FAQs on the levy
What is the apprenticeship levy? An automatic deduction from the payroll of larger companies used to fund apprenticeship schemes. The Government is aiming to fund three million places for apprenticeships.
When will the levy be introduced? After plenty of speculation, it has now been confirmed that it will be implemented from April 2017. That means the first levy payments will be in May 2017.
Who will have to pay the levy? Employers whose total annual payroll is greater than £3m. That sounds like a huge figure, but if you only have 150 employees earning £20,000 each year (making the £3m sum), that means you will have to pay a portion of your wage bill into the levy fund.
How much has to be paid into the levy? Levy-paying employers will pay 0.5% of their payroll. The bottom line is the total amount paid by a company into the levy fund is 0.5% of its annual payroll over £3m. For example, a company with an annual payroll of £5m would pay 0.5% of £2m: a total of £10,000. The Government has created an online tool that calculates exactly how much you will need to pay and how much you will receive from the levy.
What happens to the money once the levy has been paid? It will go into an online account and the Government will provide a 10% top-up of the amount put into the fund every month. Through that online account, an approved training provider can then be purchased.
What can the levy be used for? It can be used to fund apprenticeship schemes for both new and existing employees.
Does the money in the digital account expire? Any funds and top-ups will disappear 18 months after they have first been put into the online account.
What about apprenticeships that start before the levy? They will continue under the terms that were in place before the levy’s introduction in April 2017.
What about businesses with a payroll less than £3m? If your payroll is less than £3m, you don’t have to pay the levy. In fact you will only have to pay 10% towards the cost of apprenticeships and the Government will cover the rest.
What this means in a nutshell
For employers with a wage bill of less than £3m a year, nothing has to be paid into the levy. However, training can be paid for through the same online training service and 90% will be covered by the Government. Meaning that the employer will only have to pay for 10% of training.
For employers with a wage bill of more than £3m a year, 0.5% of the payroll will be paid into a levy fund – regardless of whether it is used or not. The Government will put a 10% top-up of all money paid into that levy fund.
A video giving more information
How the experts say you can prepare
“Start looking at workforce development and identify what your business needs are in terms of staff and what skills are required. You can therefore identify which apprenticeship is right and how that fits into your levy contribution. We work with a group of training providers who we recognise as serving the industry particularly well and meet the needs of hospitality businesses. That can be viewed here.” – Annette Allmark, director of strategic policy at People 1st
“The best way to research providers is to look at the new Government website, which I think they're planning on launching at about the same time as the levy. Once that's available, any employer will be able to type in what they're looking for and training providers in their area will come up with key indicators, such as course completion rate.” – Jill Whittaker, managing director of HIT Training
The five things you need to know, according to People 1st
1. All businesses with a wage bill in excess of £3m must pay an apprenticeship levy from April 2017
2. The new standards define the skills, knowledge and behaviours required for a given job role
3. The training is not prescribed, so you can choose in-house or external programmes
4. You can use an external training provider or your in-house team to deliver the training
5. All apprentices will need to go through an end assessment to ensure they meet the standard
Further information online