Changes to the system and how it could affect your business
A key reform to the Apprenticeship programme in recent years, has been the introduction of the Apprenticeship Levy in 2020.
Not all businesses will pay the Levy, in fact only some 2% of all businesses in the UK will have to pay it. However, if your business is not required to pay the Levy but you are still looking to recruit new Apprentices, or enrol some of your existing members of staff to the Apprenticeship programme, there are changes you will need to be aware of.
Our promise to you…
As always, McArthur Dean will provide a comprehensive support and guidance service to both Levy payers and Non Levy payers at no cost;
Our team will be able to consider your needs and provide you with a free training needs analysis designed in order to meet your requirements in a cost effective manner;
You will receive a free recruitment, selection and matching service, which will help you to find the right person to fill the vacancy available;
Your staff will receive quality training, which will deliver the high achievement rates our company is renowned for.
- How does the Apprenticeship Levy Work?
The Apprenticeship Levy is paid by large UK organisations across all industries with an annual payroll over £3 million, including public sector organisations. This is applied regardless of whether they employ Apprentices, or not. With this in mind, the government imposes a tax of 0.5% on every £ paid over the £3 million threshold and this is payable through PAYE alongside Income Tax and National Insurance.
Any business with an annual payroll up to and including £3 million does not pay the Levy. In essence, each employer receives an allowance of up to £15,000 to offset against any potential Levy payment. Please note, that this is not a payment, nor an allocation. It is merely an allowance which will ensure that any organisation with a payroll of £3 million, or less, will not have to pay the Levy.
Our promise to you...
As always, McArthur Dean will provide a comprehensive support and guidance service to both Levy payers and Non Levy payers at no cost;
Our team will be able to consider your needs and provide you with a free training needs analysis designed in order to meet your requirements in a cost effective manner;
You will receive a free recruitment, selection and matching service, which will help you to find the right person to fill the vacancy available;
Your staff will receive quality training, which will deliver the high achievement rates our company is renowned for.
- Levy Payers - The Process
Those employers who pay the Levy need to register on the Apprenticeship Service. The Levy payment is deducted at source by HMRC and then paid into the employer's account.
In addition to this, the government also pay a ‘top up’ payment into the account which is 10% of the Levy payment. The aim is that employers who commit to Apprenticeships will be able to get out more than they pay into the Levy, using the top up payments. Levy paying employers also receive a £1000 bonus for recruiting a 16-18 year old.
The employer will have to pay the Apprenticeship Levy for all employees living and working in the UK. However, the funds directed to their account and available to spend on Apprenticeship training will only relate to the employees living in England.
Once the Levy money arrives in the account, the employer is able to arrange Apprenticeship training. In order to do this, the employer can access a list of approved providers who are able to deliver the training required. Only approved providers will be able to deliver the Apprenticeship programme.
Each provider is able to provide details on the various Apprenticeships offered with the relevant costs, based on the training required for the different occupational areas and the respective pricing bands set by the government. If the final price agreed is higher than the relevant funding band for the Apprenticeship, the employer will have to pay the difference out of their own funds and cannot use levy funds.
Once the price has been agreed, the employer informs the Apprenticeship Service which provider they are working with and when the training will start.
Payments are then automatically paid to the provider on a monthly basis and split between the number of months required to complete the training. 80% is paid to the provider on a monthly basis from the account with the final 20% held back for completion.
If, during the course of the Apprenticeship programme, there isn’t enough money in the account to meet the agreed monthly payments, the employer will then have to act as a non-levy employer and pay 5% of the training cost. The government will pay the remaining 95%.
Our promise to you...
As always, McArthur Dean will provide a comprehensive support and guidance service to both Levy payers and Non Levy payers at no cost;
Our team will be able to consider your needs and provide you with a free training needs analysis designed in order to meet your requirements in a cost effective manner;
You will receive a free recruitment, selection and matching service, which will help you to find the right person to fill the vacancy available;
Your staff will receive quality training, which will deliver the high achievement rates our company is renowned for.
- Non Levy Payers - The Process
The vast majority of employers within the UK are not Levy payers.
Smaller employers - with fewer than 50 people working for them - will not have to make any contribution towards the cost of training a 16-18 year old Apprentice. However, larger non levy paying employers will have to pay 5% towards the cost of training a 16-18 year old Apprentice. The government will pay the rest of the cost (95%).
Any Non-Levy paying employer who wishes to train a 16-18 year old Apprentice will receive an incentive payment of £1000 towards the costs.
With regard to 19+ learners, all employers will be required to pay 5% of the training costs agreed. The government will pay the remaining 95% of the fees.
The payments will be made directly to the training provider.
Recent changes mean that businesses of all sizes now need to set up an apprenticeship account which will enable them to access government funding for Apprenticeship funding. If you need advice and guidance relating to the account and how to set it up please contact Julie Curtis on Hull 01482 307357 (julie@mcarthurdean.co.uk) and she will be happy to help.
