From April 2017 the way the Government funds apprenticeships in England is changing. Large employers across all industries will be required to contribute to the new Apprenticeship Levy.
The Apprenticeship Levy is part of the Government’s plan to help fund a further £3 million new Apprenticeships by 2020. As a major commitment to increasing both the quality and the quantity of apprenticeships in England, the reforms will also give employers the opportunity to add to and influence the new apprenticeship standards by developing their own standards to meet their precise organisational needs.
- The Levy will apply to all large organisations with a payroll of over £3million per annum, regardless of whether they already employ apprentices or not.
- Employers will not pay the first £15k of the Levy, which means that the Levy will only be payable by companies with payrolls in excess of £3 million per year.
- It will be payable by employers at the rate of 0.5% of the payroll cost through PAYE alongside Income Tax and National Insurance.
- Public sector organisations will also pay the Levy if their payroll meets the above criteria and in addition, 2.32% of their workforce must be Apprentices.
- The levy will not affect funding for training apprentices who start their apprenticeship programme before 01st May 2017. You will need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.
Employers who pay the Apprenticeship Levy and provide Apprenticeships will be able to allocate their Levy contributions as digital vouchers to use to train their Apprentices. Employers will be allowed to spend their digital vouchers within a period of up to 18 - 24 months. All employers will also receive a 10% ‘top-up’ payment.
Non Levy paying employers:
- Employers that are not in scope to pay the levy will be required to pay a 10% contribution towards the costs of training apprentices.
- Employers with fewer than 50 employees (49 or less) will not be required to contribute towards training costs for 16-18-year-old apprentices.
- Employers who recruit a 16-18-year-old apprentice will receive a £1,000 payment to help with the cost of this.
Calculating what you have to pay:
To calculate how much Levy you will pay, follow these steps:
1) Work out what your total pay bill is.
Your pay bill is made up of the total amount of your employees’ earnings that are subject to Class 1 National Insurance contributions. Employees’ earnings include any money they make from employment, such as:
- Pension contributions
2) Work out what 0.5% of your total pay bill is.
3) Subtract the £15,000 allowance.
Here's an example:
An employer with an annual pay bill of £5,000,000 will need to spend £10,000 on the levy:
- levy sum: 0.5% x £5,000,000 = £25,000
- subtracting levy allowance: £25,000 - £15,000 = £10,000 annual levy payment
To find out more about the Apprenticeship Levy and to speak to our Apprenticeship team, contact us via email.