The levy has been designed to fund all Apprenticeship delivery and will be calculated on 0.5% of the payroll bill of all employees across the whole of the UK including Scotland, Wales and Northern Ireland. However there will be a £15,000 allowance for Levy payers meaning that employers with a payroll bill of less than £3m will not pay the Levy at all. In broad terms this means that employers with around 150 reasonably paid employees will pay a Levy.
There are currently two systems of payment for Levy and non-Levy employers. Non-levy employers will have access to a government contribution of 95% towards training in most cases.
All employers delivering Apprenticeships for their staff must register for a Apprenticeship Service (AS) account. This will track the amount of funds in the account and how much is therefore available for their Apprenticeship delivery, as well as helping employers to decide on which standard will suit their employees best, and to select providers to deliver them.
Levy payments are calculated on annual payroll. The Levy is collected on a monthly basis, based on ‘live’ HMRC payroll data. It includes all directly employed employees but not contractors. It includes all directly employed employees but not contractors and payments made through payrolls but not ‘benefits’. It applies to ‘groups’ of companies but not franchisees. HMRC sets out the rules and collects the Levy.
Levy payments will be available for expenditure by levy payers for up to 24 months from the time that they reach the apprenticeship service account.
Levy paying employers can transfer up to 25% of their levy to support apprenticeship training in other organisations.
In England, levy funding can only be used for the funding of English Apprenticeships at workplaces within England (The devolved nations may make other arrangements). The employer will pay the tax and the AS will be credited with that amount, plus a 10% government ‘top-up’. Levy funding can be used to fund starters on frameworks and standards.
Levy payers who use up the funding within the AS account will be able to continue to recruit Apprentices but will pay 10% of the agreed price with the provider. The remaining 90% will be paid by the government.
Employers will negotiate a price with the provider for the Apprenticeship to be delivered. Each apprenticeship is allocated to one of 30 funding bands, which range from £3,000 to £27,000.
Employers are free to negotiate prices above the funding cap given above, but any amount above the cap cannot be funded using levy (AS) money and must be funded in full by the employer under a separate agreement.
English and math qualifications will be paid directly to the provider – this will not be deducted from the employer’s AS account.
Payments will be made to the provider from the employer’s AS account on a monthly basis. 80% of the payment will be available for as long as the Apprentice is studying – if they stop studying, the payments must be stopped by the employer in a timely manner. The remaining 20% is held back as a completion payment in recognition of the fact that costs of End-Point Assessment (EPA) may be proportionately higher than the rest of the Apprenticeship. The 20% is released on completion of the Apprenticeship. (N.B. Only Apprenticeship completion is required – not achievement for standards.)
Apprenticeships are a devolved matter which means that each nation is responsible for how their share of the levy is spent. Because the tax is collected by HMRC, the UK government therefore has to allocate the levy take between the four devolved nations. This will be done on the basis of residency of workers. If, for example, 80% of a workforce lives in England and 20% lives in Wales, then 80% of the employer’s levy account will be made available in the (English) AS system for expenditure on Apprenticeships. The remaining 20% will be allocated to the Welsh government.
However the expenditure of money from the English AS account will only depend on the workplace of the employee. In other words, using the example above, an employer who has a worker residing in Wales but working in England will be able to use AS funds for them to follow an English Apprenticeship.
Where an employer has used up their levy funds, they may continue to recruit Apprentices but must pay a co-investment rate. This means they will pay 5% of the cost of the Apprenticeship and the government will fund the remaining 95%. This is the system that will be used for non-levy payers and is explained in more detail below.
If an employer agrees a price for an Apprenticeship that is in excess of the funding band cap for that standard, then the employer must pay the full amount in excess of the cap.
Any company with less than 50 employees that recruits a 16-18 year old Apprentice will not make any contribution towards the cost of their training from the AS account or elsewhere
Additionally, any 16-18 year old Apprentice will attract an additional £1000 payment to both the employer and the provider towards the extra expenses incurred in training Apprentices in this age group. These amounts will be paid across two instalments at months 3 and 12 of the Apprentice’s study. This will not be deducted from AS accounts.
Levy contributions made remain in scope for 24 months from the date at which they reached the AS account. Before such time they may re allocate up to 25% to other employers.
Learners who are 19-24, and who have previously been in care, or who have a local authority Education, Health and Care (EHC) plan – broadly speaking, learners with special needs, or learning and physical difficulties – will attract additional payments of £1000 to both the provider and the employer, payable in two equal instalments at months 3 and 12 of the Apprentice’s study.
If such learners are employed as Apprentices by SMEs employers (up to 250 employees), then the government will pay 100% of the training costs for these individuals.
Additional learning support arrangements will be delivered by the training provider.
As for levy paying employers you will need to set up an AS account and reserve funds prior to the start of the apprenticeship.
As with the levy system, non-levy paying employers will negotiate a price for the Apprenticeship, bearing in mind the banding caps referred to earlier. The employer is then liable for 5% of this price, and the remaining 95% will be paid to the employer by the government.
The provider will have to evidence that the employer has paid their contribution before any government funding is released to them.
English and maths costs will be paid at an additional rate directly to the provider.
All organisations that deliver apprenticeship training must be on the Register of Apprenticeship Training Providers (RoATP). Providers on RoATP are monitored for funding compliance and quality in delivery via the relevant government departments.
The latest progress reports for apprenticeship and traineeships can be found here. The report details starts, participation and achievement.
The register of apprenticeship training providers lists organisations that are eligible to train apprentices and receive government funding to do so. Follow the link for more information: https://www.gov.uk/government/publications/register-of-apprenticeship-training-providers
The latest funding rates for apprenticeship standards can be found here.
For the latest information in relation to the apprenticeship levy can be found in the link below. If you have any questions, contact the Forum for more information.