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Large Levy Paying Employer

Apprenticeship Funding

As a large employer (with more than 50 employees and a pay bill of over £3 million) you will pay an annual Apprenticeship levy. The levy will be 0.5% of your annual pay bill. All employers have a £15,000 levy allowance which is why only employers with a pay bill of more than £3 million will pay the levy. Funds are taken via the PAYE system and placed in an Apprenticeship Service (AS) account. The Government will then give you a 10% top up, meaning you'll be able to access more funds than you pay into the levy. You can access the funds through your AS account to purchase Apprenticeship training for new apprentices and to develop existing employees of any age or position - including graduates - as long as there is a need for training and they live or work in England.

As a levy payer, you will pay the full cost of training an apprentice. Each Apprenticeship programme will fall into one of 15 ‘funding bands’ ranging from £1,500 to £27,000. Therefore the cost you will have to pay will depend on which funding band the Apprenticeship you wish the apprentice to do falls into.

If the apprentice is aged:
• 16-18; or
• 19-24 and is a care leaver or has a Local Authority Education, Health & Care Plan
... you’ll receive a £1,000 bonus per apprentice, paid in two equal instalments.

Please note: as apprentices are employees of your company, you are responsible for paying apprentices at least the minimum wage.

How much will our levy bill be?

Your levy bill will depend on your annual pay bill.

The Government levy calculator will help you find out what you will pay and below are 2 examples of how the levy is calculated.

Example A
Employer of 250 employees, each with a gross salary of £20,000
Pay bill: 250 x £20,000 = £5,000,000
Levy sum: 0.5% x £5,000,000 = £25,000
Allowance: £25,000 – £15,000 = £10,000 annual levy payment
Plus 10% Government top up: £10,000 x 10% = £1,000
Total levy amount to spend: £11,000

 

Example B
Employer of 1000 employees, each with a gross salary of £25,000
Pay bill: 1000 x £25,000 = £25,000,000
Levy sum: 0.5% x £25,000,000 = £125,000
Allowance: £125,000 – £15,000 = £110,000 annual levy payment
Plus 10% Government top up: £110,000 x 10% = £11,000
Total levy amount to spend: £121,000

What if we run out of levy funds but still want more apprentices?

Not a problem. You will revert to Government co-investment funding, where the Government will pay 90% of the Apprenticeship training costs and you will only pay the remaining 10%. You will still get the £1,000 incentive if your apprentice is aged:

• 16-18; or
• 19-24 and is a care leaver or has a Local Authority Education, Health & Care Plan.

 

This may mean that you receive more money back than you spend on Apprenticeship training.

For example:

Total cost of Apprenticeship = £5,000
Employer co-investment (10%) = £500 + VAT*
Government incentive payment for a 16-18 year old = £1,000
Employer gain = £500

*VAT may be recoverable if you are a VAT registered company.

How much will co-investment cost?

Each Apprenticeship programme will fall into one of 15 ‘funding bands’ ranging from £1,500 to £27,000. Therefore the 10% cost you will have to pay will depend on which funding band the type of Apprenticeship you wish the apprentice to do falls into.

The below example is for Funding Band 4

Total cost of Apprenticeship £3,000
Employer co-investment (10%)
(payable monthly by instalments)
£300 + VAT*
Maximum Government Co-investment (90%) £2,700

 

*VAT may be recoverable if you are a VAT registered company.

How long will the levy funds stay in my Apprenticeship Service account?

You’ll need to spend your Apprenticeship levy funds within 24 months of them appearing in your Apprenticeship Service (AS) account or you will lose them, so it’s worth planning how you’ll use your levy funds now to make sure you don’t miss out.

What are Apprenticeship levy funds transfers?

From April 2018 employers who pay the apprenticeship levy will be able to transfer apprenticeship funds to other organisations to pay for their apprenticeship training and assessment. They will be able to transfer up to a maximum of 10% of their annual funds, which will be calculated from the total amount of levy declared during the previous tax year.

Transfers are being brought in as a flexibility in the system in response to employer demand and should lead to the creation of more apprenticeship starts, allowing larger employers to spend some of their funding to help upskill the workforce of another employer, perhaps in their supply chain.

Levy-paying employers will be able to transfer funds to any employer and will have to agree the apprenticeships that are being funded by a transfer with the employer receiving the funds. Employers receiving transferred funds will only be able to use them to pay for training and assessment for apprenticeship standards and the transfer must cover the cost in full.

For more information go to the transferring apprenticeship service funds page on GOV.UK, read this blog on 5 tips for employers to get ready for transfers and take a look at this short video.

How do I set up my Apprenticeship Service account?

