8 things you need to know about the Apprenticeship Levy
Here are the most important things you need to know about the government’s Apprenticeship Levy.
Once enforced, the Apprenticeship Levy will have an impact on businesses throughout the UK. Earlier this year, the government announced that from April 6th 2017, companies with a payroll over a certain threshold will have to contribute to the levy, whilst those under the limit will see changes to the funding for apprenticeship training.
The levy will mean a reshuffle in terms of funds for many businesses, meaning that the government and leading organisations across the country are urging companies to prepare now.
Here we highlight the 8 key takeaways you need to know about the levy.
The levy will mean a reshuffle in terms of funds for many businesses, meaning that the government and leading organisations across the country are urging companies to prepare now.
1. If your business has a payroll of over £3 million, you will have to pay the levy
According to the government, companies with a payroll greater than £3 million per year will have to pay 0.5 per cent of their earnings to the levy, in addition to their existing PAYE payments. This means that when it comes to planning ahead for the financial year, it is crucial that the levy is taken into consideration.
2. SMEs may pay less
Small and medium sized business will not be eligible to pay the levy unless their payroll is over £3 million, and the choice is up to them whether or not they pay to train apprentices. In this respect, SMEs are given much more freedom.
However, employers who choose to pay to train apprentices will be offered a number of substantial government subsidies, paying just ten per cent of the cost of training and the government paying 90 per cent. If you have fewer than 50 employees, the government will pay 100 per cent of the funding if the employer takes on a 16-18-year-old.
3. Additional funding is available
If an employer has fewer than 50 employees, the government will pay 100 per cent of the funding if the employer takes on a 16-18-year-old. This also applies to care leavers aged 19-24 and young people within this age bracket with an education, health and care (EHC) plan.
Bigger businesses who choose to employ anyone in these groups are able to receive £2,000 of additional funding to cover any extra costs.
4. Employers can fund existing employees through apprenticeships
Next spring, employers will be able to use the apprenticeship funding to train existing employees as apprentices for the time being. However, this could change in coming years and this funding only covers apprenticeships and not other types of learning and development.
5. Employers will pay via an online account
Businesses paying the levy will do so into an online account called the Digital Apprenticeship Service (DAS) and will have 18 months to spend what they’ve paid in. The government is urging employers to think about how best to spend this money to add value to their business, for example by tackling issues such as an ageing workforce, competition for the best talent, or retaining and training good people.
Employers will also be able to use the DAS to choose a supplier to train their apprentices, deciding whether or not to work with various suppliers for different specialisms. Suppliers on the DAS will have to meet certain quality checks and businesses will be able to negotiate on price.
6. Separate funding will be provided with Maths, English and extra support needs
The government stated that it will continue to provide separate Maths and English support for apprentices. This will not come out of an employer’s levy fund and will be paid to the training provider.
Further support will also be given by the government to disabled apprentices and others with additional support needs.
7. Employers cannot use the levy to pay for agency training in 2017-18
Employers will only be able to use their levy funding to pay for training for their directly employed apprentices, not those employed through apprenticeship training agencies (ATA). Yet despite this, the government is considering allowing employers to transfer ten per cent of their funds to an ATA digital account from 2018 onwards.
This will mean that businesses will have to wait to be able to use their levy fund training in their supply chain.
8. Businesses are able to become training providers
Businesses are provided with the option of becoming a training provider, training their apprentices themselves via an internal training function.
However, in order to do this, employers will have to complete a number of quality and audit requirements that require high expertise, from entering a contractual agreement with the SFA to developing training content and materials. Entering the process also makes your business subject to inspections by Ofsted.
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