The Apprenticeship Levy is in place to increase the quantity and quality of Apprenticeships. It is a new tax which aims to fund three million new Apprenticeships in England by 2020.

In April 2017

All UK employers who have a total employee pay bill above £3m a year will pay the Levy. This includes public and private sector, charities and educational providers such as academy groups and universities. The Levy rate is set at 0.5% of your pay bill.

Your ‘pay bill’ is your total employee earnings subject to Class 1 secondary NICs.
Employers get a £15,000 fixed annual allowance to offset against the Levy payment. Employers who operate multiple payrolls can claim one allowance for the Levy.
An example: if you have a £3m pay bill, you have a Levy bill of £15,000 (at 0.5% of employer pay bill). The allowance is offset against this, so your Levy payment is £0.00.

Here are some examples of how much employers may pay for the Levy;

Employer A: 1,000 employees, each with a gross salary of £20,000

Annual pay bill: 1,000 x £20,000 = £20,000,000
Levy applied: 0.5% x £20,000,000 = £100,000
After allowance applied: £100,000-£15,000 means £85,000 Levy payment

Employer B: 500 employees, each with a gross salary of £20,000

Annual pay bill: 500 x £20,000 = £10,000,000
Levy applied: 0.5% x £10,000,000 = £50,000
After allowance applied: £50,000 – £15,000 means £35,000 Levy payment

Employer C: 100 employees, each with a gross salary of £20,000

Annual pay bill: 100 x £20,000 = £2,000,000
Levy applied: 0.5% x £2,000,000 = £10,000
After allowance applied: £10,000 – £15,000 means £0 Levy payment

Levy payers who use up the funding within their DAS account will be able to continue to upskill existing employees and recruit apprentices, but will pay a 10% contribution of the agreed price to The Tess Group. The remaining 90% will be paid by the government.

Payments are collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), alongside tax and National Insurance.

The money is collected by HMRC and can be accessed via a new Digital Apprenticeship Service (DAS) account. This can be used to pay for apprenticeship training. On your DAS account you can see all the training providers you want to deliver the training, you then chose the appropriate Apprenticeship training courses.

In England, you need to register your details online with the apprenticeship service, along with the details of the learner. You can see how much can be drawn down for each learner in your account. You can then use these funds to spend on training with The Tess Group.

There is still some clarification required on the funding rules that will apply to the levy which will be issued in the spring re. If someone already holds a level 6 degree, could they eligible for funding for either a relevant Degree Apprenticeship, or a Level 4 Higher Apprenticeship if the apprenticeship is in a totally different area/specialism to their degree and is relevant to their role. We’ll update you when we have more clarity.

You can spend your Levy funds on apprenticeship training for either existing staff or new recruits if the training meets an approved standard or framework and the individual meets the apprentice eligibility criteria.

Research current vacancies in your sector as a benchmark on the National Apprenticeship Service vacancy website. We would also recommend networking with your peers within the sector and sharing best practice. The current minimum wage rate for an apprentice is £3.40 per hour. This rate applies to apprentices aged 16 to 18 and those aged 19 or over who are in their first year. Apprentices aged 19 or over who have completed your first year must be paid at least the National Minimum wage for their age.

A range of apprenticeship training programmes can be funded. At the Tess Group we specialise in Management, Team Leading, Customer Service, Recruitment and Business Administration however we can also offer many others.

Funds can only be used towards the costs of apprenticeship training. They cannot be used on other associated costs such as apprentice wages, travel and subsidiary costs or the costs of setting up an apprenticeship programme.

When an apprenticeship has started, monthly payments will be automatically taken from your digital account and sent to The Tess Group. This spreads the cost over the lifetime of the apprenticeship. You will see funds entering your digital account each month as you pay the Levy, and funds leaving the account regularly each month as you pay for training.

Employers in England who pay the Levy will get a 10% top up to their digital accounts. This means every £1 will be increased to £1.10.

Funds will expire 24 months after they enter your (DAS) account unless you spend them on apprenticeship training. Money is spent when it leaves your digital account as a payment to The Tess Group.

The Levy will be UK wide, so contributions are based on the pay bill for all UK employees, but you can only spend it your employees who are deemed to live in England, Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.

If your organisation has a pay bill of less than £3m it will not have to pay the Levy. In England, organisations will still be able to access government support of 90% of the training costs. As a business we will ask you to contribute just 10% of the apprenticeship costs so you can still benefit from on going training with us.