What is the Apprenticeship Levy? Everything You Need to Know

The apprenticeship levy is a program that was introduced in April 2017. The levy is a way to fund apprenticeship training and is paid by businesses with a wage bill of over £3 million per year. 

In this post, we'll explain how the levy is funded and how to access it.  We'll also discuss some of the benefits of apprenticeships for businesses. 

What is the Apprenticeship Levy & How does it work?

To access apprenticeship funding, you'll need to register for an apprenticeship service account. Once your account is set up and connected to the apprenticeship levy, you can use the funds in your account to cover the costs of apprenticeship training for your business. 
 
There are a number of different types of apprenticeships available, including degree-level apprenticeships and higher apprenticeships that cater to more experienced workers. You can also apply for additional support such as apprenticeship grants if these are available in your area.

The Apprenticeship Levy is designed to encourage investment in high-quality apprenticeships

Do I need to pay Apprenticeship Levy?

If you’re an employer with a pay bill of £3 million or more per year, you meet the established criteria to pay the Apprenticeship Levy. Qualifying employers are required to pay a rate of 0.5% of your annual pay bill towards the Apprenticeship Levy each year. 

However, even though only approximately 2% of employers pay into the Apprenticeship Levy scheme, the amount generated can be used to fund apprenticeship training for smaller businesses, too. 

If you’re an employer with an annual pay bill of less than £3 million, you only need to pay 5% of the training costs for your apprentice - the Government covers all other costs. 

What happens if I don't use my apprenticeship fund? 

If you don't use the apprenticeship fund in your apprenticeship service account within 24 months, it will expire, and the funds will be returned to the government. However, there are options available to extend this time limit if necessary, so make sure to check with your apprenticeship provider or local government if you're concerned.  
 
If your business is not in a position to take on a new apprentice to make use of these levy funds, you have a couple of other options to consider: 
 
Upskill existing staff – you can use your apprenticeship levy funds to upskill an existing member of staff via an apprenticeship. This can help them learn new skills, progress in their career, and take on new responsibilities within the business  

Gift 25% of your funds to an SME (Small-Medium Enterprise) – you can choose to gift up to 25 percent of your unspent levy funds to an SME and become a sponsor of vocational training in that industry. This is great for CSR (Corporate Social Responsibility) and developing industry relationships (with no additional costs to do so). Either way, you can be sure that your levy funds are being put to good use, and helping to develop the skills of the UK workforce.

I am an SME, can I access Apprenticeship funding? 

If you're a small or medium-sized business, you may be eligible to access apprenticeship funding through a variety of government programs and grants. This funding can help you cover the cost of training and support your business as you invest in the next generation of talent. There are a number of helpful resources available to SMEs who are interested in starting an apprenticeship program.  

If you’re of how and when to access SME apprenticeship funding, read our guide to short courses for SME businesses. 

What kinds of apprenticeships are available? 

Deciding which type of apprenticeship is right for your business can be daunting - there are so many different types, and each offers different benefits. However, with a little research, you can find the perfect fit for your company.  
 
As a non-levy paying employer, you may be wondering if apprenticeships can still be helpful for your business. The answer is yes! Just like levy-paying employers, you can use apprenticeships to train new members of staff or to upskill existing members of staff. 

You can choose from a wide range of sector-specific or business skills apprenticeships, depending on your needs. Either way, apprenticeships can provide your employees with the skills they need to be successful in their roles. So don't hesitate to take advantage of this helpful training opportunity. 
 
And apprenticeship grants can help offset the cost of training. No matter which type of apprenticeship you choose, you're sure to find it helpful in growing your business and developing your employees. 

How do I pay an apprentice? 

When it comes to paying apprentices, there are a few options and apprenticeship guides that may help you understand the process.  As we’ve explained, there are different systems in place for apprenticeship funding which are based on the pay bill of the employer; these funds are used to cover apprenticeship training and qualification costs.
 
However, while the Apprenticeship Levy is a valuable resource for funding apprenticeship training and pre-approved certifications, the funds cannot be used to pay apprentices’ wages, ‘top-up’ qualifications, or any other certifications which have not been outlined and approved as part of the original apprenticeship programme. 

You are responsible for overseeing the wages for any apprentices you take on, and they must be paid in accordance with standards set out in the Government’s National Wage and Living Wage guidelines.

For more information and advice on the Apprenticeship Levy and funding, check out our resources for apprentices.

How can I get started on my apprenticeship journey? 

Whether you're a levy-paying employer or an SME, there are many resources available to help you get started on your apprenticeship journey. 
 
If you're interested in finding out more about apprenticeship funding, grants, or other support available to businesses like yours, get in touch with Total People today and explore our helpful resources on the Apprenticeship Levy and funding.

We'll be happy to answer any questions you may have, to help you get started on your apprenticeship journey!