apprenticeship levy

Less than 2 months left, but do you know exactly what the apprenticeship levy is and how will it affect you?

On 6th April 2017, the government is introducing the apprenticeship levy. This requires all employers operating in the UK to invest into apprenticeships. Research undertaken by City and Guilds* claims a third of UK employers eligible to pay the apprenticeship levy are still not aware of it so let us help clarify what it is and how it might affect you.

Why is this being introduced?

With a target of 3 million apprenticeships by 2020, the objective behind it is to improve the quality and quantity of apprenticeships available in England. It’s not just the government that believes this will help bridge current skills gaps. Our research* with some of the UK’s largest organisations suggests that most employers agree that the apprenticeship levy will help address future skills gaps.

What is the apprenticeship levy and who needs to pay?

From 6th April 2017, employers with a payroll bill of £3million a year or higher will need to pay 0.5% of their annual bill towards the apprenticeship levy.

Employers with over 50 employees but less than £3m annual payroll bill won’t have to contribute to the levy, but will need to pay 10% towards the training (the other 90% of training costs provided by the government).

Employers with under 50 employees and less than £3m annual payroll bill will get 100% of the training cost funded by the government.

Who is eligible to apply for an apprenticeship?

The common misconception is that ‘apprenticeships are just for school leavers’. This inaccurate reputation along with lack of awareness have been the main barriers to uptake of apprenticeships until now. As per research conducted by Interserve*, only around 27% of parents think an apprenticeship would be useful in their children’s’ perusal of their career. However, many are still unaware that apprenticeships are available in a range of bands, some which are even up to degree level and worth up to £27,000. There is clearly work to be done in raising the profile of apprenticeships amongst young people and their parents. Even employers need to embrace apprenticeships which now offer the potential for them to ‘grow their own graduates’.

How will it work?

The levy contributions will be transferred monthly into a digital account specific to each employer. The fund can only be used towards apprenticeship training providers and cannot be used for other apprenticeship related costs such as apprentice wages, managerial costs, or the cost of setting up an apprenticeship programme. The employer will need to choose a training provider from a selected list but the price of the training can be negotiated with the provider so it’s worth asking.

The training provider will also receive a £1,000 incentive so they will also be working hard to promote apprenticeship courses in future.

Depending on the needs of the apprentice (e.g. has previously been in care or has a disability) there is further funding available for the employer to contribute towards the cost of the apprenticeship.

Levy contributions cannot be used towards training costs where the apprenticeships started before April 2017.

Offset allowance

Employers that qualify for levy contributions will receive a £15,000 allowance which will be deducted from their contributions. For example, if an employer has a £3,500,000 annual payroll bill:

0.5% of £3,500,000 = £17,500.

£17,500 minus the £15,000 allowance = £2,500 per to be paid towards the levy for that year.

Use it or lose it

The funds within the digital accounts must be used within 24 months if when it entered the account otherwise it’s lost.

Levy contributions can be used to develop existing staff members via an apprenticeship qualification, if they would be acquiring new skills or knowledge vs their current qualifications.

From 2018, employers that contribute to the levy will have the opportunity to transfer up to 10% of their levy funds to the account of another employer. Our research* highlighted that around 3/5 companies are already working collaboratively with other organisations so the levy could further encourage local companies to support one another in the development of their communities.

By Jay Thethi, Commercial Director


*Research conducted in December 2016 via an online survey of 92 organisations. 

*City and Guilds - "One-third of eligible employers not aware of apprenticeship levy".

*Interserve-"Lack of awareness main barrier for modern apprenticeships".


This entry was posted in Work placement, tagged Career tips, Recruitment and posted on February 21, 2017

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