Paying the apprenticeship levy
All UK employers in both the public and private sector contribute 0.5% of their annual wage bill into their apprenticeship levy.
Payroll is based on the total amount of earnings that are subject to class 1 secondary NIC’s. Earnings will include al remuneration coming from employment such as wages, bonuses, commissions and pension contributions that the employer pays NIC’s on but not as a benefit in kind.
The apprenticeship levy is set at 0.5% of your total payroll. This amount is collected each month through PAYE. There is a £15,000 fixed annual allowance that employers can offset against their levy payments.
The levy allowance operates on a monthly basis and accumulates over the year. This means that the employer has an allowance of £1,250 each month. Any allowance that is unused can be carried over to the following month. Example: ‘Calculating what you have to pay’
An employer with an annual wage bill of £5m
Levy sum: 0.5% of £5,000,000 = £25,000
Offset allowance of £15,000 (£25,000-£15,000) = £10,0000
Annual levy payment = £10,000 (£833.33 per month)
One £15,000 allowance can only be used when a group of employers are connected. It is important to plan what each of the employers within the group is allocated out of the £15,000 allowance. Wise Origin College can support you with ensuring you maximise your levy despite the size of the group.
All employers in England will receive a 10% top up for every £1 they contribute to their levy. This 10% top up comes from the government and means that for every £1 contributed, you will actually receive £1.10.
Spending the apprenticeship levy
The training provider will take a payment for each month of training delivery across the duration of the apprenticeship. This ultimately means that an employer does not have to pay the entire cost of apprenticeship at the start of the programme. The important aspect to remember is that the employer must have enough funds in their Digital Apprenticeship Service (DAS) account each month to meet the monthly cost. Additionally, 20% of the apprenticeship funding value will be held back and taken from your (DAS) account at the end of the apprenticeship.
Wise Origin College will endeavour to support you to manage this process in terms of the full costs of each apprenticeship and your available amounts to spend each month.
Yes. The simple answer to this question is that if you don’t use them, you will lose them. Levy funds will expire after 24 months from entry into your digital account. For example, funds that entered your account in February 2020 will expire in February 2022. When you decide to spend money on an apprenticeship, the first payments that entered your account will be taken first.
Wise Origin College can support you with managing your funds effectively to benefit your business growth and staff development.
The levy fund is designed to pay for apprenticeship training and the subsequent end-point assessment. You can only use these funds in conjunction with an approved training provider such as Wise Origin College and a registered end-point assessment organisation (EPAO).
An employer is unable to use these funds to pay the wages of an apprentice, managerial costs, expenses, work placements, traineeships or the initial cost of setting up an apprenticeship programme.
Each apprenticeship type has a different funding value and there are 15 funding bands in total. The lowest funding value is £1,500 and the highest is £27,000. The banding governs the maximum amount that can be spend on each apprenticeship. The maximum funding value for each apprenticeship controls the maximum price that the government will ‘co-invest’ if an employer does not pay their apprenticeship levy or if an employer requires a ‘co-investment’ if they do not have enough funds to cover the cost of the number of apprentices they require.
Yes. Apprenticeships can be utilised for existing staff if they are taking on new roles or require new knowledge and skills for their existing role. Apprenticeships are suitable for all ages as long as the minimum age of the apprentice is 16.
Yes. You can transfer 25% of your funds to another employer’s digital account.
If an employer pays the apprenticeship levy but they don’t have enough funds to cover the full cost of the apprenticeship, support is available.
The government will contribute 95% of the additional costs (capped at the maximum funding band for the apprenticeship). The employer will be required to contribute the remaining 5%.
An employer with a levy pot of £25,000 takes on five apprentices.
The agreed cost for each apprentice = £7,000 each.
The total apprenticeship cost for all five apprentices would be = £35,000
Employer shortfall = £10,000
Government will contribute 95% = £9,500
Employer will contribute 5% = £500
Total spend by the employer is = £35,000 (from the levy pot) + £500
Total contribution from the government = £9,500
- £3,000 for each new apprentice who started employment from 1st April 2021
- The above payment would further increase if you recruited an apprentice between the ages of 16 to 18 years or under 25 with an Education, Health and Care Plan, meaning that some employers could receive £4,000 in total
- Incentives are paid in two equal instalments at 90 days and 365 days.
Wise Origin College can provide support to apprentices who require additional support with English and Maths. The costs associated with this do not come out of the employers apprenticeship levy funds.
SME’s and non-levy paying employers
Not all employers are required to pay the apprenticeship levy. If your annual wage bill is less than £3m, you would be one of them.
If you would like to employ an apprentice, as an SME you would only be required to a 5% contribution towards the total cost of an apprenticeship. In the industry this is classed as a ‘co-investment’. The total cost would depend on the funding band that the apprenticeship falls within. Wise Origin college can discuss this with you in detail if you would like to know more about funding bands and the associated costs to you.
Yes. An employer with less than 50 employees will have the full cost of the apprenticeship value paid for by the government if the apprentice is aged between 16-18. If the apprentice is aged 19 or older at the start of their apprenticeship the employer will be required to contribute 5%. The exception to this rule is that if the apprentice is aged between 19-24 from a disadvantaged background or with additional learning needs.
The funding bands apply to all employers small or large. From 2019 you will pay for the cost of the apprenticeship through the Digital Apprenticeship Service (DAS) account. Wise Origin College can support you with this if you are experiencing any difficulties.