apprenticeship training. The Apprenticeship service will support the English Apprenticeship system. To know how much you have to spend through the system. The Government will use data that is currently held about your Employers addresses and this will be used to work out the proportion of your pay bill is for English based Employees. Employees can update Employees who through the RTI (Real Times Information) returns.

What training will I be buying?

Once you decide to buy Apprenticeship training through the Apprenticeship Service, the funds will be taken from your account each month to pay the training provider and the assessment organisation. You can only spend the funds in your Apprenticeship account on training from a Government approved Training Provider. There are two types of Apprenticeships to choose from:

  • Apprenticeship Standards – each standard covers a specific job role and sets out the core skills, knowledge and behaviours an Apprentice will need to be fully competent in their job role and meet the needs of Employers.
  • Apprenticeship Frameworks – A series of work-related vocational and professional qualifications, with workplace and classroom based training.

Frameworks will phase out between now and 2020, as a move to Employer led standards is being completed.

Do the funds expire?

In a nutshell – Yes. Funds will expire 24 months after they enter your Apprenticeship account, unless you spend them on Apprenticeship Training with a training provider. Payment is automatically taken from your account and uses the oldest funds first.

 

How do I choose a provider?

Through the Apprenticeship Service. You need to choose a Training Provider to deliver the training and an assessment organisation to complete end-point assessments. Each Apprenticeship standard requires an end-point assessment to decide whether the Apprentice has met the required standard. You can only use Government approved Assessment organisations.

We have a dedicated team in place to go through your requirements so please contact us on; 0191 514 2799, email – info@teamwearside.co.uk and we will be more than happy to discuss your requirements with you.

I want to use my funds in the Apprenticeship Service Account, how do I do this?

You and your main provider must agree a total price for each Apprenticeship. This included the costs of training and assessment. For standards this must include the cost of end-point assessment agreed with the Apprentice Assessment Organisation. Costs of end-point assessments will vary, but are not expected to exceed 20% of the total price agreed for the delivery of the Apprenticeship and assessment. Funds can be used from your account up to funding band maximum and if you agree a price in excess of this, you will need to cover the balance. Once Apprenticeship training you’ve bought has started, monthly payments will automatically be sent to the provider from your account. The provider will pay the End-Point Assessment Organisation.

What can I spend Apprenticeship funding on? (All Employers)

Funds enter in your Apprenticeship service account or provided by the Government through co-investment can only be used towards the costs of Apprenticeship Training and End Point Assessment. This must be with an Approved Training Provider and Approved Assessment Organisation.

Funds cannot be used on other costs associated with your Apprentices or wider training – i.e. wages, statutory licences, travel and subsidiary costs, work placements or costs of setting up Apprenticeship Programme.

I don’t have enough money in my account to pay for training. What do I do?

If you pay the Levy, this might happen if you only pay a small amount to the Levy or have a variable pay bill and pay the levy in some months but not others. Where the cost of Apprenticeship Training cannot be met fully by your funds, you must co-invest 10% of the outstanding balance for that month. The Government will pay the remaining 90% up to fund binding maximum. Where funding band maximum is exceeded you must pay all additional costs.

 


I am a business that does not pay the Levy. What do I do?

If you don’t pay the Levy then you will not need to use the Apprenticeship Service to pay for Apprenticeship Training and Assessment until at least 2018. The New funding system begins in May 2017; you choose the training you would like your Apprentice to receive, from any approved Training Provider and an Assessment Organisation. The list of these is available from National Apprenticeship Service. www.gov.uk/take-on-an-apprentice.

I don’t pay the Levy (cont.)

You will need to make a 10% contribution towards the cost of the training and the Government will pay the balance (90%), up to the maximum amount of Government funding available for the Apprenticeship. This is called a co-investment as both you and the Government are making a payment. Every individual Apprenticeship framework and standard is allocated a funding band. The upper limit of the funding band caps the maximum price that the Government will co-invest toward that individual framework and standard. You will have to meet in full any cost which is above the funding band maximum.

You will pay your contribution directly to the provider and you will be able to spread it over the lifetime of the Apprenticeship and agree a payment schedule with the provider. The provider will show us that you have paid your contributions as a condition of the Government paying its contribution.

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TEAM (Training, Education, Achievement and Motivation) Wearside Ltd is a Sunderland based Training Provider Charity. Since its establishment in 1991 TEAM Wearside has offered training and support to a range of individuals and businesses across the North East.

From the inception of TEAM Wearside the core charity ethos has been to support people to develop and reach their potential.  Initially the focus was on supporting the unemployed client group, however, over the years the expertise at TEAM Wearside has developed to such an extent that a range of target groups are now supported.

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