Changes to Apprenticeships – FAQ
Apprenticeships are changing to further benefit employers, apprentices and the economy. The English Apprenticeships 2020 vision document outlines the Government’s plan to increase the quality and quantity of apprenticeships to reach commitment of 3 million apprenticeships by 2020.
What does this mean?
There are a number of changes planned to apprenticeship delivery in the UK, including the introduction of the apprenticeship levy from April 2017, which will help make apprenticeship funding more sustainable and improve the technical and professional skills of the workforce.
What is the apprenticeship levy?
From April 2017, employers operating within the UK, in any sector, with a pay bill of more than £3million per year, on which there is a liability to pay secondary Class 1 NICs, will be asked to pay the apprenticeship levy.
0.5% of an employer’s pay bill, on which there is a liability to pay secondary Class 1 NICs, will be collected monthly via PAYE. Employers (subject to connected companies rules) will have an allowance of £15,000, which means that the levy is only applicable on pay bill over £3 million.
|Example 1: Levy paying employer||Example 2: Non-levy paying employer|
|Employer of 250 employees, each with a gross salary of £20,000 would pay:||Employer of 100 employees, each with a gross salary of £20,000 would pay:|
|Pay bill: 250 x £20,000 = £5,000,000||Pay bill: 100 x £20,000 = £2,000,000|
|Levy sum: 0.5% x £5,000,000 = £25,000||Levy sum: 0.5% x £2,000,000 = £10,000|
|Allowance: £25,000 – £15,000 = £10,000 annual levy payment||Allowance: £10,000 – £15,000 = £0 annual levy payment|
Individual employers’ funding for apprenticeship training in England will then be made available to them via the digital apprenticeship service. Employers will be able to use their levy funds to pay for training and assessment for apprentices in England.
What is the digital apprenticeship service?
Whether you pay the levy or not, the digital apprenticeship service will help you to:
- Select an apprenticeship framework or standard
- Choose the training provider or providers you want to deliver the training
- Choose an assessment organisation
- Advertise and recruit to apprenticeship vacancies
More information about the levy has been published here.
What about employers who do not pay the levy?
Employers with a pay bill of less than £3 million will not pay the levy. The government will provide financial support for non-levy paying employers to take on apprenticeships, but these employers will be expected to make a small financial contribution to the cost of training and assessment in partnership with Government.
For a relatively small contribution, smaller employers can get significant benefits from employing apprentices. Research shows that many employers are able to recoup the cost of training within 1 or 2 years of training finishing and 82% of employers were satisfied with the programme and 70% reported that apprenticeships improved the quality of their product or service. Asking non-levied employers to pay a contribution towards the cost of apprenticeship training is only fair when larger employers are contributing towards the cost of their apprenticeships. It also helps put employers in the driving seat for influencing their choices and interacting with their training providers.
If employers do not pay the levy, they will not need a digital apprenticeship service account to pay the training provider, such as CWA, in April 2017. Non levy paying employers will agree a price and pay their co-investment to the training provider directly. Government will also pay its contribution to the provider directly.
How can I get more information?
Full details from the Government can be downloaded here.