The Apprenticeship Levy – What installers need to know

Neil Collishaw – Head of Innovation and Development at BPEC-  looks at some of the common questions that have been by potential employers asked in relation to the apprenticeship levy introduced last year.
Those with some connection to the construction industry may be aware of the CITB training levy that’s been in existence for a number of years to support construction employers with developing a skilled workforce.
Separate to this, last year the Government introduced an apprenticeship levy to raise money for apprentice training from large employers across all industries. Perhaps understandably there’s since been confusion – particularly around what smaller companies now have to pay if they want to recruit an apprentice.
The questions that follow cover some of the main queries relating to the levy.
Who has to pay the levy?
Employers have to pay the levy, via the PAYE process, if they have a wage bill over £3 million each year. The levy is charged at 0.5% of the annual pay bill.It doesn’t affect the way employers fund training for apprentices who started an apprenticeship programme before 1 May 2017. They’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started. In total, fewer than 2% of UK employers will pay the levy.
How do levy payers benefit?
Employers in England will be able to claim back their levy contribution in the form of digital vouchers, which they can then use to pay for apprenticeship training. Essentially, this means the levy is designed purely to encourage employers to support apprenticeships. To further encourage this, those paying the levy receive an additional 10% top-up to spend on training.
Can those who don’t pay it still benefit from it?
Employers that don’t pay the levy can still benefit from support with apprentice training costs. They will share the cost of training
and assessing their apprentices with Government – this is called ‘co-investment’.
At least 90% of non-levy-paying employers’ apprenticeship training and assessment costs in England will be paid for by the Government.
These employers will pay 10% towards the cost of training and assessing of any apprentice. Employers need to:
• agree a payment schedule with the training organisation, and
• pay them directly for the training.
The Government will pay the rest (90%) up to the funding band maximum. Apprenticeships have differing funding bands across industries and occupations. The funding for the plumbing and heating apprenticeship is £21,000.
Can a small business get any additional help?
Companies with fewer than 50 employees may be able to get further support on top of the 90% Government funding mentioned above. This will depend on the apprentice’s circumstances.
The Government will fund all of the apprenticeship training costs, up to the maximum value of the funding band for the apprenticeship, for employers employing fewer than 50 people if, on the first day of their apprenticeship, the apprentice is:
• aged between 16 and 18 years (or 15 years old if the apprentice’s 16th birthday is between the last Friday of June and 31 August)
• aged between 19 and 24 years old and either has:
i. an Education, Health and Care (EHC) plan provided by their local authority, or
ii. has been in the care of their local authority
In addition to the apprentice training costs, the Government is offering additional payments and funding that may be available to smaller employers. These include:
• Employers are not required to pay National Insurance Contributions for apprentices under the age of 25 on earnings below the higher tax rate of £827 a week (£43,000)
• £1,000 payment to both the employer and provider when they train a 16- to 18-year-old
• £1,000 payment to both the employer and provider when they train a 19- to 24-year-old who has previously been in care or who has a local authority education, health and care plan
I sub-contract to a larger contractor who does pay the levy – can I benefit from any of their levy funds?
There are opportunities for levy-paying employers to pass on some of their levy funding to other employers. The current guidance is that, from April 2018, employers who pay the apprenticeship levy will be able to see their transfer allowance in their apprenticeship service account and, from June 2018, the first transfer payments can be made.
Employers who want to transfer funds have been advised they can find employers who want to receive a transfer, either directly or via an Apprenticeship Training Agency. More details are available on the gov.uk website or by speaking to a local training provider.
Is this different to how it used to operate? Didn’t all training costs used to be paid?
For smaller employers, it’s more or less the same in respect to funding and how they get their apprentice trained. The key changes are if you are a larger employer and contribute to the levy. The other key changes are the principle of employers having more control of the training and assessment of their apprentices.
Is it still worth training an apprentice?
With the funding available for smaller employers, it’s still certainly worth investing in an apprentice. Employers who have an established apprenticeship programme reported that productivity in their workplace had improved by 76%, while 75% reported that apprenticeships improved the quality of their product or service. Apprenticeships can deliver a range of benefits, including:
• growing a business and solving recruitment challenges
• breeding creativity and enthusiasm with new talent, or retaining and upskilling current staff
• providing training that’s tailored to the needs and requirements of a business – learning can even be done in your workplace, minimising disruption and maximising impact.
There does also seem to be more flexibility and support for employers who are recruiting older apprentices around the age of 19 and upwards.
The gov.uk website has a wealth of information about apprentice recruitment and funding, and is easily searchable. It is also worth speaking to local training providers for more advice.