The brewing and pub sector has significantly increased the number of apprenticeships that it offers in recent years with Mitchells and Butler pledging to take on 100,000 apprentices over the next 3 years. The industry is beginning to see how apprenticeships can improve the bottom line. They can lead to better staff retention and therefore a fall in recruitment costs with some progressing into management roles.
From April this year an apprenticeship levy applies to businesses whose annual pay bill is more than £3million. If this applies to your business then the levy funds will be credited to an account which you can use to train apprentices. If you are going to have to pay the levy then it clearly makes sense to plan to use the funds to train more apprentices. You may even consider becoming an approved training provider so that you can use the funds to deliver training in-house that is specifically relevant to your requirements. If you do not have to pay the levy then the Government will pay 90% of the training costs leaving you to pay the extra 10%.
It is clear that apprentices are an investment that you can’t afford to ignore.
What is the apprenticeship levy and will it apply to your business?
The Levy applies where your annual pay bill is more than £3million.
The Levy will be charged at a rate of 0.5%.
Each employer will have an annual allowance of £15,000 so in practice the levy will only apply to employers with an annual pay bill in excess of £3million (£3million x 0.5% = £15,000).
If your annual pay bill is £5,000,000:
- levy sum: 0.5% x £5,000,000 = £25,000
- less levy allowance: £25,000 – £15,000 = £10,000 annual levy payment
If your annual pay bill is £2,000,000:
- levy sum: 0.5% x £2,000,000 = £10,000
- less levy allowance: £10,000 – £15,000 = £0 annual levy payment
What is included in your annual “pay bill”?
For the purpose of the levy, employer’s pay bills will be made up of all earnings subject to Class 1 secondary National Insurance Contributions. This means earnings, bonuses, commissions and pensions will be included, although items such as benefits in kind will be disregarded
How will the apprenticeship levy be collected?
The levy is a payroll tax so will be collected through the PAYE system and will be charged monthly. In England employers will receive a credit to their online account, to fund apprenticeships in their business. You will have up to 24 months to use the credit.
What can the levy payment be used for?
The levy can only to purchase apprenticeship training through Government approved training providers. It cannot be used to pay wages, licences to practice, travel, subsistence, managerial costs etc.
You can currently chose between apprenticeship standards which are being developed by employer groups and cover the core skills needed for a specific job role and apprenticeship frameworks which are vocational qualifications. The Government aims to phase out apprenticeship frameworks by 2020 once a full set of apprenticeship standards have been developed.
Levy paying employers
Employers in England will have a digital account, which the government will credit with funds to spend on apprenticeship training. Employers will receive a 10% uplift on funds deposited in the account so for every £1 paid in the account will be credited with £1.10. Funds can only be spent on apprenticeship training and assessment with approved providers.
Employers in Scotland, Wales and Northern Ireland have their own apprentice authorities and the schemes there may work differently.
Non-levy paying employers
Where an employer’s annual pay bill is less than £3million no levy is payable. The Government will pay 90% of the training costs directly to an approved provider with the employer required to pay the remaining 10%. Over the next couple of years you will be asked to use the apprenticeship service to pay for training.
Become a training provider or assessor?
You may become a training provider for your own apprentices and those of other employers. In this way you would be able to design and deliver the content of the training ensuring that it covers everything that you think it should. If you are a levy paying employer then to be able to use your levy payment to deliver in-house apprenticeship training that meets your specific needs could be very beneficial. To do this you will need to become an approved employer provider.
The Government has produced a guide to help you decide whether to become an apprenticeship provider and the process of approval: – Click Here to download the Employer-provider Guide PDF
The guide, published by the Department for Business, Innovation and Skills clarifies how the levy will work. This can be found at:
The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.