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Are you aware of the Apprenticeship Levy? If not, don’t worry, you’re in good company. The Levy was introduced in April 2017, coinciding with reform of the Apprenticeship system; yet many business leaders haven’t heard of it. Around 2% of UK businesses now pay the Levy; so what’s it all about?
Here we outline what the Levy is, what some of the new Apprenticeship Reforms are and why, if used well, the Levy could be a great opportunity to invest in your workforce.
What is the Apprenticeship Levy?
The Apprenticeship Levy came into force in England in April 2017 and is payable annually by companies with a wage bill of over £3 million. Levy payments are 0.5% of the company wage bill, and are made via the PAYE system. Monies are held in a digital account, to be used to purchase Apprenticeship training through accredited training providers. A variety of Apprenticeships are available, with costs starting at £1,500 and rising to £27,000 for those at the higher end, such as degree level Apprenticeships. The Government provides a £15,000 Levy allowance (meaning employers do not pay the first £15,000 of the Levy) and also tops up funds by 10%, giving employers access to more funds than they actually pay into the Levy.
Funds may be used to train 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 spend at least 50% of their working hours in England over the duration of the Apprenticeship.
16 to 18-year-old apprentices, and apprentices aged 19-24 who are care leavers or who have an Education Health & Care Plan, attract an additional payment of £1,000.
Companies with a wage bill of less than £3 million do not pay the Levy, but can still access support for Apprenticeship training. Depending on the size of company and age of the apprentice, Apprenticeship training may be free or may be supported by Government co-investment funding. Again, it’s been found that around 75% of smaller companies have either not used co-investment funding, or weren’t even aware of the scheme.
Please note: as apprentices are employees of your company, you are responsible for paying apprentices at least the minimum wage.
What are Apprenticeship Reforms?
The Levy and Apprenticeship Reforms were introduced by the Government to help hit its target of creating 3 million Apprenticeship starts in the public and private sectors by 2020. Reforms give employers more control over how they design, select and pay for Apprenticeship training, with Apprenticeships bringing returns of £26 – £28 for every £1 invested according to the Government.
• Alongside the Levy have come a new and improved type of Apprenticeship, called a ‘Standard’. Standards have been designed by employers and result in more meaningful and useful ways of learning within the workplace; learning that aligns more closely with the job itself.
• Those companies that have embraced the Levy, have placed a greater emphasis on their recruitment and development strategies. New talent is being properly nurtured, existing staff are being better catered for, and overall, the business is strengthening its talent pipeline.
• The Reforms and new funding system, have brought Apprenticeships to the fore. They are increasingly being seen as a more business focussed way for people to start building their career, and for employers to develop new and existing employees, improve productivity and competitiveness.
For those organisations who invest time to look at using their funding creatively, who get involved and think holistically about the benefits to their whole organisation, we think there’s a lot of scope to really help their apprentices fly.
We can help you make sense of the Apprenticeship Levy and what it means for your business. Simply contact us to find out more.
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