The Apprenticeship Levy has been introduced as part of the government’s plan to deliver 3 million new Apprenticeships by 2020 and create the workforce of tomorrow. As a major commitment to increasing both the quality and the quantity of Apprenticeships in England, the government is putting the control in the hands of Employers around the country.
As one of the UK’s leading and largest providers of apprenticeship and vocational training, Raytheon Professional Services (RPS) is well placed to support you to maximise your return on investment from the levy.
Many businesses are still unaware of the levy or have little understanding of how it will work or use their levy. Don’t worry, we are here to help you.
The Levy will be calculated, reported and paid to HMRC through PAYE process alongside tax and National Insurance Contributions
If you have a payroll of 250 employees, each with a gross salary of £20,000.
Paybill: 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, that can be used towards training an apprentice with an approved Apprenticeship Provider.
Employer of 2,000 employees, each with a gross salary of £25,000.
Pay bill: 2,000 x £25,000 = £50,000,000
Levy sum: 0.5% x £50,000,000 = £250,000
Allowance: £250,000 - £15,000 = £235,000 annual levy payment, that can be used towards training apprentices with an approved Apprenticeship Provider.
Example of how to spend your Levy:
Employer employs an apprentice and chooses an apprenticeship in Band 12 (£18,000). The apprenticeship chosen has a duration of 3 years.
The employer facilitates that the approved provider is allocated £4,800 per year from their levy funding to pay towards the delivery with the Apprenticeship Provider. The final 20% which is £3,600 is paid via the same method once the apprentice is approved to take their End Point Assessment.
Employers who are not eligible to pay the apprenticeship levy will be able to access government support and funding for their apprentices (subject to eligibility) via an approved apprenticeship provider.
Employers with no levy pot (or those that have run out of levy) will need to make a contribution (called co-investment) to the cost of training and the government will pay the rest, up to the maximum funding cap.
This co-investment contribution will have to be paid direct to the training provider. The government has set this employer contribution at 10% of the total cost with the government funding the remaining 90%.
Example of how to fund an apprentice:
Employer employs an apprentice and chooses an apprenticeship in Band 10 (£12,000). The apprenticeship chosen has a duration of 3 years. Your approved training provider draws funding directly from the government for 90% of the £12,000. This equals £10,800. The remaining 10% (£1200) is a mandatory co-investment contribution from the employer. The total amounts are spread over the agreed 3 years.
To support smaller employers, the government has confirmed that employers with fewer than 50 employees will not have to pay anything towards the cost of training a 16 to 18 year old apprentice (or for apprentices 19 to 23 years old who have been in care or who have an Education and Health Care (EHC) plan).
If they employ a 19+ year old. The mandatory 10% still applies.
Enquiring about Government top-up & incentives
Apprentices aged between 16 and 18 (at enrolment) will attract an incentive payment of £1,000 to the employer. This will also be payable for apprentices 19 to 23 years old who have been in care or who have an Education and Health Care (EHC) plan.
The government has confirmed that it will apply a 10% top-up to the monthly funds entering levy paying employers' digital accounts. So for every £1 entered through the levy the government will add £0.10. E.g. £10,000 levy fund will become £11,000.
If you employ an apprentice below the age of 25, you are no longer be required to pay employer National Insurance contributions for them.
Example: If you were paying a wage to a none apprentice of £20k per year the employer would be eligible to pay £1,597.44 in National Insurance.
However if this person was on an approved apprenticeship scheme the employer National Insurance bill would be £0
Key Facts – what you need to know:
- Employers cannot use their levy towards training that is not approved as an Apprenticeship Standard or Framework.
- Employers cannot use the Levy funding to pay for wages, travel and lodgings.
- Only providers registered on the Register of Approved Training Providers (RoATP) will be able to deliver training (for both levy and non-levy payers).
- Your apprenticeship provider may charge additional to the funds generated by the system. This will be to cover training that is considered outside of the apprenticeship and often above the normal requirements.
- If your apprentice needs Maths or English training your training provider will draw funding for this directly from the government and will not be using your Levy pot.
- The Levy will apply to all large organisations with an annual payroll of over £3million per annum, regardless of whether they already employ Apprentices or not.
- It will be payable by employers in the UK at the rate of 0.5% of the payroll cost through PAYE alongside Income Tax and National Insurance.
Looking for advice?
RPS is strongly committed to encouraging apprenticeships and operates several successful schemes. We specialise is designing bespoke programmes that can meet your needs.
If you are looking to develop your apprenticeship and levy strategy, RPS can arrange a consultancy session with one of our apprenticeship levy experts. They will go through the background to the levy, provide estimates on your liability and advise of potential apprenticeship pathways from across our portfolio of qualifications.
Our experienced and knowledgeable team is on hand to answer all of your questions.
More information on the Apprenticeship Levy can be found on the Government website using the links below:
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