Apprenticeships have changed, with the introduction of an apprenticeship levy from April 2017.
The British Government is changing the way it funds apprenticeships in England from 6 April. All public and private organisations operating in the UK with an annual wage bill of more than £3 million will be required to contribute to the new levy.
The aim of the levy is to meet the Government’s pledge to create 3 million new apprenticeships by 2020.
How it affects organisations
The Department for Education confirmed recently that most employers will only contribute 10% to the cost of an apprenticeship from April. This means that the Government will pay 90% of the cost for 98% of employers whose annual wage bill falls below £3m. These reforms are particularly beneficial to small employers who continue to invest in their workforce through the apprenticeship scheme.
How the levy is calculated
The levy is charged at a rate of 0.5% of an employers total payroll bill. However, the UK Government will provide a ‘levy allowance’ of £15,000 to offset against this, as well as a 10% monthly top-up to the funds employers have for spending on apprenticeship training and assessments in England. This means that every £1 of levy collected will increase to £1.10 in value for funding for an employer operating in England.
Who has to pay
An employer’s total pay bill will be based on total employees earning subject to Class 1 secondary NICS. However, if your organisation is part of a group, you might find that you’re still liable to pay the levy, even if your individual organisation’s pay bill is under £3m. HMRC will collect the levy monthly via PAYE.
How payment is calculated
If the organisation’s payroll is over £3m, the levy contribution is 0.5% over that £3m, minus the Governement’s £15,000 allowance.
The Skills Funding Agency has created an online levy calculator to help employers work out what their levy contribution will be in the first year – found here.
Organisations with a pay bill of less than £3m
Employers with an annual pay bill of less than £3m will not be required to make any apprenticeship levy contributions. However, organisations operating in England will still receive government funding for apprenticeship training, and will need to pay in 10 per cent of the apprenticeship training and assessment costs – the Government contributes the remaining 90%.
For more information, guidance and advice on the apprenticeship levy, visit the government’s official website – found here.
What should I do now?
There are three key steps you can take:
- If you already have apprenticeship programmes up and running in your organisation, then you will need to calculate the amount of apprenticeship levy you will be liable to pay and see how this fits against the budget you have already allocated to apprenticeships. You might find that you will need to expand the amount of apprenticeship programmes you run in your organisation.
- If you don’t currently have apprenticeship programmes in your organisation but you do have an annual wage bill of £3m or more and will be affected by the levy, then this is an opportunity to assess how apprenticeships can drive your organisation forward in terms of performance and productivity. This is where it is useful to conduct a skills analysis – refer to our section on Apprenticeships for more information.
- Talk to the City of Liverpool College. We can help you manage different aspects of maximising degree apprenticeships in your organisation, so you’re not just spending the levy but you’re implementing apprenticeships in a meaningful way. There are many ways you can upskill and reskill your existing workforce and we can help you identify those opportunities. We also offer an end-to-end managed service and can help you all the way through the process.
The college is a leading provider of Apprenticeship training in the region
Providing high-calibre apprentices is our business. And we’re committed to meeting demand for skills in the city region’s growth sectors through apprenticeship programmes.
Apprentices inject energy, passion and fresh-thinking into a business. They provide a launch pad for careers and give young people their first taste of work.
We will help you to source work-ready apprentices with drive and an appetite to learn on the job, removing the stress of recruitment from your organisation.
Our dedicated recruitment team employs a wealth of industry knowledge and experience to help you advertise for candidates, sifting, pre-screening and arrange interviews on behalf of your business.
Always cost-effective, results driven and forward thinking we work across a broad range of sectors to provide tailored employer-led schemes.
We hand-pick the most promising apprentices for you – highly-motivated people who are eager to learn more.
Talk to us about developing an apprenticeship framework that will move your business forward.