The apprenticeship levy was introduced in April 2017 to create long term sustainable funding for apprenticeships and to give employers more control to provide their staff with a range of training opportunities.
Large employers with a payroll of over £3 million per annum are required to pay the levy set at 0.5% of their total payroll (with a £15k allowance) and is collected through PAYE. The vast majority of employers (around 98%) will not have to pay the levy.
Smaller employers – those with a total annual payroll of less than £3 million – will only have to pay 5% of the total cost of the apprenticeship, with the remainder being funded by the government, up to the funding band maximum for that programme.
Employers in England are able to reclaim their levy contributions as digital vouchers to pay for training apprentices. Funds expire 24 months after entering the digital account, if not spent on apprenticeship training. Any unspent levy funds within each financial year are then used to support existing apprentices to complete their training, pay for apprenticeship training for smaller employers and additional payments to support apprentices.
The digital account works on a ‘first-in, first out’ basis, so payments automatically draw from the funds which entered the account first.
Employers who pay the levy will receive a 10% top-up from the government towards monthly contributions. So, for every £1 an employer pays in, they can draw out £1.10 to spend on apprenticeship training through their digital account.
The cost of training depends on the type of apprenticeship being undertaken. There are 15 funding bands ranging from £1,500 to £27,000.
Government funding, either through the levy digital account or co-investment for non-levy payers, cannot be used to pay for apprenticeship costs above the funding cap.
Funds in the digital account will pay for apprenticeship training and assessment, according to the funding band with an approved provider/assessment organisation.
Funds cannot pay for wages, travel or subsidiary costs, managerial costs, work placements, traineeships, or the costs of setting up an apprenticeship programme.
Once the apprenticeship has started, monthly payments will be automatically taken from the digital account and sent to the provider. There must be enough funds in the account to cover the monthly cost of each apprenticeship that has been chosen.
From April 2021, the government extended the Apprenticeship Incentive Scheme and doubled the funding for taking on new apprentices.
Employers now receive £3,000 for new employees of any age who start an apprenticeship between 1 April 2021 to 30 September 2021. Additionally, there is now no limit on the number of incentive payments an employer can claim for apprentices eligible to receive funding.
These payments are in addition to the existing £1,000 payment that the government already provides for new 16-18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan (where applicable). Payments are made 3 and 12 months into the apprenticeship.
To receive these incentive payments, each apprentice must meet the stipulated eligibility criteria, including being a new employee, have a contract of employment and have not been employed by the organisation within the six months before the start of the contract. Employers must also set up an apprenticeship service account to apply for these payments.
With the exciting developments in apprenticeship standards, and incentives available to help towards costs, there has never been a better time to recruit and train an apprentice.
To find out more about how apprentices will benefit your business and how we can help you to maximise those benefits, contact our expert team today for a free consultation.Speak to a consultant