If you are a levy paying company, you will need to set up your Apprenticeship Service account by clicking here.  This will allow you to access your levy funds, add learners to your account and make payments.

If you are not sure whether you will need to pay the levy, please use the Government levy calculator to find out.

You can also follow @SFADigital on Twitter for the latest updates on the Apprenticeship Service.

What do I need to know when registering for the Apprenticeship Service?

Below are the Government’s answers to the top 5 questions employers ask when registering for the Apprenticeship Service.

  1. 1. Where do I get my Government Gateway details from?

As part of the registration process, you’ll need to enter the Government Gateway username and password associated with your PAYE scheme. This is so that we can link the amount of levy you’ve paid to your account. Depending on the size and complexity of your organisation, this might be more straightforward for some than others. The first thing to do is to talk to your payroll department. Hopefully, they should have access to the credentials and should be able to help you set-up the account.

If your payroll is outsourced, you might find that the Government Gateway account your agent uses is not suitable for use on the apprenticeship service. If this happens, you’ll need to set up a Government Gateway account before you can register. To do this, you’ll need your Accounts Office reference and your PAYE scheme number. Your agent should be able to provide you with this. You can find out more about setting up a Government Gateway account here. Doing this won’t affect the way you currently manage your payroll, your agent can carry on as normal.

If your payroll department or agents are worried about the security of the site or what information it might give you access to, the next question should give them some reassurance.

  1. 2. Is there any sensitive PAYE information visible in the account?

Once the PAYE schemes are linked to the account, the only information that is shown in the account is the amount of levy paid against the scheme. There is no access to any other payroll information within the account. The Government Gateway user name and password entered during registration can’t be accessed from the account, and they only need to be entered once during registration.

  1. 3. Should I set up one account or more?

That really depends on how you want to manage your levy. If you have more than one PAYE scheme, you can add them to separate accounts if you wish. The benefit of this is that you have a greater degree of separation between the funds, and it might be easier for you to manage if you have subsidiaries or areas of the business that are managed autonomously. The disadvantage is that you can’t move funds between accounts, so if you would prefer to manage your levy as one amount across all of your connected companies, it would be best to add them all to the same account.

  1. 4. Should I add my connected companies to my account or not?

To receive levy from your connected companies, you only need to add their PAYE schemes to the account. Whether or not you add your connected companies as legal entities to the account depends on how you contract with your training provider. Only legal entities who contract with training providers need to be added to the account. The legal entity that is named on the contract with your training provider should be added to the account under the ‘organisations’ section.

  1. 5. If I give staff in my connected companies access to the account, will they be able to see information from other connected companies?

At the moment, they will. There is currently no way to section your account to control spend or access against connected companies or sites, however we know that this is something employers would like, so we’re looking into how we could do this in the future.

 

How do I add apprentices and set up payments in my Apprenticeship Service account?

The Government will soon be adding a new piece of functionality into the Apprenticeship Service. This will enable levy-paying employers to add apprentices and set up payments to training providers.

The Government has recorded this video to take you through how the process will work and below are answers to the most common questions employers ask about adding apprentices and setting up payments in their Apprenticeship Service account.

1. How much administration will I have to do when setting up payments?

You can choose to do as much or as little as you like. To set up a payment, you’ll need to add apprentices to the account. You can choose whether you do this, or whether you would prefer to ask your training provider to do it for you. If you choose to hand it over to your training provider, all you’ll need to do is set up the request, and then approve the data when your training provider sends it back you. You can do this as infrequently as once a month or more frequently if you want to.

2. Should I give my training provider access to my account?

No, training providers will have their own access to the apprenticeship service and they’ll be able to add apprentice data for you from there. The apprentice data will then be sent back to you for approval.

3. What’s the deadline each month for adding apprentices to the service?

Your training provider will need to submit data about your apprentices to the Skills Funding Agency by the 4th working day of each month, and that data needs to match the data that you have approved on the apprenticeship service. You should talk to your training provider about a reasonable deadline to allow them to make sure the data is in order before the end of the month.

4. Which of my connected companies should I register my apprentices against on the service?

If you have more than one connected company registered to your account, you’ll be asked to select one of them as part of the process of adding the apprentice details to the account. The connected company you select should be the same as the company named on the contract with your training provider. The training provider will have to verify that the organisation on the contract is the same as the one approving the apprentice details on the service, so it’s important to make sure that this is done correctly.

5. Do I have to upload the contract between my organisation and my training provider?

No – whilst the agreement with the Skills Funding agency states that you must have a contract in place between your organisation and the training provider, this does not need to be uploaded on to the system.

Further information

This is the latest post in the Government series on the Apprenticeship Service. If you’d like to read more, you can sign up for email updates or follow @SFADigital on Twitter.