The UK Government wants 3 million active apprenticeships across businesses in Great Britain by 2020.
However, given that following the introduction of their apprenticeship levy in April 2017 there was, according to Croner, a 59.3% drop in apprenticeships in the May-to-June quarter, the Government still has a lot of work to do to achieve their goal.
So, we’re going to explore what the apprenticeship levy is.
Sticking with the “3 million” number, the apprenticeship levy demands that any company with an annual bill that exceeds £3 million must contribute 0.5% of their total pay amount to a “digital apprenticeship account”. So if your annual bill was exactly £3 million (which would be weirdly coincidental), you’d set aside £15,000 (0.5%) for the apprenticeship levy.
This rule took effect on 6th April 2017.
What counts as part of your annual pay bill?
Your annual pay bill includes any payments to your staff that are subject to the employer Class 1 secondary National Insurance contributions (NICs). This includes wages, bonuses, and commissions.
Your annual pay bill includes payments of the above to the following people:
- Apprentices under the age of 25.
- Employees under the age of 21.
- Any employees who earn below the Lower Earnings Limit and the Secondary Threshold.
Your annual pay bill doesn’t include the earnings of employees under the age of 16; nor does your annual pay bill factor in the earnings of your employees who aren’t subject to the UK’s National Insurance contribution legislation.
You also don’t count earnings on which Class 1A NICs are payable, such as benefits in kind.
You must report and pay your levy to Her Majesty’s Revenue & Customs (HMRC) through the PAYE payment system.
If you have any apprentices whose apprenticeship began before May 1, 2017, you must continue funding the training for these apprentices under the original terms and conditions.
What does the digital apprenticeship account let you do?
You can create an account here. Having an account lets you:
- Manage your apprentices.
- Receive funds to spend on apprenticeships.
- Pay training providers.
- End or pause payments to any training providers you have.
So what can you spend your apprenticeship services fund on?
A critical question indeed. You can buy apprenticeship training for any apprentices who work in England for at least 50% of their apprenticeship hours.
Maximum funding for a single apprenticeship currently stands at £27,000. As of 1 August 2018, the funding structure changed. The number of pay bands has risen from 15 to 30. The lowest band is £1,500.
If training and assessment costs exceed the funding granted to you, it’s your responsibility to pay the remaining balance with funds from your own budget.
What can’t you buy?
You should not use your fund to cover costs such as the apprentice’s wages, their travel, or other subsidiary costs. You also shouldn’t use the fund for work placement programmes or statutory licences.
Many businesses are child companies within a group. A group can pay the apprenticeship levy together; when this situation arises, the companies have the option of setting up a single shared apprenticeship account. Into this, the companies pool their funds.
And, as of April 2018, levy-paying employers can transfer some of their funds to other employers using the apprenticeship service. Initially, employers will have the freedom to transfer 10% or less of their apprenticeship service account’s funds.
Companies can also choose to transfer some of this 10% or less to training agencies, too.
Funds expire after 24 months—make sure you use them
Your funds will appear in your apprenticeship account on the 23rd of each month.
Here’s how much enters your apprenticeship account each month:
- The levy you declare to HMRC through PAYE.
- This levy multiplied by the proportion of your bill that you pay to your English-living workforce.
- Add on a 10% top-up on this amount from the Government.
When funds have been in your account for 24 months unused, they expire. All funds have a traceable origin—what this means is that when you use some of your funds, such as for training, your account uses the oldest money first.
The Government’s support goes even further
The Government wants employers and employees alike to make the most of apprenticeships, and so it’s offering support to companies that don’t have annual bills of over £3 million, too.
If a business has fewer than 50 employees, and takes on an apprentice (or more than one), the Government will pay for 100% of the apprentice training costs.
The Government pledges to grant £1,000 to an employer if the employer takes on an apprentice aged 16-18, or aged 19-24 and who was in care (or has an education and health care plan).
If your business doesn’t have an annual pay bill of over £3 million, you’re a non-levy paying employer. The Government shares the cost of training and assessment for your apprentices with you. This is co-investment. You pay 10%, the Government pays 90% (up to the band maximum for that apprenticeship).
The Government promises that UK businesses across many industries will thrive with these millions of new apprenticeships—based on the plummet in numbers so far, there’s still plenty of work ahead.