The greatest shake up of Apprenticeships and how they are funded in England is fast approaching. Consultations with employers and the education sector have taken place, education ministers and even Prime Ministers have come and gone - it is full steam ahead with Apprenticeship reform.
What is the Apprenticeship Levy and what does it mean for business?
From April 2017, the way the Government funds Apprenticeships in England is changing. The Apprenticeship Levy will require all UK employers with an annual pay bill over £3 million to make an investment towards apprenticeships.
If you are an employer, in any sector, with a pay bill of more than £3 million each year you will be charged a levy at a rate of 0.5% of your annual pay bill. You will pay the apprenticeship levy to HM Revenue and Customs through the PAYE process and will only be able to use the funds you contribute for Apprenticeships within your organisation or supply chain.
How much will businesses be paying?
The Government gives all employers a levy allowance of £15,000.
- Levy Calculation Example 1
If you are an employer with an annual pay bill of, for example, £5 million, then you would have an annual apprenticeship levy payment of £10,000:
- 0.5% Levy x £5,000,000 pay bill = £25,000 levy to pay
- £25,000 - £15,000 levy allowance = £10,000 annual levy payment
- Levy Calculation Example 2
An employer with a pay bill of £20 million would have an annual apprenticeship levy payment of £85,000:
- 0.5% Levy x £20,000,000 pay bill = £100,000 levy to pay
- £100,000 - £15,000 levy allowance = £85,000 annual levy payment
What happens after businesses have paid the Apprenticeship Levy?
Once you have paid the levy to HMRC through the PAYE system you will need to register for an online Digital Apprenticeship Service account. This will allow you to access your levy money to pay for training and assessment for apprentices.
The Digital Apprenticeship Service will help you both plan and manage the spending of your levy fund and contact organisations like Ascento who can provide and deliver your Apprenticeships.
So in a nutshell, the Apprenticeship Levy is a mandatory 0.5% levy taken through the current PAYE system that you can only access to spend on apprenticeships.
Ascento's regular blog posts will address questions like:
- How will I know how much my company has to pay?
- What exactly is the Digital Apprenticeship Service?
- How much do Apprenticeships actually cost when you ask training providers to deliver them?
- How can I create an Apprenticeship Levy implementation strategy that gives my business a real return on my levy investment?
If you can’t wait, contact us now.