The levy for employers

The levy is a government tax of 0.5% for every UK employer with a pay-bill of over £3million, and will be introduced from April 2017.

The introduction of the levy is part of the Government’s apprenticeship reforms, which are currently in the process of being implemented.

According to HMRC data there are 22,000 organisations that will be subject to the levy.

With the introduction of the levy, we are encouraging employers to evaluate their HR people plan and either introduce apprenticeships or develop their apprenticeship programme to earn back their levy.

Read our FAQs on the levy

Find out more about the Funding Reforms

How does the levy work?

Key aspects of the levy include:

  • The levy will be 0.5% of an employer’s paybill which is in excess of £3million
  • It will be collected by HMRC, directly via PAYE process
  • There is a £15,000 allowance, similar to PAYE tax allowance
  • The Government will top-up monthly funds for apprenticeship training by 10%
  • No employer is exempt

 

Levy examples:

1. Employer with a pay bill of £2,000,000

  • Levy sum: 0.5% x £2,000,000 = £10,000
  • Subtract Allowance: £10,000 - £15,000 = £0 annual levy payment (as total levy sum amounts to less than the £15,000 allowance)

2. Employer with a pay bill of £50,000,000

  • Levy sum: 0.5% x £50,000,000 = £250,000
  • Allowance: £250,000 - £15,000 = £235,000
  • After 10% top-up = £235,000 + £23,555 = £258,000 levy funds available to spend

2. Employer with a pay bill of £2,000,000,000 

  • Levy sum: 0.5% x £2,000,000,000 = £10,000,000
  • Allowance: £10,000,000 - £15,000 = £9,985,000
  • After 10% top-up = £9,985,000 + £998,500 = £10,983,500 levy funds available to spend

Read the Government’s SFA guide to the levy, March 2016.    

The levy for employers in Wales, Scotland & Northern Ireland

Apprenticeships are a devolved policy, so authorities in the UK nations manage their own apprenticeship programmes, how funding is spent on apprenticeship training and how employers access apprenticeships.

A proportion of the levy collected in the UK will be allocated to Scotland, Wales and Northern Ireland via the relevant authorities. Funding for the apprenticeship Frameworks in these regions will continue as 'business as usual' under the apprenticeship reforms.

The Digital Apprenticeship Service will support the English apprenticeship system only. For employers will cross-border operations, the government is reviewing proposals that employers should be able to use their digital funds and access government support for training employees whose main workplace is England.

We will advise you of any changes to the current situation as soon as they are announced by the Government.

Please note that the rest of this web page applies to employers in England only.

 

The levy for employers in England

In England, the Government will be pioneering its new Digital Apprenticeship Service (DAS) from April 2017. This online portal will enable employers to have a levy account showing the amount of funding they can spend on apprenticeships.

Funds from the levy account can only be used for Government approved apprenticeships including both SASE Frameworks and the new Trailblazer Apprenticeships. From May 2017, the DAS will enable levy-paying employers to make virtual payments to providers that are delivering their apprenticeships.

If you deliver your own apprenticeships, your organisation will need to be on the Register of Apprenticeship Training Providers (RoATP) for you to access your levy funding. Employers can apply to go onto the register but will have to meet all the SFA reporting and audit requirements along with all quality standards as defined by Ofsted and the Institute for Apprenticeships (IfA).

DAS will also help employers to identify a training provider, choose an apprenticeship training course and find a candidate.  

Can’t find a suitable apprenticeship programme?

If you’re unable to find a suitable apprenticeship programme in England for your business, you may not be able to spend your levy.

If your business is part of the Trailblazer group relevant to your occupational area, then you can ensure, through the consultation process, that the resulting apprenticeship is fit for purpose for your organisation.

Alternatively, employers can contact the department for Business, Innovation and Skills (BIS) to find out if there is already a Trailblazer group in place for their specific occupation.  If one doesn’t exist, you can get together with 10 or more other employers (2 of which have to be an SME) to create a Trailblazer of your own.

Contact BIS

The levy and working with education providers

With the introduction of the Digital Apprenticeship Service (DAS) in England, there is now a new way of working with providers.

This new apprenticeship model relies on employers and providers negotiating how apprenticeships will be delivered and assessed (including end-point assessment), as well as agreeing a fee and payment schedule. Your business may opt to work closely with a provider to design a bespoke apprenticeship programme, or you may opt for a programme pre-designed by a provider. 

The Digital Apprenticeship Service (DAS) will hold performance data for all providers that deliver apprenticeships, including Ofsted outcomes. It will be down to the employer to choose a provider they think is fit to deliver their apprenticeships.

Ensure a watertight contract

We recommend that all employers and providers have a legal contract and payment schedule.

It will be up to you to negotiate the payment schedule which could be one up-front payment, or payments over a series of months during delivery. Funds will be transferred directly from your account on the Digital Apprenticeship Service (DAS). 

The funding cap is the maximum amount that can be claimed for delivery, although the employer and provider can negotiate to deliver the apprenticeship at a reduced cost.   

Flow chart for working with providers

Flow chart for working with providers

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Employ an Apprentice

City & Guilds has developed a comprehensive guide on the apprenticeship levy for employers with a series of strategic considerations and actions for developing and delivering successful apprenticeship programmes that will enhance your workforce development plan.

Download the guide

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