The apprenticeship levy, which came into effect on 6 April 2017, was brought in to plug the gap in funding for apprentices.The Government had promised 3 million new apprentices by 2020, and this promise could only be realised with additional finance.
Who has to pay the levy?
The levy applies to employers in England, who have an annual pay bill above £3 million. The pay bill is defined as employee earnings subject to Class 1 secondary NICs.
How is the levy calculated?
The levy is 0.5 per cent of the annual pay bill.
All employers will receive a £15,000 annual allowance, to be offset against the bill. This effectively means that employers with an annual pay bill of £3 million or less pay no levy.
How does the levy work?
The levy will be collected by HM Revenue and Customs monthly through Pay as You Earn (PAYE). It can then be accessed by employers through an online digital service account.
Employers can use the online digital service to pay for apprenticeship training for apprentices that work for at least 50 per cent of their time in England, which will be limited up to certain maximum funding bands. When the apprentice training starts funds (in the form of vouchers) will be taken from the account.
The Government will top up the account by 10 per cent monthly. Employers will lose the vouchers if they don’t use them within 24 months.
Guidance on how to pay the levy can be found at Gov.UK.
What about apprenticeship funding for businesses that do not have to pay the levy?
Employers not paying the levy with less than 50 employees, who offer apprenticeships to 16 to 18 year olds, can receive 100 per cent of the cost of the training from the Government, up to the maximum funding bands. Employers not paying the levy with less than 50 employees, who offer apprenticeships to 19 year olds and over have to pay 10 per cent of the cost of the apprenticeship training and the Government will pay the remaining 90 per cent, up to the maximum funding bands.
Employers not paying the levy with 50 employees or more, who offer apprenticeships have to pay 10 per cent of the cost of the apprenticeship training and the Government will pay the remaining 90 per cent, up to the maximum funding bands.
For non-levy businesses there is also a new £1000 incentive towards apprenticeships for taking on someone aged 16 to 18.
I have written an article on this topic which was published in the Independent.
If you need any advice on apprenticeships or have queries relating to other employment law issues please call 0203 797 1264.