In 2017, the government introduced the apprenticeship levy to help fund the delivery and improvement of apprenticeships. The government intended to improve the quality and quantity of the apprenticeships available. Employers that have made use of the levy funds will have reaped the benefits. However, two years later, not everyone understands what the levy is and how to use it.
Only recently, according to the International Association of Bookkeepers, leading accountancy bodies are urging the government to simplify the apprenticeship levy. The problem, it seems, is that the benefits are “particularly enticing with the government committing to paying 95% of its apprenticeship training costs,” however the SMEs are reluctant to apply due to the “complexities in accessing the funds”.
Until the government reforms the Apprenticeship Levy, we feel it is important to help employers understand how to capitalise on it.
Not everyone is required to pay into the Apprenticeship Levy. In fact, it is aimed at larger businesses. In essence, it affects less than 3% of UK businesses. It is easy to determine who pays into the levy.
Just like their income tax and national insurance bill, a company will pay their levy through HMRCs PAYE process. Your company will already use this system. This makes it an easy and recognisable process for them to use.
Larger companies pay into the Levy each year. However, this does not stop the smaller companies from accessing the funds.
Most businesses in the UK will not contribute. If your annual wage bill is less than £3 million pounds, then you will not need to pay. However, you might still have to contribute towards the cost of an apprenticeship. The rules may vary.
Despite being a smaller company, you may have more than 50 people in your employ. If so, the government will ‘co-invest’ in an apprenticeship. It breaks down very simply:
To help work out how much you will pay, there is some helpful advice to determine what “funding band” your apprenticeship falls into. Information on the funding bands can be found on: https://www.gov.uk/government/publications/apprenticeship-funding-bands
In the instance that you’re a small company with less than 50 employees, the government might fund the entire apprenticeship. This depends on three criteria:
If your apprentice is 19 years old or above then you will need to meet 5% per cent of the total apprenticeship cost, and the government will pay the rest.
If you are a company that doesn’t pay into the Apprenticeship Levy, you can be forgiven for struggling with accessing government funding. In fact, the simplest way to circumnavigate this problem is to choose a training provider first.
Because the training provider needs to prove that your company is paying the 10% before the government will release the funds, it stands to reason that you should lean on your training provider. A good apprenticeship provider will be a source of important information and will be willing to discuss this with you at any point.
The Apprenticeship Levy does need simplifying. It is difficult for SMEs to nurture promising talent because they struggle to understand the levy. For a business to grow and prosper, it needs to be able to future-proof a workforce. What is better than a young workforce full of fresh and contemporary ideas?
But the confusion around the Apprenticeship Levy is scaring smaller employers, and as such, the levy is failing to achieve what it set out to do.
If you are a smaller employer that wants to make use of apprentices, don’t let the thick and confusing language of the Apprenticeship Levy put you off. Contact PTS Training Academy for help. We will help you deal with the levy so that you can benefit fully.
Telephone: 01604 491622
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