Apprenticeships in England are changing.
The apprenticeship reform programme aims to increase the benefits to employers, individuals and the economy by delivering more and better quality apprenticeships. Part of the reform includes the introduction of the apprenticeship levy in April 2017. The levy will lead to greater levels of investment in training and employers will be given more influence over how apprenticeships are designed and paid for. This will encourage employers to seek out high quality, relevant training that meets their needs.
Employers in all sectors will need to pay the apprenticeship levy if they have a pay bill of more than £3 million each year. In England, these employers will be able to access a new digital apprenticeship service that allows them to spend the levy they have paid on apprenticeship training. The vast majority of employers will not be eligible to pay the levy and these employers will continue to benefit from government support to pay for apprenticeship training.
We have compiled a list of frequently asked questions about the new apprenticeship levy below.
What exactly is the levy?
- The levy is a government tax of 0.5% for every employer with a pay bill of more than £3 million
- It will be collected by HMRC, directly via PAYE process
- There is a £15,000 allowance, similar to PAYE tax allowance
- No employer is exempt (including charities, colleges etc)
Why has a levy been introduced and how much will it generate?
When the government set a target of creating 3 million apprenticeship places by 2020, it was clear that a sustainable, long-term funding solution was needed to help the education and skills system better meet the needs of employers.
The new apprenticeship levy is expected to generate £3 billion by 2020.
How many businesses will be paying the levy?
According to HMRC data there are 22,000 businesses that will be subject to pay the levy
Business with 250 employees, each with a gross salary of £20,000:
Pay bill: 250 x £20,000 = £5,000,000
Levy sum: 0.5% x £5,000,000 = £25,000
Allowance: £25,000 - £15,000 = £10,000 annual levy payment
Business with 100 employees, each with a gross salary of £20,000:
Pay bill: 100 x £20,000 = £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000
Allowance: £10,000 - £15,000 = £0 annual levy payment (total amount of the levy sum is less than the £15,000 allowance)
The allowance is not an amount paid to an employer, it is a % amount of the allowed pay bill funding before the levy is due.
Will the government continue to fund apprenticeships for non-levy paying small employers?
The government is still discussing how apprenticeships will be funded for Small to Medium Enterprises (SMEs).
How will the money be collected?
The levy will be collected from employers monthly starting 6 April 2017 and will be held in a virtual account. The employer can earn back their levy by delivering apprenticeships, they may een be able to access more levy than they put in.
Is there a minimum or maximum age limit?
The levy can be spent on apprenticeships at all levels and all ages.
Will the 0.5% be taken from the total wage bill including bonuses?
It will be based on 'gross pay' which is basic salary & bonuses and will not include NI and pension contributions. A business' pay bill is calculated on total employee earnings (excluding all benefits in kind).
What can the money be spent on?
The levy can only be used on government approved apprenticeships. Therefore if the employer is not part of the Trailblazer relevant to their occupational areas, they may want to ensure that they are part of the consultation process as they may not be able to spend their levy if the resulting apprenticeship is not fit for purpose for their organisation.
How do employers access their levy?
The government is planning a Digital Apprenticeship System (DAS) that will be implemented in April 2017. Employers will have a virtual levy account showing the amount they can spend on apprenticeships. From August 2017, the DAS will enable employers to trigger payments by the Skills Funding Agency to providers that they have selected to deliver their apprenticeships. The system will provide details of approved providers/colleges in the employers local area, offering the desired apprenticeship. This allows the employer to approach the provider to negotiate funding and contributions.
What happens if an employer is unable to spend the full levy?
If an employer does not use all of its levy, the government will redistribute the funds elsewhere for apprenticeship delivery.
Can an employer's levy contribution be used to fund apprenticeships in their supply chain?
Employers will be allowed to use a % of their levy contribution to fund apprenticeships in their supply chain (although the % and details are still being worked on).
Can employers access the levy if they deliver their own apprenticeships?
The Skills Funding Agency (SFA) will only pay cash to organisations that are on the Register of Training Organisation (RoTO). Employers can apply to go onto the register but will have to meet all the SFA reporting and audit requirements along with all quality standards as defined by Ofsted and the Institute for Apprenticeships (IfA).
What about employers that are not based in England?
The levy will be collected based on the employers UK payroll. However, the levy can only be spend on apprenticeships in England. A proportion of the levy collected will be allocated to Scotland, Wales and Northern Ireland via the relevant administrations.
What happens for businesses that are part of a group?
If the group has separate payroll accounts (HMRC VAT numbers), then each organisation in the group will be treated as a separate payroll by HMRC. If the group has an overarching payroll then that would be treated as the one payroll for all companies in the group.
Will employers need to pay NI contributions for apprentices?
Employers will not have to pay NI contributions for apprentices under 25 years of age from April 2016.
What is the Institute for Apprenticeships (IfA)?
The Institute for Apprenticeships (IfA) is an employer led statutory body with responsibility for:
- Quality and approval functions in relation to apprenticeship Standards and Assessment Plans
- Wider quality assurance functions, including making arrangements for assessing the quality of the end point assessment for each apprenticeship
- Advising government of funding allocations per each apprenticeship Standards
What are the current Apprenticeship Frameworks?
The current Apprenticeship Frameworks were designed and developed by employers, Sector Skills Councils, Standard Setting Bodies, awarding organisations and training providers. They are referred to as SASE Frameworks (Specification of Apprenticeships Standards for England).
Frameworks are mad up of qualifications, each with a credit value. Learners can register for a pathway that meets the required number of credits for their framework. On completion, they will have the full set of knowledge, skills and behaviours to be fully compliant and productive in their sector job role.
The current apprenticeships are mostly assessed on an on-going basis through competency assessment.
Apprenticeship Frameworks are a minimum of 12 months. See the government website for a complete list of SASE Frameworks in England.
The government intends to phase these frameworks out by 2020 as the new Apprenticeship Standards are introduced.
Can the levy be used to pay for existing Apprenticeship Frameworks?
Yes, employers can use their levy to pay for existing Apprenticeship Frameworks until they are replaced with the new standards.
What are the new apprenticeship standards?
The new apprenticeship standards are defined by Trailblazer employer groups and relate to a specific role or occupation. The standard is a short (one/two pages) document that describes the level of knowledge, skill, and behaviours required to demonstrate full competence for the role. All standards are accompanied by a detailed assessment plan.
They require at least 12 months of training and will include assessment criteria and relevant qualifications.
Apprenticeship completion will be through an Independent End-Point Assessment rather than ongoing achievement.
What is a Trailblazer?
A Trailblazer is a group of employers that works to design new apprenticeship standards for occupations within their sectors.
Each Trailblazer group is supported by a representative from the department of Business Innovation and Skills (BIS), Professional Bodies, Training Providers and Awarding Organisations who can support the development of the assessment plans.
How can employers get involved in a Trailblazer?
Employers can contact the department for Business Innovation Skills (BIS) to find out if there is already a Trailblazer in place for their specific occupation, or, when one doesn't exist already, they can get together with 10 or more other employers (2 of which have to be an SME) to create a Trailblazer of their own. You can contact BIS directly at: firstname.lastname@example.org