Recently, the Apprentice Levy was introduced. What does it mean for the employer? How will it change things for the apprentice? How will it be funded? We answer all these burning questions!

Who pays the levy?

The levy only applies to employers in England, who have an annual pay bill of above £3m. This pay bill is defined as employee earnings, which as subject to Class 1 secondary NICs.

How is the levy calculated?

Simply put, the levy is 0.5% of the annual pay bill. However, all employers will receive a £15k annual allowance, which will be offset against the bill. Which means that employers with an annual pay bill of £3m or less will not have to pay the levy.

How will the levy work?

HM Revenue and Customs will collect the levy through Pay as You Earn (PAYE) and National Insurance (NI) each month. Employers can then access it through an online digital service account. The online digital service can then be used by employers to pay for apprenticeship training. This will be used for apprentices that work at least 50% of their time in England, however, this will be limited to certain maximum funding bands. Once the training starts, funds, which will be in the form of vouchers, will be taken from the account.

What about the businesses that do not have to pay the levy?

From May 2017, employers that do not pay the levy and that do offer apprenticeships to 16-to-18-year-olds will receive 100% of the cost of the training from the government. 10% of the cost of the training will have to be paid by the employer if the apprentice is aged 19 or over. The remaining 90% of the apprenticeship will be paid but the government. For those non-levy businesses that have less than 50 employees, a £1000 incentive will be given towards apprenticeships, but the apprentices have to be aged from 16-18 years old.

The Apprentice Levy is designed to increase the quality of apprenticeships, as well as the number of them, in the UK. To find out more click here or check out our Levy Guide.