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Apprenticeships Levy


There is a lot of concern around the apprentice levy that will come into force next year. Who will it effect, who can spend that money, will small businesses be forced to take on apprentices they neither need or want, and what about companies that can’t take on apprentices for one reason or another?

What is the apprenticeship Levy?

As a part of the government’s drive to ensure that the next generation of the workforce are skilled, they are changing the way that apprenticeships are funded and who pays for it. It’s estimated that the top 2% of businesses will be paying into a digital account, which will be topped up by the government, money held in that account has to be used to invest in apprenticeships.

The idea that large companies will have to invest in apprenticeships is far from new, with many major businesses already having apprenticeships in place, including many major manufacturing firms, building firms and many others. But in industries without a tradition of apprenticeships, there is a push to redress this balance.

Who will have to pay the Levy?

Companies with an annual salary bill over £3 million will have to pay the apprenticeship levy. This equates to around 100-110 employees based on the average UK salary, although obviously, one highly paid individual could find themselves over the threshold.

This is estimated to only be the top 2% of the businesses in England, and all that money can be used to invest in apprenticeships within the company.

How much will a company have to pay?

The formula is
(Wage bill x 0.5%) – £15 000
So if your wage bill is £5 000 000 per year you will pay
£5000 000 x 0.005 – £15 000 = £10 000

The wage bill is based on the amount of earnings that are subject to Class 1 secondary NICs. This means “Earnings include any remuneration or profit coming from employment, such as wages, bonuses, commissions, and pension contributions that you pay NICs on.

The levy allowance, the £15 000 that you offset against the 0.5% of your total bill, operates on a monthly basis, but unused allowance carries from one month to the next. So if you employ most of your staff in the run up to Christmas for example, you will be able to use your unused allowance to offset some of those costs.

There is a handy tool here to help you estimate your contribution to the apprenticeship levy fund.

This money will go into a digital account that you can use to pay for apprenticeship training. The government will also top up this digital account by 10%, adding an extra £10 to your training budget for every £100 you put in.

But my industry already pays into a training levy scheme.

You will still have to pay the apprenticeship levy fee as well. Several industry bodies are looking at changing the fees they already charge their members in light of these extra training costs. However, as things stand if your business pays a wage bill over £3 million, you will be subject to the levy.

What if my wage bill isn’t even close to the £3 million minimum?

Not only will you not have to pay the Apprenticeship Levy, but you may also be eligible for grants up to 90% of the costs of training apprentices. There is also an extra £2000 available for those taking on 16-18 year olds and young care leavers. Contact us to discuss this in more depth as the amounts available vary from location to location with the Greater Manchester Combined Authority and Liverpool City Region having devolved powers to control their own grants. Some of the funding is still gained via the Skills Funding Agency.

I have to pay the apprenticeship levy, what can I spend the money in my digital account on?

This money is for training costs, whilst the details are yet to be released, in general, the money that you will pay a training provider can come out of the apprenticeship levy fund, but not wages, travel cost, or other incidentals that are involved in training an apprentice. Contact us for more details and to discussion your exact situation and how we can help you to take on new apprentices, and to upskill existing staff.

Contact Us Main

  • Apply for an Apprenticeship

    We work with a lot of employers in different sectors. Please fill out the form and indicate your preferred type of apprenticeship and we will call you back to discuss. Call 0161 82 11 802 to speak with us.