What is an apprenticeship?
An apprenticeship is a development programme undertaken alongside a job, including workplace learning, formal off-the-job training and End Point Assessment. Apprenticeships are open to anyone over the age of 16 including existing employees who are looking to develop their skills and experience.
Apprentices will gain the technical knowledge, practical experience and wider skills they need for their immediate and future careers through a range of learning, as well as the opportunity to practise new skills in a real work environment.
Apprentices must be an employee on the first day and last day of their apprenticeship, be paid above the minimum wage, have been a UK resident for at least the last three years and must work over 30 hours per week. The apprenticeship must last at least one year or more.
What does the apprenticeship levy mean in practice?
The levy applies to all employers operating in the UK who have a payroll bill of over £3m each year.
The levy will be 0.5% of an employer’s payroll bill, paid through PAYE.
The payroll bill will cover all employees across the whole of the UK including Scotland, Wales and Northern Ireland.
For the purposes of the levy, an ‘employer’ is someone who is a secondary contributor, with the liability to pay Class 1 Secondary National Insurance Contributions (NICs) for their employees. Although earnings below the secondary threshold are not counted when calculating an employer’s NICs, they will be included for the purposes of calculating the amount of levy the employer needs to pay.
The payroll bill (earnings) will include any remuneration or profit coming from employment, such as wages, bonuses, commissions and pension contributions on which NICs are paid. Levy will not be charged on other payments such as benefits in kind, subject to Class 1A NICs.
The levy will apply to ‘groups’ of companies but not franchises.
The levy payment will be allowable for Corporation Tax.
There will be a time limit of 24 months within which contributions can be spent. If not spent within this timescale, levy is returned to the government.
The levy can only be used to pay for the training and assessment of apprentices in England
How much will the apprenticeship cost?
Each Apprenticeship qualification has a funding band that the Government will fund as part of the Levy. Each organisation will agree on a cost per learner for each apprenticeship with the training provider they have chosen.
What if my company is a non-levy-payer?
If you have an annual wage bill under £3m, you will not be a levy payer. You are still able to take advantage of government funding for staff apprenticeships though. You can reserve up to 10 spaces each year for your employees, with the government paying 95% of the cost and the business paying just 5%. This equates to you paying approximately £16 per month per learner with the Government paying the rest.
How do I know if a learner is eligible?
To be eligible for funding, apprentices must (including but not limited to) have the right to work in England, spend at least 50% of their working hours in England and work for the employer or a connected company as defined by HMRC.
Levy funds can be used to fund an apprentice to undertake an apprenticeship at the same or a lower level than a qualification they already hold if the individual will acquire substantive new skills and the content of the training is materially different from any prior qualification or a previous apprenticeship.
Apprentices cannot be funded for other qualifications at the same time.
Funding for apprenticeship training can only be spent with an approved training provider included on the Government’s Register of Approved Training Providers (ROATP).
What can and can’t the levy funds be used for?
The funds in the employer’s digital account can be used for apprenticeship training and End Point Assessment for its own employees up to the limit of the funding band.
planned on programme assessment and end-point assessment and the costs associated with external quality assurance and certification
registration, materials, examination and certification where part of the apprenticeship programme
administration directly linked to the training, education and end-point assessment
How does the system work in other parts of the UK?
The levy applies to employers across the UK. The devolved nations (Wales, Scotland and Northern Ireland) are each responsible for their own apprenticeship programmes, including how funding is spent. The Apprenticeship Service therefore only supports the English apprenticeship system and the amount showing in the digital account will be how much an employer has available to spend on apprenticeship training in England.
For employers operating in one or more of the devolved nations including England, a calculation will be made based on data that is already held by the Government about the home address of an employer’s employees. This data will be used to work out what proportion of the pay bill is paid to employees living in England.
What if my payroll fluctuates?
If your payroll fluctuates month on month; either because the business is growing, seasonal variations or due to payment of bonuses/commissions, then the amount being transferred to the DAS will vary as well.
Can I use the levy with contract/agency staff?
There is nothing to stop apprenticeships being delivered to contract/agency staff. However, the minimum length of ANY apprenticeship programme is 12 months, and many are longer. Most contract/agency staff have much shorter placements, so are not suitable for apprenticeship programmes.