Back in April 2017 the apprenticeship levy came into force. The new levy was introduced by the government to change the way apprenticeships are funded in the UK and to encourage employers to embrace apprenticeships schemes and offer more apprenticeships to young people.
The new scheme should raise approximately £2.7 billion a year. Funds which will be made available for apprentice training.
Apprenticeships are one approach to managing the skills gap amongst the UK workforce and the government has committed to improving the quality of apprenticeship available to young people as well as to increase the number of apprenticeships on offer. In fact, their aim is to provide 3 million more apprenticeships by 2020. The funding generated by the new levy should help to make this number a reality.
How does the levy work?
Employers above a certain size now have to pay the levy. The levy is calculated at 0.5% of an employer’s payroll bill for all employees in the UK. The levy currently only applies to organisations with an annual payroll bill of £3 million or more which means that around 22,000 businesses in the UK will pay the new levy. The levy will be collected by HMRC monthly.
Once an organisation has contributed to the levy they will be able to draw on those funds in order to pay for apprenticeship training courses. The good news for businesses is that on top of the fund they contribute when accessing the funding they will be entitled to a 10% top up from the government.
There is an incentive for these businesses to use the fund for immediate training as unused funds will expire 24 months later.
There is also good news for businesses that don’t have to pay the levy. Non-levy paying employers will benefit from government funding towards apprenticeships with the government paying 90% of the cost up to the relevant funding band maximum. The move makes apprenticeships more attractive to smaller employers.