Are you ready?
In the Summer 2015 budget, the Government announced a new target of 3 million Apprenticeships over the next 5 years and the introduction of the new Apprenticeship Levy from April 2017 for large employers.
To support this the Government is making significant changes to the way Apprenticeships are funded.
But how exactly will it all work? We’ve pulled together below some of the key information which all Employers need to know before the Levy begins in 2017.
The Government will introduce the apprenticeship levy on 6 April 2017. If you’re an employer with an annual pay bill of more than £3 million, you’ll start paying the levy in May 2017.
Employers with an annual pay bill of more than £3 million will need to spend 0.5% of their total pay bill on the apprenticeship levy.
However, the Government are introducing a ‘levy allowance’ of £15,000 per year. This means that the total amount companies need to spend is 0.5% of their pay bill, minus £15,000.
Where several employers are connected as a group, they will only be able to use one £15,000 levy allowance. For more info visit the official Government site.
To calculate how much levy you will pay, follow these steps:
Each month, you will have to:
Any apprenticeship levy payment to HMRC will be allowable for Corporation Tax.
The Government will apply a 10% top-up to the funds you have for spending on apprenticeship training in England. We will apply the top-up monthly at the same time the funds enter your digital account. That means for every £1 that enters your digital account to spend in England on apprenticeship training, you get £1.10.
Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through a new digital apprenticeship service account.
Through the digital apprenticeship service all employers will be able to:
If you are an employer who pays the levy, you can also use the digital apprenticeship service to:
By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships.
The digital apprenticeship service will support the English apprenticeship system only.
If you don’t have enough in your account in a particular month, you will be asked to make a contribution to the extra cost of training and to pay this directly to the provider, rather than through your digital account.
If you are in a group of companies connected for the purposes of paying the levy, your group will be able to collect their funds together into one digital account.
Funds will expire 24 months after they enter your digital account unless you spend them on apprenticeship training with a training provider.
Funds in your digital account, and funding provided by the Government through co-investment, can only be used towards the costs of apprenticeship training and end point assessment. This must be with an approved training provider and assessment organisation.
It can’t be used on other costs associated with apprentices or wider training effort. For example wages, statutory licences to practise, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or the costs of setting up an apprenticeship programme.
The levy can be used to fund any type of Apprenticeship – you can either recruit new staff and train them through an Apprenticeship programme or you can up-skill existing staff to develop your workforce with higher level skills -
Developing existing staff often encourages them to become more productive, have higher morale, produce higher quality work and stay in their positions for longer.
The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017. You’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.
If you do not pay the levy, you won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least 2018.
The Government will ask you to make a 10% contribution to the cost of Apprenticeship training and they will pay the rest (90%), up to the maximum amount of Government funding available for that apprenticeship. You will have to pay this directly to the provider and you will be able to spread it over the life time of the apprenticeship. As both you and the Government make a payment, this is called a ‘co-investment’.
Every individual apprenticeship framework and standard will be allocated to a funding band. The upper limit of the funding band will cap the maximum price that government will ‘co-invest’ towards.