Apprenticeship Levy

All employers operating in the UK, with a pay bill over £3 million each year pay a levy to make an investment in apprenticeships.

The apprenticeship levy is a monthly made by employers to the Treasury. Employers can recoup their funds by employing apprentices. If the employer chooses not to spend the levy on apprenticeships during 24 months after payment, their levy contribution will not be returned to them.

Apprenticeship Levy FAQs

 

The levy is an investment to workforce skills and it incentivises employers to take on apprentices. Employer investment in training has been in decline since late 1990’s and roughly third of employers don’t train their staff at all.

The TUC believes that the levy is a helpful way to motivate employers to take responsibility of paying for training their staff and make workforce development plans that include apprentices.

Yes, the TUC and the unions have long campaigned for bigger employer investment in skills. However, trade union support for the levy or other apprenticeship reforms is not unconditional. We believe that there should be an emphasis on quality rather than quantity.

For further information about the high-quality standards, which should underpin apprenticeships please view the Apprenticeships Toolkit.

Yes. Private sector, public sector and third sector organisations will have to pay the levy, where their pay bill exceeds £3 million.
Employers pay the levy at a rate of 0.5% of payroll from the point where their payroll exceeds £3 million.
There is a £15,000 fixed annual allowance for employers to offset against their levy payment.
They calculate, report and pay their levy to HMRC, through the Pay as You Earn (PAYE) process alongside tax and National Insurance Contributions (NICs).
The levy can be used to fund apprentices aged 16 and over. Apprentices can therefore be new entrants to the workforce or existing staff.

While trade unions have generally welcomed the introduction of the apprenticeship levy, we also recognise that it will throw up some additional, potential, challenges.

  • Unions and employers have suggested that there may be a detrimental impact on wider workforce training, as employers will have to make mandatory levy payments. However, many employers may not be offering any workforce training so the levy can motivate them to do better. The TUC believes that the apprenticeship levy will incentivise employers to take on apprentices. It is an opportunity for employers to take a hard look at their training provision. It is also worth viewing the levy in the context of wider tax cuts for employers. For example, the corporation tax rate has been cut from 28% to 18%. Furthermore, employers don’t have to pay national insurance for apprentices under the age of 25.
  • Employers with a pay bill of over £3 million pay the levy. The pay bill size is based on the earnings of employees. Therefore, the earnings of workers on casual contracts, such as agency workers or zero hours contracts will not count towards an employer’s pay bill. The TUC is concerned that employers may seek to restructure their workforce to avoid levy payments. For example, employers may seek to shift employees on permanent contracts into more flexible forms of employment.
  • Public sector unions have expressed concerns that already constrained public sector budgets could decrease further as a result of levy payments. For example, it has been estimated that the NHS will have to contribute £190m per year in levy contributions. To recoup this, they would have to take on around 42,000 apprentices and the NHS is anticipating not being able to recoup a significant amount of levy funding.
Yes. A levy paying employer can transfer up to 25 per cent of the annual value of funds entering their digital levy account to other employers.
Some industries already operate levy systems, or other collective training arrangements. Employers who use existing mandatory levy systems, such as construction and engineering construction, will also have to contribute to the national apprenticeship levy.
The government will pay the costs of level 1 and level 2 English and maths provision for apprentices directly to the learning provider, up to an amount of £471 for each qualification.

The levy applies to employers across the UK. However, apprenticeships are a devolved policy, which means that authorities in each of the UK nations manage their own apprenticeship programmes, including how funding is spent on apprenticeship training.

Levy payments via the Digital Apprenticeship service will only be able to be spent on apprenticeship training in England. The DAS will support the English apprenticeship system. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.

To calculate how much funds will be available to an employer to spend through the English system, the government uses data that it already holds under the PAYE system about the home addresses of employees. The government uses this data to work out what proportion of the pay bill is paid to employees living in England and levy funds distributed to the DAS account will be adjusted accordingly.

Employers can use their funding (up to a cap which will depend upon the standard or framework that is being trained against) to cover the costs of an apprentice’s training, assessment and certification. The costs of apprenticeship training and end point assessment can be paid for an approved training provider and assessment organisation.
This funding cannot be used for other costs associated with apprentices or wider training effort, e.g. wages, statutory licences to practise, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or the costs of setting up an apprenticeship programme, overheads, supervision costs or apprentices’ wages.
The new apprenticeship funding system has 30 funding bands, with the upper limit of these bands ranging from £1,500 to £27,000.
Each apprenticeship falls into a funding band. The upper limit of each funding band caps the maximum amount of digital levy funds an employer who pays the levy can use towards an individual apprenticeship. It is up to employers to negotiate prices with providers, within these funding limits.
If an employer has not paid the levy and would like to train an apprentice, the government will cover 90 per cent of the training and assessment costs. This means that the employer has to cover the remaining ten per cent of these costs.
Also, employers with fewer than 50 people working for them are able to train 16-18-year-old apprentices without making a contribution towards the costs of training and assessment. Instead, the government pays 100 per cent of the training costs for these individuals, up to the funding band maximum. This also applies to apprentices aged 19-24 who have previously been in care or who have a Local Authority Education, Health and Care plan.
Yes, as long as the proposed apprenticeship will allow the apprentice to acquire substantive new skills, and the content of the training is materially different from any prior training or previous apprenticeship, then the employer could fund this apprenticeship.