Our promise to you...
As always, McArthur Dean will provide a comprehensive support and guidance service to both Levy payers and Non Levy payers at no cost;
Our team will be able to consider your needs and provide you with a free training needs analysis designed in order to meet your requirements in a cost effective manner;
You will receive a free recruitment, selection and matching service, which will help you to find the right person to fill the vacancy available;
Your staff will receive quality training, which will deliver the high achievement rates our company is renowned for.
- Questions & Answers
Can employers opt out of paying the Levy?
No - this is a mandatory tax which must be paid if the employer has a payroll of £3 million (and above) per year.
Who will pay the Levy?
The Levy is calculated on 0.5% of the payroll bill of all employees across the whole of the UK including Scotland, Wales and NI. However, employers will not pay the first £15k of the Levy. Therefore the payroll bill has to be £3m before an employer starts paying. That means that employers with around 150 employees could well pay the Levy.
How does the Levy work?
The employer pays the tax into their Digital Apprenticeship Service (DAS) account, which is then credited with that amount. They are then be able to draw the money down in order to pay for apprenticeship training. The government will ‘top-up’ the funds by 10%. Therefore if a company pays a £20,000 Levy they will have £22,000 in their virtual account to spend on the Apprenticeship.
As the Levy is taken monthly, is the Levy based on a £3 million annual or monthly payroll?
It is based on your monthly payroll. Therefore, any under or over payment of the levy is adjusted in the same way all tax calculations are.
When do you get the Levy back?
You receive an amount in your levy pot each month, which you can then spend on English apprenticeship training and assessment.
What if I don’t spend all of my Levy funds?
All employers will have 24 months in which to spend their Levy funds on apprenticeship training. Any unspent funds will then be reclaimed by the government.
How will the Levy work for the other UK nations?
The levy is collected across the UK and allocated depending on where each employee lives. The funds directed to the employers DAS account and available to spend on Apprenticeship training will only relate to the employees living in England.
How can I spend my Levy fund?
It must be spent on Apprenticeship training and cannot be spent on anything else, such as internal training.
What are the levels of funding for each Apprentice?
Each Apprenticeship programme is allocated to a funding band. We will be happy to explain the various levels of funding and how they relate to the apprenticeship training you require. Payments for English and maths and additional learner support will be separate payments made directly by the government to the provider.
Who can be trained under the Apprenticeship system?
Both existing employees and new recruits of any age can be trained under the Apprenticeship system. So you can use Levy funds to train your existing staff.
How do we maximise our Levy payment? Should we increase the number of Apprentices in our business?
In order to maximise your levy contribution, you will firstly need to calculate your levy ‘pot’ based on a 0.5% payment from your annual payroll. The number of apprentices you will be able to train using this 'pot' will vary depending on what programmes you choose to offer. Always consider if there are any skills gaps within your business where you are able to train existing staff via an apprenticeship.
We’ve read that employers in England who pay the Levy and are committed to Apprenticeship training will be able to get out more than they pay into the Levy through a ‘top up’ to their digital accounts. How will this work in practice?
Employers will receive a 10% top-up to their monthly levy contributions in England and this will be available for them to spend on apprenticeship training through their digital account.
How will the system work for Non-Levy payers?
Smaller employers that recruit 16-18 year olds will not have to make any contribution to the Apprentice’s training. In essence, employers with fewer than 50 people working for them will be able to access training for 16-18 year old apprentices at no cost. Other employers will pay 5% of the cost of the Apprenticeship training. The government will contribute the rest of the cost (95%). Any employer who recruits a 16-18 year old apprentice will receive a £1000 contribution from the government. With regard to 19+ learners, all employers will be required to pay 5% of the training costs agreed. The government will pay the remaining 95% of the fees. The payments will be made directly to the training provider.
How much do we pay Apprentices?
It differs, however the current minimum wage rate for an apprentice is £4.81 per hour. This rate applies to apprentices aged 16 to 18 and those aged 19 or over, who are in their first year of the apprenticeship. Apprentices aged 19 or over who have completed your first year must be paid at least the National Minimum wage for their age.
How long does my Apprentice have to spend on off-the-job training each week?
Following recent changes by the ESFA, Apprentices who work 30 hours, or more, per week must devote at least 6 hours of their working week to Off-the-job training as part of their Apprenticeship. For those learners working less than 30 hours per week, their off-the-job training will be calculated on a pro-rata basis.
Can a Graduate become an Apprentice?
Graduates will be able to undertake an Apprenticeship. This is on the understanding that the learner and provider can demonstrate that the training provided is different from the original degree studied but necessary for the learner to progress within their role.
Which training providers will be able to deliver the training for employers?
Those providers able to deliver the Apprenticeship need to be on the Register of Apprenticeship Training Providers (RoATP). McArthur Dean Training is a ‘Good’ Ofsted provider and is included on the current Register of Apprenticeship Training Providers.