Levy FAQ’s

questions

  • The Government has a manifesto commitment to create 3 million Apprentices within the term of this parliament, by 2020.
  • Successive Governments have had a desire for larger employers to fund Apprenticeship training. As a direct tax, the Levy will ensure this happens.
  • The UK has significant skills gaps when compared with other developed countries; Apprenticeships are a key mechanism to address these skills gaps

The Levy will be a monthly tax set at 0.5% of payroll, payable by all businesses with a wage bill of more than £3M per annum (or £250K per month). The tax will be paid on all payroll costs which includes bonuses, commissions, pension contributions, but excludes any “benefits in kind” (defined as those subject to Class 1 National Insurance contributions). There will be a £15,000 annual allowance/deduction (£1,250 per month) and the payment will be topped up by a 10% Government contribution.

Your final Levy amount will be placed monthly into a Digital Apprenticeship Service (DAS) to be accessed by the you to spend on Apprenticeship training. The first payment will be taken in April 2017 and will be available to spend on Apprenticeship training from May 2017.

Many view Apprentices as primarily a young person in a new role, often doing a manual trade role, and called an “Apprentice”. For many Apprentices this is no longer the case. With the new Standards, Apprenticeship training is now available across the board for almost all occupations, ages and levels right up to Masters Degree. Existing staff do not become an “Apprentice” in the traditional meaning of the term, but do undertake Apprenticeship training to gain new skills and knowledge.

When planning your Apprenticeship Levy Strategy, the whole workforce should be considered, for the following:

  • Recruiting new talent into the organisation
  • Addressing retention issues in certain areas
  • Skills gaps within existing areas of the business
  • Improving leadership and management skills
  • Succession planning
  • Equality and diversity strategies
  • Technical and profession development
  • Creating Career Pathways “from shop floor to boardroom”

The Levy will be collected as a monthly deduction from your payroll. The first deduction will be on your April 2017 pay run and this will be placed in your Digital Apprenticeship Service (DAS) for use in May 2017.

You have 24 months to use the Levy. Any monies that are not spent after 24 months will be removed from your DAS monthly, with the first month’s money being removed. This money will be used to fund other organisations, including SME provision.

Each Apprenticeship qualification will have a “cap”; this will be the maximum the Government will fund as part of the Levy. Each organisation will agree a cost per learner for each Apprenticeship up to the level of this cap with the training provider they have chosen.

Employers will need to consider quality as well as cost when procuring Apprenticeship provision, much in the same way they do now for commercial training.

Once employers have agreed a price for the Apprenticeship programme payments will be made monthly to the provider(s). An allowance of 20% will be deducted from the cap to fund the End Point Assessment (EPA). For example, if a programme is 12 months in duration (the minimum) and a cost of £4,000 has been agreed then £267 per learner per month will be sent to the training provider from your online DAS with £800 held back until the end of the programme for the EPA. In planning the Levy spend employers need to take into account the agreed process, start dates, group cohorts and retention rates for each Apprenticeship programme being implemented.

Many existing in-house or commercial training programmes can be mapped to Apprenticeship programmes to enable the Levy to fund them. Where this is the case the Employer will either pay less for the elements delivered in house/commercially, or the Employer will receive payments back in return for the elements they deliver.

The Levy must be used for Apprenticeship training, delivered by a registered Apprenticeship Training Organisation from a Government approved list. You cannot use the Levy for Apprentice wages or management of the Levy. This is a significant issue to consider. Employing new Apprentices into new roles is a double cost for organisations paying the Levy as not only will you have to pay the Levy but also the Apprenticeship wages that the new roles will attract.

If you overspend the amount in your DAS then you will need to “co-invest”. However, the Government will fund 90% of the overspend, with the employer funding just 10%. For many organisations for whom the Levy does not cover the full amount of the Apprenticeship programmes they wish to deliver, the 90% Government subsidy offers an opportunity to provide a wide ranging programmes with a contribution of 10%.

The Levy will be deducted across the UK, but because education is a devolved function across Scotland, Wales and Northern Ireland the Levy funds raised will not all appear in the DAS. Instead the monies raised in Scotland, Wales and Northern Ireland will be sent to the devolved governments; who are responsible for policy on education, including Apprenticeships. Hence the money will be deducted, but not appear in the DAS. The devolved Governments have announced they will not use the funding as the English government has planned.

If your payroll fluctuates month on month; either because the business is growing, seasonal variations or due to payment of bonuses/commissions, then the amount being transferred to the DAS will vary as well. This can make planning to spend the Levy more difficult. If for example a Levy paying customer expects to pay £200K in to the DAS annually, but due to bonuses etc. £90K of this is in month 12, then only £10K per month would be being transferred into the DAS. If a programme was designed to spend the full £200K, spending £16.7K per month, then this would be a £6.7K overspend for each of the first 11 months, and the Employer would need to co-invest/contribute 10% of the excess.

Delivery of Apprenticeship training must be by a registered provider. Providers are registered by the Skills Funding Agency who follow a process to ensure they have the appropriate skills and capacity to deliver Apprenticeships. This list of providers will be available for Levy paying employers via the DAS.

Some employers of sufficient size may register to become Apprenticeship providers themselves. Becoming an Apprenticeship provider entails significant bureaucracy and subject to Ofsted inspection; which usually means that most employers do not wish to become delivery organisations themselves.

A major reform of the Apprenticeship landscape is being introduced with the introduction of the Levy. Previously any potential Apprentices who had a degree was ineligible for Apprenticeship funding. This exemption is being lifted with the introduction of the Levy, so from April 2017 employees with a degree can undertake Apprenticeship training, as long as it is in a different subject or is at a higher level. This means that managers with technical degrees can undertake management training, or employees in roles that are not relevant to their degree can be retrained and up-skilled into their new roles through Apprenticeship training.

The old Frameworks are currently being phased out as the new Standards become ready for delivery. The Standards have been specifically designed by employers to ensure staff develop the skills your business needs to drive success.

There are many new Standards that are in development and are being periodically released for delivery over the coming months.

Please visit www.gov.uk/government/collections/Apprenticesship-standards for an up-to-date list of those that are currently available and ready for delivery.