A while back I wrote an article outlining key Apprenticeship Levy info, however, in light of the new developments; this article provides an update and outlines the latest August 2016 proposals. I will edit this article with the latest facts when they are finalised and released post-consultation.
APPRENTICESHIP LEVY INFO – FAQS
DO I HAVE TO PAY THE APPRENTICESHIP LEVY?
98% of employers will not have to pay the levy. If your wage bill is less than £3,000,000 per year, then you will NOT have to pay the Levy. Any company paying in excess of this figure will indeed have to pay.
You can use this useful calculator tool to find out if your organisation will pay the apprenticeship levy, how much your organisation will have available to spend on apprenticeships and how much the government will contribute towards the cost of training: http://bit.ly/2aQtoYW
WHY ARE THEY DOING THIS?
Well, the purpose of the Levy is to bring to life the Government pledge to create three million apprenticeships by 2020. The main aim is to encourage businesses to employ more apprentices by issuing them with digital vouchers which will enable them to purchase training from a recognised provider of their choosing. By doing this, employers will have greater freedom and it will (in theory) increase competitiveness among training providers. Some FE professionals argue this may actually drive down quality instead – more on this later on in this article.
WHEN DOES THE LEVY START?
It has now been confirmed that the Apprenticeship Levy will be introduced in April 2017.
HOW MUCH WILL I HAVE TO PAY?
If you are eligible, the Levy will be set at 0.5% of an employer’s wage bill. However, this will be offset by a £15,000 tax-free allowance. This sounds a bit confusing, but for more apprenticeship levy info on this matter there is a BIS report on the Government website that provides some useful examples to clarify.
Employer 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
Employer of 100 employees, each with a gross salary of £20,000 would pay:
Paybill: 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
HOW IS THE LEVY COLLECTED?
The Apprenticeship Levy will be collected via Pay As You Earn (PAYE)
WILL THE LEVY PAYMENTS BE TAX DEDUCTABLE?
Any apprenticeship levy payment to HMRC will be allowable for Corporation Tax.
WILL MY BUSINESS HAVE TO CONTRIBUTE TO THE TRAINING COSTS?
This answer has to be broken down into two parts.
Businesses that DO NOT pay the Levy
The latest proposal is that these employers will have to pay just 10% of the apprenticeship cost, with 90% of apprenticeship training costs being paid for by the Government Levy funds. In addition, for small employers with fewer than 50 employees it has been proposed that the Government pays the full 100% of the training if the employer takes on 16- to 18-year-old apprentices or 19- to 24-year-olds formerly in care or who have an EHCplan. So if you employ a 19-24 year old who has not been in care, you will need to pay a 10% contribution. I will share examples of the proposed prices below, so you can get an idea of costs.
Businesses that DO have to pay the levy
Once you have declared the levy to HMRC you will be able to access funding for apprenticeships through a new digital apprenticeship service account. It is proposed that employers who have to pay the Levy (those with annual payroll bills over £3m) will get a 10% automatic monthly top-up. However, if their levy account is insufficient then like smaller employers, 90 per cent of their additional apprenticeship training costs will be subsidised. So for every £100 that enters your digital account to spend on apprenticeship training, you get £110.
SO I HAVE TO PAY 10%. GREAT. GOT ANY EXAMPLES OF HOW THIS WORKS?
Don’t worry, I’ve got you covered. Bear in mind these prices are currently just at proposal stage and may change. Il update this article when that happens. Basically all apprenticeship frameworks and standards starts from April 2017 will be funded from one of 15 bands, each with an upper limit ranging from £1,500 to £27,000. It will then be up to employers to negotiate prices with providers. This goes back to what I was saying at the start about driving quality down – employers will now be able to negotiate prices with colleges and providers, thus causing price wars and potentially compromising overall quality.
Here is an example of how this may work:
- Employer chooses apprenticeship in band 5 with a maximum price of £3,500
- Employer negotiates a price of £3,000 with their provider
- Government co-invests 90% = £2,700
- Employer co-invests remaining 10%= £300
- Employer and provider agree to spread this £300 in instalments or 1 single £300 payment.
SO HOW MUCH WILL EACH APPRENTICESHIP FRAMEWORK COST?
Currently the Government funds apprenticeship frameworks at different rates depending on the age of the learner. They are proposing to allocate each individual framework pathway to a single funding band, regardless of the age of the learner, or geographic location in order to simplify the process.
The Government website has released a handy tool to search for apprenticeship frameworks and reveal their maximum proposed funding. You can download the tool by clicking on this text.
To save you some time, I will show you some search results:
- Business Admin Level 2 = £2,000
- Customer Service Level 2 = £1,500
- Hospitality (Variety of disciplines) £1,500 – £2,500
- Accounting Level 3 = £2,000
- Sales & Telesales L2 = £1,500
- Retail Level 3 = £1,500
- Social Media L3 = £3,000
- Digital Marketing L3 = £4,000
- Warehousing L2 = £1,500
- Trowel Occupations = £5,000
- IT, Software, Web & Comms L2 = £3,500
- IT, Software, Web & Comms L3 = £9,000
Actually, while typing this up I realised this tool is much easier to use than the one above: https://estimate-my-apprenticeship-funding.sfa.bis.gov.uk/forecast/50000/NA/
WILL THERE BE ANY ADDITIONAL FINANCIAL SUPPORT?
It has been proposed that a £2,000 incentive is provided to help 16-to 18-year-olds, young care leavers and young people with an Education and Health Care (EHC) plan, make their first step into the world of work. This money will be equally split: £1,000 to employers and £1,000 to training providers.
The Apprenticeship Grant for Employers 16-24 (The AGE grant) will continue until the end of the 2016/17 academic year offering £1,500 support for eligible employers.
In October 2016 there will be information about apprentices starting from May 2017, including final levels of:
- government support
- additional support for 16- to 18-year-olds
- English and maths payments
- final detailed funding and eligibility rules
In December 2016 there will be information about further employer guidance from HMRC on how to calculate and pay the apprenticeship levy.
I WANT TO EMPLOY AN APPRENTICE, WHO SHALL I CALL?
We currently offer a FREE apprenticeship recruitment and consultancy service. As a recruitment specialist with a deep knowledge of apprenticeships, Manchester Staff Ltd is the perfect choice for local employers. We advertise across our premium channels and social media to get the most eyes on your vacancy, we then arrange enrolment with our College partners.
- Take a look at our advert reach: https://www.manchesterstaff.com/manchester-job-boards/
- Visit our website to learn more about our Free Apprenticeship service: https://www.manchesterstaff.com/employ-an-apprentice-in-manchester/
- You can contact me directly at firstname.lastname@example.org or visit us at www.manchesterstaff.com
For more apprenticeship levy info, please check out the sources we used to make this article. Sources used to make this Apprenticeship Levy Info Key facts article, do visit them for more information and detail: https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work http://fisss.org/wp-content/uploads/2014/05/Facilitator-toolkit-apprenticeship-standards-May2014.pdf https://www.gov.uk/government/publications/apprenticeships-proposals-for-funding-from-may-2017 http://feweek.co.uk/2016/08/12/levy-funding-update-released/ https://www.gov.uk/government/news/views-sought-on-plans-to-boost-apprenticeships Image Credit: pcruciatti Shutterstock.com Infographic designed using www.freepik.com