The Apprenticeship Levy came into force in April amid the confusion that often surrounds new Government initiatives. Some businesses see the levy as a form of tax on their provision of employment and while they complain about the unfair burden, fail to realise that they too can benefit from the scheme.
What is the UK Apprenticeship Levy?
The apprenticeship levy came into effect in April 2017; it is a mandatory tax which is paid directly to HMRC.
What is the purpose of the UK Apprenticeship Levy?
The government has an objective to boost UK productivity growth by investing in people. As a result the government is committed to increasing vocational skills through the delivery of quality apprenticeships.
The levy will contribute to the delivery of new apprenticeships and quality training with employers being the central focus. Employers that demonstrate a commitment to training through apprenticeships will be able to get more out more than they invest through increasing the number of apprentices.
What will the UK apprenticeship levy cost my business? Which companies must pay the apprenticeship levy? How does the levy work?
An employer with an annual wage bill exceeding £3m must pay a levy equivalent to 0.5% of the excess. For instance, a wage bill of £4m will result in a levy of £5,000 and an allowance of £15,000 to spend on apprenticeships. This allowance is topped up by 10% by the Government and held in a Digital Apprenticeship Service account for a maximum of 24 months. From the moment it enters your Business Digital Account the clock is ticking, after 24 months any unused funds is returned to the government for distribution.
Our wage threshold is less than £3m, what happens?
An employer with an annual wage bill below the threshold will not pay the levy and won’t initially have to use the digital service. From May 2017, they can use the National Apprenticeship Service to find approved training and assessment suppliers. The government will pay 90% of the costs with the employer contributing just 10%. For instance, an Apprenticeship fee of £9000 will cost the employer just £900.
All sizes of employer will be able to select an apprenticeship standard, choose training providers and assessors, and offer apprenticeship opportunities.
Who can the Apprenticeship Levy money be spent on?
The money can be spent a wide range of individuals from new recruits, trainees and existing employees. Anyone who has a requirement to increase skills for their role. There are no age or status restrictions, so money can be invested in those from new trainees through to director level.
Even those who have existing degrees or professional qualifications can be included. Many apprenticeships today include professional qualifications such as AAT, CIPS, CIMA, APM and more so there is never a better time to invest, there are many apprenticeship to choose from for all areas of your business.
Is the apprenticeship levy working?
Since the introduction of the levy there has been more money available than ever before for organisations to spend on apprenticeship training which allows employers to choose the apprenticeships they offer, the number and frequency.
The government report that the funding available in 2019-20 for investment in apprenticeships in England increased to over £2.5 billion, double what was spent in 2010-11 in cash terms. Since its introduction the levy has directly supported almost 313,000 people to start their apprenticeship journey. 
Can small medium enterprises (SME’s) take advantage of the levy?
The ESFA has given SME’s the opportunity to access any provider on the Registered Apprenticeship Training Provider list and utilise levy funding to support training which includes both new roles and the upskilling of existing employees. Employers will be able to create an account, reserve access to funding and choose a Registered Apprenticeship Training Provider of which SRSCC is a member.
The Education and Skills Funding Agency (ESFA) is keen to ensure the programme remains affordable. Consequently, it’s allowing individual employers to reserve funds for a maximum of three apprenticeship starts.
How do I access the levy money?
You will be required to register for an online digital apprenticeship account and sign an online contractual agreement with the Education Skills Funding Agency (ESFA) agreeing to their terms and conditions.
Who pays the apprentices?
The employer must pay apprentices at least the National Minimum Wage. There are different rates of pay for apprentices depending on their age and what year of their apprenticeship they’ve completed. The contract of employment should make it clear what wage you’ll pay your apprentice and for what hours.
If your apprentice is an existing employee, you would continue to pay them as per their existing contract.
You must offer apprentices the same conditions as other employees working at similar grades or in similar roles. This includes:
- paid holidays
- sick pay
- any benefits you offer such as childcare voucher schemes
- any support you offer such as coaching or mentoring
Employer incentive payments for hiring an apprentice.
Employers can claim incentive payments for Apprentices who joined their organisation from 1st August 2020. Employers can only apply for new apprentices who joined their organisations between 1 August 2020 and 30 September 2021. Organisations cannot apply for an existing employee who joined your organisation before 1 August 2020, even if they started an apprenticeship after this date.
Employers will receive £3,000 for new employees of any age who start their apprenticeship from 1 April 2021 to 30 September 2021. They can apply for these incentive payments for their apprentices from 1 June 2021.
For new apprentices who joined your organisation between 1 August 2020 and 31 March 2021 aged:
- 16 to 24, employers will receive £2,000
- 25 and over, employers will receive £1,500
- apply for these apprentices before 31 May 2021.
The payment is different to apprenticeship levy funds, so can be spent on anything to support an organisation’s costs. For example, on uniforms, apprentice’s travel or their salary. Plus organisation do not have to pay it back.
To apply you must set up an apprenticeship service account at gov.uk.
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