WHAT IS THE APPRENTICESHIP LEVY?
The Levy was put into place on the 6th April 2017 to create more funds for Apprenticeships. As a business, or just a curious young learner/parent, if you haven’t already heard of The Levy, it’s not as complicated as it may seem! Whether a company pays into a levy account depends entirely on the business’ annual payroll. Businesses who will be obliged to pay into a levy digital account will only be those with an annual payroll of £3m plus. This works out monthly at £25,000. The Levy is deducted monthly and also is only a small percent of the annual payroll, currently at 0.5%. All employers hiring Apprentices will have to pay for Apprenticeships either through the levy pay bill tax or through a co-investment cash contribution.
WHAT CAN I SPEND THE LEVY ON?
As you may have guessed, levy funds are to be used on Apprenticeships. The courses must be done through a government approved training and assessment provider such as NowSkills (hint!).
Your funds can be used for Apprenticeship programmes called “Standards”, delivered by government approved Apprenticeship training providers. NowSkills currently have a selection of standards on offer, with a range of level 3 and 4 IT Apprenticeships. All of our programmes offer industry-recognised qualifications, our level 4 standards offer training up to university foundation level.
WHAT CAN I NOT SPEND THE LEVY ON?
It is specifically designed to fund Apprenticeships. Although many may consider additional costs besides training part of the Apprenticeship, there are a selection of things in which the funds cannot be spent on. Also, the Apprenticeship Levy funds cannot be used for:
• Travel and subsidiary costs
• Work placement programmes
• Managerial costs
• Statutory licenses to practice
• The costs of setting up an Apprenticeship programme
HOW IS THE IT CALCULATED?
Employer of 250 employees, with an average gross salary of £20,000
Salary bill: 250 x £20,000 = £5,000,000
Levy entry point: = £3,000,000
Therefore Levy payable on £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000
= £10,000 annual levy payment
On top of your Levy funds, the government will also offer a 10% top-up to employers.
Employer has £10,000 annually entering their levy account Monthly account funding = £1,000
10% x £1,000 = £100 Levy monthly account increase: £1,000 + £100 = £1,100
= £11,100 annually to spend on Apprenticeships
Employer of 100 employees, with an average gross salary of £20,000
Salary bill: 100 x £20,000 = £2,000,000 Levy entry point: = £3,000,000
= £0 annual levy payment
DO I HAVE TO SPEND THE LEVY FUNDS?
Businesses do not have to spend the funds, although they expire within 24 months of entering your digital account. So guys, you can either use it or lose it! Hiring an Apprentice can be very beneficial to a business. Not only will you save money, but you will be building up a potentially valuable future employee. From our Apprenticeship programmes, young learners are able to gain skills and experiences which are becoming more crucial within businesses to keep up with modern technological advances. Furthermore, many businesses are now struggling to find employees for these roles as the skills gap is taking its toll. Take a look at our current standards on offer to see how they could benefit your business,
HOW WILL THE LEVY BENEFIT ME OR MY BUSINESS?
The levy is considered to be very beneficial to both businesses and also young learners. This was set up in target of having an additional 3 million Apprenticeship starts by 2020. Also, by having more Apprenticeships, it aims to increase vocational skills and the quality and quantity of the programmes. Also, it is believed that due to this, in consideration of the current skills gap, by completing an Apprenticeship, it will increase the potential wages for the learners, as the skills they will develop are very desirable within the industry, and also for businesses, it is set to increase profitability.
WHAT IF I SPEND MY LEVY FUNDS?
Additionally, each Apprenticeship Standard has a funding cap – you can spend less than the cap with your levy, but not more. If you spend all of your funds, you will then be moved into the co-investment band that is required to contribute 5% towards the cost of the programme. Additionally, the other 90% will be paid by the government. Also, at NowSkills, this amount does not have to be paid in full. We can arrange an instalment plan to be taken out of your account monthly by direct debit in ten instalments. If there is another way you would like to pay your co-investment, please get in touch with our team today to discuss possible payments.
Overall, still looking for more info? Why not give us a call?