Apprenticeship Levy Update

In May 2017 the way the Government funds apprenticeships in England is changing. Some employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers. A key aim of the levy is to encourage businesses to take on apprentices or alternatively, upskill their existing staff through an apprenticeship.

With the clock ticking away to the introduction of the levy, now is the right time for organisations to review their current apprenticeship programmes, consider the implications of the levy, changes to funding and consider how to maximise the opportunity and minimise the risk.

The Facts

  • The government is reforming the way Apprenticeship Training is handled moving all emphasis from Training Providers, Colleges and Awarding Bodies and placing control of the process into the hands of the employers
  • The apprenticeship levy will be introduced to employers who have an annual payroll in excess of £3m, with the first payment due in May 2017 at a rate of 0.5% paid through Pay as You Earn
  • The Government will top up levy by 10% each month
  • The levy will apply to employers across all sectors regardless of whether they already employ apprentices or not
  • Training can either be given to new recruits or existing staff
  • All employers will receive an allowance of £15,000 to offset against payment of the levy
  • Employers who pay the levy and are committed to apprenticeship training will be able to get more than they pay into the levy as the government will top up 10% to their digital account each month
  • The levy will need to be paid by larger organisations regardless of whether they reclaim funds to purchase apprenticeships
  • Smaller companies can still take advantage of available Government funding, which will include an employer contribution to the cost of apprenticeship training
  • Creation of an Institute of Apprenticeships to oversee the regulation, design and delivery of apprenticeships overseen by a board made up primarily of employers
  • A Creation of a Digital Apprenticeship Service (DAS) for employers to simplify the process of finding apprentices and training providers

How much will I pay?

For employers paying into the levy, it will be charged at a rate of 0.5% of their pay bill.

All employers will receive a £15,000 fixed annual allowance to offset the levy payment.

Examples:

Below are some examples of how much employers may have to pay for the levy:

Employer 1:

1,000 employees, each with a gross salary of £20,000

Annual pay bill: 1,000 x £20,000 = £20,000,000

Levy applied: 0.5% x £20,000,000 = £100,000

After allowance applied: £100,000-£15,000 means £85,000 levy payment

Employer 2:

500 employees, each with a gross salary of £20,000

Annual pay bill: 500 x £20,000 = £10,000,000

Levy applied: 0.5% x £10,000,000 = £50,000

After allowance applied: £50,000 – £15,000 means £35,000 levy payment

Employer 3:

100 employees, each with a gross salary of £20,000

Annual pay bill: 100 x £20,000 = £2,000,000

Levy applied: 0.5% x £2,000,000 = £10,000

After allowance applied: £10,000 – £15,000 means no levy payment

To help employers see how the levy and funding system would work for them, the government has created a new online calculator. The simple to use tool will enable employers to understand how much levy they will pay and how they could use their digital funds to pay for training in future.

What does the levy mean for SMEs?

Non-levy paying businesses (around 98% of all businesses) will only have to contribute 10% of the costs of an apprentice’s training, with the government paying the remaining 90% through a new ‘co-investment’ model.

The government are encouraging businesses to help 16-18 year olds, young care leavers and young people with an Education and Health Care (EHC) plan. If you take on an apprentice who meets this criteria, you will receive a £1,000 incentive payment to help meet the extra costs of employing them.

Companies with fewer than 50 employees will not have to pay anything towards the cost of training 16-to 18–year-old apprentices.

Useful Links

Please refer to the links from the Skills Funding Agency to presentations on you tube around the the changes to funding, the Levy and the new Register of Apprenticeship Training Providers.

 

Next Steps

We are happy to talk to you to discuss how these changes will impact your business and work with you to plan for your current and future training needs.  For a free consultation please contact the Business Development Team on 01788 892058 or email employers@tqtraining.co.uk

Levy Update – Key Points

For more detailed information on how the Apprenticeship Levy will affect you download our latest employer factsheet.

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