Are you ready for the Apprenticeship Levy? Q&A

We have included the very helpful Q&A document from our Are you ready for the Apprenticeship Levy event below, for any employers who were unable to attend our event on 1st November 2016. Help and advice is always available from our Apprenticeship Team on 01872 242711.

When does the Levy come into effect?
The levy will come into effect on 6 April 2017.

Who pays the Levy?
Employers with an annual pay bill of more than £3 million are liable to pay the Levy (c:1.3% of employers).

What counts as “pay bill”?

Pay bill will be based on total employee earnings subject to Class 1 secondary National Insurance Contributions (NICs), but includes earnings below as well as above the secondary threshold. Earnings include any remuneration or profit derived from employment which includes wages, bonuses, commissions and pension contributions that you pay NICs on.

How much are Levy payments?
The Levy is set at 0.5% of UK pay bill, paid through PAYE.  It applies to all employers in all sectors. All employers have an allowance of £15,000 to offset against their Levy liability.  Employers in England who pay the Levy will be able to get out more than they pay into the levy, through a 10% top-up to their digital accounts.

What if we already pay an industry levy?

Some industries already operate levy systems. You won’t be exempt from the Apprenticeship Levy if you already pay into an existing levy. The government is working with the relevant Industry Training Boards for the construction, engineering and film industries looking at arrangements about the interaction with the Apprenticeship Levy.

Is there a top up to the digital account by the government?
Yes, 10%.

How do we access funds in the digital account?
Once registered for the new digital service, levied employers will be able to select their PAYE schemes and access funds available to them as a result of their Levy payments. Registration is planned to open at end of 2016. Employers will be able to see their Levy contributions coming into the account monthly and accumulating over time. Funds will first appear in account in late May 2017.

Does the money just stay in the digital account until it is used?
No, if it is not used within 24 months it is lost. Funds will expire 24 months after they appear in the employer’s digital account unless they are spent on apprenticeship training. This will also apply to any top-ups in their digital account.

What happens about apprentices that are currently employed?
Any employee who has already started an apprenticeship will continue to be funded as currently.

How can the digital fund be used?

  • Apprenticeship training and assessment
  • Against an approved framework or standard
  • With an approved training provider and assessment organisation
  • Up to the funding band maximum for that Apprenticeship

What can’t digital funds be used for?

  • Wages
  • Travel and subsistence costs
  • Managerial costs
  • Traineeships
  • Work placement programmes
  • The costs of setting up an Apprenticeship programme

How can I work out what the amount in my digital account would be able to fund?
All apprenticeships will be in a funding band. The funding band for a specific apprenticeship will be the same for apprentices of all ages. There is an easy to use calculator tool at Truro and Penwith College are more than happy to work with you and this tool to develop your Levy investment plan.

Are there any incentives similar to the AGE grant from May 2017?
Employers with fewer than 50 employees will be able to train 16 – 18-year-old apprentices at no cost.  The government will pay 100% of the apprenticeship training costs for these individuals. Also the government proposes to pay £1,000 to employers (of any size and in any sector), and a further £1,000 to training providers if they train a 16-18-year-old Apprentice.

What happens if I don’t have enough in my digital account to cover the apprenticeship training I want?
If you have £0 in your account you will receive funding for 90% of the agreed cost with the provider and you will need to pay 10% (£500). If you have digital funds available, these will be used first, and then the government will pay 90% of the remaining costs and you will pay 10%.

What are the new apprenticeship standards?

These are new sets of competencies into a wider range of job roles and levels that will replace current apprenticeship frameworks over the coming years. A list of standards that are ready for delivery and in development can be found on the website. To make this a bit simpler Truro and Penwith College has a range of events and Business Development Advisors to support businesses in choosing the standards that best fit their business.

Guide to Using the Apprenticeship Levy Calculator

The online calculator can be found here and is a really useful tool to help you:

  • Estimate your organisation’s UK payroll
  • Employees living in England %
  • Choose an apprenticeship (drop down list of options available – add start date and number of apprentices and will calculate how much of your levy is used based on choices of apprenticeship and different start dates

Screenshot of the online calculator, displaying an organisation's funding breakdown