Over the next few years, it promises to challenge the graduate recruitment model, empower individuals eager to learn, and perhaps even permanently change the structure of the workforce. It’s also a vague and somewhat baffling piece of legislation.
Since coming into effect on 6 April 2017, the Apprenticeship Levy has confused as many employers as it has excited. At heart, the new government scheme requires employers to take control over selecting their apprenticeship training provider. But depending on the size of your business, the Apprenticeship Levy will affect you in different ways.
Below we’ve answered some of the most popular and pressing questions:
Is my business eligible to pay the Levy?
All employers with a payroll bill of over £3 million will now be taxed 0.5% on that bill from 6th April 2017. There is a £15,000 funding allowance per year - this applies to all businesses whether you have a payroll of more or less than £3 million.
How will my contribution be calculated?
The Levy you pay will automatically be determined by HMRC’s Real Time Information and calculated on all employee earnings. Naturally, businesses will want to get a handle on expected outgoings so there are no shocks ahead of year end.
Here’s an example of how the contribution will be calculated
An employer with an annual payroll bill of £7 million would pay £20,000:
0.5% Levy of £7,000,000 = £35,000
£35,000 – £15,000 allowance = £20,000 annual payment
The Apprenticeship Levy draws in some businesses which might otherwise not have considered training. Some may still consider they don’t require it and choose to write off the Levy as a tax.
Either way, it’s not a particularly high figure for most eligible businesses to provide meaningful training. Fortunately, there’s more money to be accessed...
Will there be additional funding available?
Yes. When you pay 10% towards to the cost of apprenticeship training, the government will pay the rest (90%), up to the funding band maximum. This is crucial.
Investing £10 million translates to £90 million from the Government. This kind of opportunity doesn't come around often and has already completely changed the way many businesses view the Levy. Rather than pay a token amount towards training, or write it off completely, employers can access enough funding to make a significant impact on their workforce. This offer is also open to businesses which are not eligible for the Levy.
How long have I got to spend the money?
The funding amount will be transferred to a digital account specifically for your business and available from 1 May 2017. You will have up to 24 months to spend it. That’s why it’s important to get training provisions in place now to avoid missing out.
What can I spend it on?
Your funding can only be spent on accredited apprenticeship programmes. Each apprenticeship standard is being led by ‘trailblazers’, employer-led groups that are ensuring the standards are developed to their needs.
What do the levels equate to?
Taking management apprenticeships as an example: Level 3 corresponds to A Level. Levels 4 and 5 equate to the first and second year of an undergraduate degree, respectively. Level 6 is a full degree and Level 7 is equivalent to an MA.
Is that all I need to know?
The Levy is complex. We’ve only answered some of the most common questions here. There is a lot of subtlety and plenty of additional considerations for different businesses.