PCS – Quality Training in the Heart of Birmingham

Levy or
Non-Levy?

Introduction

In April of 2017, an Apprenticeship Levy came into effect, causing large businesses to view Apprenticeships as viable and financially beneficial training opportunities. The introduction of the Levy then split businesses into two distinct groups:

Levy

The scheme comes into effect when a business earns an excess of £3 million a year, requiring them to pay 0.5% into a digital fund reserved purely for the training of apprentices within the business.

You can use Digital Funds and Government Funding for:

Apprenticeship training and assessment against an approved framework or standard with an approved training provider and assessment organisation up to the maximum of that Apprenticeship funding band.

You can’t use Digital Funds and Government Funding for:

The Levy is paid directly to HMRC through the pay-as-you-earn (PAYE) process. Funds are accessible through the online apprenticeship service but will expire after 24 months. At this point, any amount that remains unspent will go back to HMRC. If an employer can’t spend their full Levy fund, they can transfer 25% to other employers.

Calculating Payment

You will have a levy allowance of £15,000 per year to offset the Levy you must pay. This allowance will operate every month and will accumulate throughout the year.

Example of what you will pay:

A business with an annual revenue of £5,000,000:

Levy sum: 0.5% x £5,000,000 = £25,000

Subtracting Levy Allowance: £25,000 – £15,000 = £10,000 annual levy payment

This scheme only supports Apprenticeships in England. Apprenticeship funding is a devolved issue so, each of Scotland, Wales, and Northern Ireland have their own arrangements for supporting employers to access Apprenticeships.

Non-Levy

Employers with a payroll of less than £3 million a year are exempt. From April 2019, at least 95% of the apprenticeship training and assessment costs will be paid for by the government, with the employer making a 5% cash contribution directly to the provider.

What a fantastic investment!

The government recognises that smaller employers have historically played a vital role in helping young people enter the world of work. For employers with 49 staff or less, the government will fund 100% of each Apprenticeship if this training is for young people aged 16 to 18. In addition to this, they are extending this offer to small employers who take on a 19 to 24-year-old Apprentice who was formerly in care or has a Local Authority Education, Health and Care plan. For people aged 19+, the government will fund 95% of the training as mentioned above.

Funding

Every individual Apprenticeship will have a funding band. The upper limit of the funding band will cap the maximum price that the government will co-invest towards. An example of how this might:

  1. Employer chooses Apprenticeship in band 9 with a maximum price of £9,000
  2. Employer negotiates a price of £8,500 with their provider
  3. Government co-invests 95% = £8,075
  4. Employer co-invests remaining 5% = £425
  5. Employer and provider agree to spread this over ten instalments of £42.50

Government Incentives

Whether you are a levy or non-levy employer, there are many financial incentives available to you when hiring an Apprentice for your business. The apprentice’s age and size of the organisation can affect the amount of incentive payment an employer receives. To find out more about what incentives are currently available for your business, please click here.

If you are interested in employing an apprentice for your business, please feel free to give us a call on 0121 236 2634, where you can speak directly to a qualified member of staff, or email at contactus@protocolgroup.co.uk.