FAQs: The Apprenticeship Levy
From its very definition to how it can affect your business, you’ve probably spent countless hours researching the apprenticeship levy looking for answers. Don’t worry, you’re not alone.
To help, our Employer Partnership Manager Amanda Fulljames has answered some of your most commonly asked questions about the apprenticeship levy.
1. What is the apprenticeship levy?
In short, the apprenticeship levy is a tax used to fund your apprenticeship training. It is only paid by employers with an annual payroll in excess of £3 million.
The levy is set at 0.5% of your total pay bill. It is collected monthly via PAYE and accumulates throughout the year. You’ll be given a 10% top-up to your monthly contributions which is paid directly into your Digital Apprenticeship Service account.
But that’s not all. After starting your levy payments, you’ll receive a £15,000 fixed allowance, to spend however you wish. So in fact the total amount you pay only equates to 0.5% of the element above £3 Million.
2. What can my levy funds pay for?
Your levy funds can only be used to pay for apprenticeship training and assessment costs charged by your training provider and end-point assessment organisation.
Your funds can’t be used to pay your apprentices’ wages, travel and subsistence costs, managerial costs, work placements or the costs of setting up your own apprenticeship programme.
3. What happens to my levy funds if I don’t spend them?
If you don’t use them, you’ll lose them. Your levy funds will ‘expire’ on a month-by-month basis two years after they enter your account unless you spend them on apprenticeships. Unspent funds are returned to the government as tax.
4. Do I have to hire new staff, or can levy funds be used on existing employees?
Apprenticeships aren’t just for teenagers, and the same applies to your levy funds. You can use your funds to offer apprenticeships to either new or current staff of all ages. And with over 450 different standards at a variety of levels to choose from, ranging from entry to degree level, there are plenty of opportunities to develop either your new recruits or existing workforce.
5. Do I have to pay the full cost of an apprenticeship upfront? Can I afford it?
You’ll make monthly payments to your training provider throughout the lifetime of the apprenticeship. This means you don’t need to worry if you can’t meet the full cost of the apprenticeship upfront, as you only need enough funds to meet the monthly payments.
This method makes apprenticeships a much more affordable option than you might think!
6. How much will an apprenticeship cost?
The truth is there’s not a universal cost to apprenticeships. Each apprenticeship standard is placed into one of 30 funding bands ranging from £1,500 to £27,000. These bands determine how much can be spent on each apprenticeship through your monthly contributions.
Don’t worry if you’ve exhausted your levy funds before covering the cost of the apprenticeship training - additional support is available through government ‘co-investment’. This scheme means the government will now pay 95% of any outstanding costs (up to the maximum for the relevant funding band) so you only have to ‘co-invest’ the remaining 5%.
7. Are there financial incentives for employing 16 – 18-year olds?
Yes. If you choose to employ a young person aged 16 – 18 you’ll be given an extra £1,000 towards your fixed allowance. These extra funds are payed in two chunks during the apprenticeship, at three and 12 months.
You can also receive an extra £1,000 for employing an apprentice aged 19-24 if they have learning needs or come from a disadvantaged backg round.
8. What if I don’t need my full levy entitlement to cover the cost of apprenticeship training?
After paying for your apprenticeship training, you might have some funds left over. Don’t worry, these aren’t wasted. Following a reform in April 2019, you can now transfer your spare funds, up to a maximum of 25% of your total funds, to companies outside your group structure. The gives you an opportunity to support companies in your supply chain or other strategic partners, ultimately benefitting your business.
9. What if no relevant apprenticeships exist to suit my training needs?
New apprenticeship standards are continually being developed, and your training provider should be able to help you identify the ones that best suit your training needs and adapt these to your business. But if you still can’t find a suitable apprenticeship you can form a trailblazer group to create your own standard.Trailblazer groups are formed of employer representatives within a specific industry, who pool resources together to design and develop a new standard that benefits their businesses.
You can find out more about creating your own trailblazer group by visiting the Institute for Apprenticeships & Technical Education website.
10. Do I have to use an external provider or can we deliver training ourselves?
As an employer you have the choice of utilising an external training provider or delivering apprenticeship training in-house as an employer provider. Of course both methods have obvious benefits, but it really comes down to your business and its individual needs. If you’ve got the resources in-house to manage an apprenticeship programme and successfully deliver the required training, this might be your preferred option. However, there are also many benefits to utilising a trusted training provider such as Seetec.
11. We have employees in Scotland, Wales and Northern Ireland. Can we use the levy to train employees in devolved nations?
No. If your business is based within a devolved nation, your funds are collected by the devolved administrators and used to support chosen apprenticeship schemes. Your business will benefit from the funding, but you’ll be unable to access funds directly to support the cost of apprenticeship training.
12. I don’t pay the levy but want to hire an apprentice, what do I do?
If your pay bill is less than £3 million and you don’t pay the apprenticeship levy, you can still invest in apprenticeships through the government ‘co-investment’ scheme. This scheme means you pay just 5% of the total cost of the apprenticeship, while the government pays the remaining 95%.
Still have questions about the apprenticeship levy? Contact Amanda or another member of our team today.. Or join our LinkedIn group to stay up-to-date with the latest news, articles and resources on the apprenticeship levy.