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Everything you need to know about the apprenticeship levy

Written by Paula Devine | 05 Jun 2018

Are you a business benefiting from the apprenticeship levy?

Perhaps you are an SME with an annual bill of less than £3m. Or perhaps as a business, you have a significant skills gap within the enterprise.

In either case, there’s no denying the relevance of the apprenticeship levy.

Since April 2017, the apprenticeship levy has been mandatory for UK employers with an annual pay bill of £3m or more, and it supports the Government’s promise of 3 million new apprentices by 2020.

The levy is calculated as 0.5% of the annual pay bill, and subsequently collected by HM Revenue and Customs. These funds can then be accessed by employers through an online digital service account to cover the cost of any apprenticeship training.

The government will then contribute an additional 10% top up as the money is added to the online account, meaning for every £1 that enters the account, an additional 10p top-up will follow.

By 2020, it is expected that all employers will be able to use the digital apprenticeship to pay for the training and assessment for apprenticeship.

How does the levy work?

The purpose of the levy is to give authorities in each of the UK nations ownership of their apprenticeship and training programmes. The funding is available to help with the training of apprentices and encourage workforce development within businesses, while giving opportunities to those who might not be able to access the training and education required to further their careers, for example, GCSEs and MBAs.

A non-levy for SMEs

Since the levy is calculated as 0.5% of the annual pay bill, for smaller businesses with an annual pay bill of less than £3m, there will be no levy. So how does apprenticeship funding work for SMEs?

SMEs can take advantage of the non-levy by receiving 100% of training funds for apprentices between 16-18 years old from the Government. For apprentices aged 19 or above, employers will be expected to pay 10%, with the remaining 90% covered by the Government. As an additional incentive, employers with less than 49 staff will receive a £1,000 lump sum towards apprenticeships for taking on someone between 16-18.

Furthermore, all unused levy funds will be used to fund apprenticeship training for SMEs. It is expected that the £2.5bn raised by the levy for training in England will stretch to cover all employers with apprentices regardless of their size.

Why recruit an apprentice?

Now’s as good a time as any to make full use of the levy and incentive scheme.

If you’re looking to grow your workforce, expand your internal skills or have a vacancy that needs filling, an apprentice could be the most viable option. Not least because the types and levels of apprenticeships are abundant, but with the availability of training providers, the programmes can be tailored to meet the needs of your individual business.

Ranging from level 2 (GCSE) through to level 7 (MBA), the diversity across the types and levels of apprenticeships is incredibly vast.  

Apprentices can also be used by those already within the business wishing to move up the ranks and enhance their existing skills, whilst contributing increased value to the business. For example, an administrative assistant may wish to progress into a HR role, and the apprenticeship levy can be used to support this.

The account can be used to receive levy funds for your apprenticeship, manage your apprenticeships and pay training providers. If the levy is something you are yet to consider, we are happy to guide and advise you through the process. Alternatively, we can put you in touch with the relevant bodies to help kickstart the training programme.

Are you already reaping the benefits of the levy, or do you have an example you’d like to share of how the levy has helped your employees? We’d love to hear from you. Comment below and tell us about your experience.

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Paula Devine

Written by Paula Devine

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