Apprenticeship Levy – What’s it All About?
Details: Written by Eleanor Lodge
What is the Apprenticeship Levy?
In April 2017 the Government introduced a levy tax for employers who were paying a wage bill of over £3 million per year. This initiative made it compulsory for employers to pay 0.5% of their payroll each month into the Apprenticeship Levy fund, with The Government offering a 10% top up on funds. The Apprenticeship Levy allows employers to reinvest back into their workforce via apprenticeship training.
The Apprenticeship Levy was designed to increase apprenticeship investment and act as an incentive for employers to offer apprenticeship positions. With a 4.2% year-on-year increase in the participation in apprenticeships seen up to March 2020, the growing demand for employers to offer apprenticeships is clear.
The policy was designed to ensure that the larger employers wouldn’t access all their funding, allowing for smaller businesses to fund their apprenticeship training programmes through these recycled funds. Each business has a rolling 24-month deadline to spend their funds on apprenticeship training, after which the funding is returned to the Treasury.
What is Unspent Levy?
Unspent Levy is money that was paid into the Apprenticeship Levy fund that fails to be spent by businesses before the end of the 24-month deadline. This unspent money is then returned to the Treasury. The department of education said that the amount of unspent levy has grown in the pandemic, as the demand for apprenticeships was lower than expected.
In the 2020/2021 Estimates Memorandum, published by the Department for Education, it says: “Unspent funding of £250 million was surrendered at the 2020/21 Supplementary Estimate as the demand for apprenticeships from employers was lower than expected during 2020/21, partly due to the impact that Covid-19 had on employers’ recruitment plans”.
Despite this, research conducted by the CIPD found that the actual amount of unspent levy is significantly higher. Research suggests that in the last two years employers have lost an estimated £2bn in unspent levy funding which was returned to the Treasury between May 2019 and March 2021. These findings have created controversy. The Financial Times said: “The official data showed that the government’s plans to bolster skills and training provision around the UK as part of its levelling-up agenda would be “fatally flawed” unless ministers recognised the need for wholesale reform of the levy”.
How can I access apprenticeship levy funds?
Despite the controversy, Apprenticeship Levy funding is available for all employers and could be used to provide high quality apprenticeship opportunities across the country. After a business has paid its levy bill to HMRC, the funds will be held in a Digital Apprenticeship Service (DAS) account. The business can access their apprenticeship funding using the online portal - The Direct Apprenticeships Service
The account allows the business to access funding, find apprenticeships, find, save, and manage training providers, recruit apprentices, and manage any apprenticeships they are currently running.
Why should I draw down my Apprenticeship Levy funding?
The Apprenticeship Levy is a resource that when utilised by employers could create positive opportunities for both businesses and employees.
For businesses, employing an apprentice is an effective way to grow your team with fresh talent and ideas
- 86% of employers said apprenticeships helped them develop skills relevant to their organisation
- 78% of employers said apprenticeships helped them improve productivity
- 74% of employers said apprenticeships helped them improve the quality of their product or service
For employees, an apprenticeship is a great way to gain qualifications whilst earning. The current National Minimum wage for an apprentice aged 16 to 18 is £4.30 per hour, rising to the National Minimum Ware or National Living wage for those aged over 19 after the first year of their apprenticeship. Similarly, it provides real life skills and insight into a company or sector an employer might want to work within.
The five most common sectors to offer apprenticeship programmes are:
- Business, Administration and Law apprenticeships
- Health, Public Services and Care apprenticeships
- Retail and Commercial Enterprise apprenticeships
- Engineering and Manufacturing Technologies apprenticeships
- Construction, Planning, and the Built Environment apprenticeships
But many more sectors are now offering apprenticeships, with schemes such as the Apprenticeship Levy providing incentive.
To find out more about the Apprenticeship Levy click here
To find out more about The Skills Network’s apprenticeship programmes click here