The Apprenticeship Levy
What is the Apprenticeship Levy?
The levy was introduced in April 2017. It's charged at a rate of 0.5% of an employers’ pay bill for employers with an annual pay bill of more than £3 million. It is paid through the pay as you earn (PAYE) system on a monthly basis. Each employer has a levy allowance of £15,000, this is not a cash payment. It works in a similar way to the personal tax allowance and cannot be used to purchase apprenticeship training.
The impact of the allowance means that fewer than the 1.3% of UK employers, those with an annual pay bill of more than £3 million, are liable to pay the levy. Employers who pay the levy are able to get out more than they pay in, through a 10% top-up to their online accounts. An employer’s pay bill is made up of a total amount of the employee’s earnings that are subject to Class 1 National Insurance contributions, such as: wages, bonuses, commissions and pension contributions.
What if my business doesn’t pay the Apprenticeship Levy?
For employers not paying the levy (as the annual pay bill is less than £3 million), at least 90% of the apprenticeship training and assessment costs are paid for by the Government. A 5% contribution from the employer is paid to the training provider, spread over the lifetime of the apprenticeship. There is additional support for businesses with less than 50 employees employing 16-18 year olds or 19-24 year olds formerly in the Local Authority care services. 100% of training and assessment costs are met.
What is expected of an employer?
Employers should give their apprentice an induction into their role and provide on-the-job training. Employers are responsible for paying their apprentice’s wage and issuing their contract of employment.
Key requirements an employer should meet when employing an apprentice include:
- an apprenticeship agreement between the employer and the apprentice
- the apprentice should receive at least the apprenticeship National Minimum Wage, which varies based on age, although employers are encouraged to pay more
- the minimum hours of employment for an apprentice should be at least 30 hours per week
- apprentices to receive the same benefits as other employees.