The way apprenticeships are funded in the UK is set to be amended in April 2017 with the introduction of a 0.5% levy on employer’s pay bills.
If passed this levy will only be payable on pay bills in excess of £3 million per year, which is estimated to effect only 2% of employers. This is estimated to provide an estimated £3bn boost to the apprenticeships budget supporting a new wave of young learners. As part of this new plan, employers will also be given an annual offset allowance of £15,000 towards the cost of the new levy.
Paying the apprenticeship levy
An employer’s pay bill will be calculated on total employee earnings subject to Class 1 secondary National Insurance Contributions (NICs), but not including benefits in kind. Employers will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process. A person will be treated as liable for NICs even where the applicable rate is 0% (for example, where an apprentice under 25). Where two or more companies are connected, only one will be entitled to use the £15,000 annual allowance for that year.
Examples of what you will pay
An employer with an annual pay bill of £5,000,000:
An employer with an annual pay bill of £2,000,000:
New Services available
Additionally, a new online portal will be launched called the Digital Apprenticeships Services will allow employers to search for apprenticeships, training providers and pay for training. Furthermore, the government will establish an Institute for Apprenticeships, where employers or groups can submit apprenticeship standards and assessment plans. In the interim, the government will stagger the withdrawal of funding for new starters on old, framework apprenticeships.
This is great news for trainees giving a bigger pot of revenue to train from, as well as for employers who will be rewarded for expanding their apprenticeship programme with the training support costs outweighing the new Levy.