The UK Government wants more people in apprenticeships. Over the past few years, there have been various campaigns to emphasise the benefits of hiring an apprentice, but the biggest bonus has to be on the budget. The apprenticeship levy was created in 2017, as a way to encourage employers to invest in apprenticeships.
The apprenticeship levy is paid into by companies that have a wage bill of over £3 million. If you don’t qualify for the apprenticeship levy, there are still a variety of funding options; see below where we’ve set them out. The apprenticeship levy is for England only; Scotland, Wales, and Northern Ireland all have their own funding arrangements.
Introduced in April 2017, the apprenticeship levy requires all employers with wage bills of over £3 million to pay 0.5% of that total into a levy fund. This money can then be spent only on apprenticeship training but can be used for either new or existing staff.
HM Revenue and Customs take these payments on a monthly basis through PAYE. Employers can then access their funding through the Digital Apprenticeship Service by creating an online account. Employers have 24 months from the time of payment to spend this levy before it is absorbed by the Government. To further encourage apprenticeships, the government will top up any payment by 10%, meaning for every £1 put in, employers can draw out £1.10. The government will also offset the levy by £15,000.
Let’s take a company with 200 staff, on an average salary of £20,000
Salary Bill: 200 x 20,000 = 4,000,000
Levy: 0.5 x 4,000,000 = 20,000
Employer Pays: 20,000 – 15,000 = 5,000
Funds Available: 5,000 + 10% = 5,500
Companies with a salary bill with less than £3 million do not contribute to the Apprenticeship Levy. However, that doesn’t mean that hiring an apprentice isn’t an option. Instead, the Government will fund 95% of the apprenticeship cost, leaving the company to pay the remaining 5%. Register with the Digital Apprenticeship Service to reserve your funding.
As an additional incentive to small businesses, any company with fewer than 50 employees who hire an apprentice aged 16-18 will have the course 100% Government funded, as well as receiving a bonus £1000 payment. So apprenticeships are cost effective, no matter the size of the company.
Levy Underspend 2017-18
Employers who don't understand the levy
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