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What is the Apprenticeship Levy – and how do I use it?


What is the Apprenticeship Levy – and how do I use it?

by Matthew Moore

Online Manager

The Apprenticeship Levy came into effect in the UK this year on 6th April and affects every company with a gross annual wage bill over £3m. Its purpose is to incentivise companies to invest in training programmes for their Apprentices to meet skills gaps and shortages. However, it has not been an easy birth.

For a start, one-in-three businesses[1] were unaware what the Levy was and just how it affected them. In addition, the process of getting the money and how it can be used has been criticised for being too complicated, with one in four businesses admitting they do not understand the system[2].

So how does the Apprentice Levy work? What exactly can businesses use the Levy for? And is there a way to simplify the process?

How does the Apprenticeship Levy work?
In summary, the basic facts of the Apprenticeship Levy are these:

  • The Apprenticeship Levy is automatically taken via PAYE if your annual paybill is £3million or more.
  • The amount taken is equal to 0.5% of the total paybill, with a £15,000 allowance to be offset against the total amount.
  • The funds are paid into a new online account that will be set up automatically for each company by the HMRC.
  • The government will top up your fund by 10% – so you receive £1.10 for every £1 you have put in.
  • The funds collected can then be exchanged for vouchers to spend with approved training providers.
  • You have 24 months to spend the funds that go into your account on approved training.

To summarise further still, if your company has a gross annual wage bill over £3m, you have money available to spend on apprentice training. It’s just sitting there, waiting to be spent.

What can it be spent on?

The levy can be spent on an approved apprenticeship at any level, ranging from intermediate Level 2 to Higher/Degree and Masters apprenticeships. However, training providers will need to be certified and registered on the ‘Register of Apprenticeship Training Providers’ (RoATP).

Where the total paid into the employers digital account does not meet the full costs of the apprentice training, the government will fund 90% of the additional costs, up to a funding band maximum, with the employer paying 10%. Employers can use the government’s Digital Apprenticeship Service to manage levy funds, their apprentices, and pay their training provider.

However, as well as introducing the Levy, the government has also introduced tougher rules on what qualifies as an apprenticeship. Each apprenticeship programme will have to meet the government’s Apprenticeship Standards, developed in partnership with relevant businesses, and be continuously assessed against those standards. The Institute for Apprenticeships[3] has been set up to develop and monitor these standards and assessment plans.

This transparency and accountability, whilst ultimately beneficial to the quality of the programme, has led to some criticising the additional complexity.

How can the process be simplified?

There has been a lot of confusion around the Levy before and since its introduction. This in turn has led to there being a lot of mis-information available: for example, when researching this blog I found two different acronyms used to describe the online portal the government creates for each employer, and some confusion as to whether the vouchers last 18 or 24 months.

This has contributed to some employers stating they may not actually use their Levy. Clearly, it is up to the training providers to make sure their service includes removing as much of the complexity as possible from the employer. It should be something they do naturally of course: they need to know the process inside out themselves in order to provide the service (as well as being certified, as previously mentioned) and should be able to create a product that smoothes the process.

Therefore, it is vital for the employer to shop around and find a training provider that not only shares their values and meets the requisite quality demands, but also one that can ensure the process does not become time-consuming and invasive.

In order to work well, Apprenticeship programmes need to be a partnership between the employer, the training provider and the apprentice themselves. And it should be the Training Provider who takes the lead when it comes to the administration, regulations and process.

IDG are have developed an apprenticeship programme that does just that. In partnership with the Babington Group, we have launched the Leadership Experience Apprenticeship Programme. LEAP provides CMI-approved high quality apprenticeships for team leaders and managers with an exclusive leadership element that incorporates experiential learning at the Royal Military Academy Sandhurst. Not only that, Ofsted-approved provider, Babington manage the Levy process for you to ensure it is as smooth and stress-free as possible!

Find out more about the Leadership Experience Apprenticeship Programme

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