Taking on an apprentice can be a great way to contribute to the training and development of your future employees. The UK government can provide apprenticeship funding to employers who take on apprentices. In particular, levy paying employers must follow certain rules in terms of how they receive funding and what they use it for. This article explains provides an overview of these rules to help levy paying employers make and receive apprenticeship funding.
What is the apprenticeship levy and how does it work?
The apprenticeship levy is a payment employers must make to the government if they have an annual pay bill greater than £3 million. The apprenticeship levy is 0.5% of the total wage bill and is paid monthly over 12 months. Apprenticeship levy payers can claim an apprenticeship levy allowance of £15,000 each year. The apprenticeship levy is paid as part of the employer's PAYE bill and levy payments are a deductible expense for Corporation Tax.
How much funding do apprenticeship levy payers receive?
The levy payment amounts will determine how much funding employers will receive from the government. This amount is calculated based on HMRC and PAYE data and the number of employees living in England. Moreover, employers will receive a 10% government top-up of the calculated amount. Levy paying employers receive and manage these funds in their apprenticeship service account.
Who can be funded with levy payments?
Employers can receive government funding for new apprentices if they:
- start their apprenticeship after the last Friday in June of the academic year in which they have their 16th birthday
- are able to complete the apprenticeship in the time they have available
- do not have a student loan
- have the right to work in England and spend at least 50% of their working hours in England over the duration of the apprenticeship
- will be in learning for a minimum of 42 days between the learning start date and learning planned end-date
Employers can also fund eligible individuals and existing employees to undertake an apprenticeship at a higher, equal or lower level than a qualification they already hold, including a previous apprenticeship. Employers must provide evidence that the apprentice will acquire new skills and that both the skills and training will be significantly different from what have completed in the past.
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What can the levy funds be used for?
Levy funds can only be used to pay for apprenticeships with an ESFA approved apprenticeship standard and apprenticeships can be funded up to the funding band maximum for the apprenticeship. Levy funds can only be used to pay for training costs and assessment costs, including the apprenticeship end point assessment. Eligible charges which can be covered by the levy funds also include:
- equipment or supplies necessary to enable a particular learning activity to happen
- accommodation for training delivered through residential modules where the residential training is a mandatory requirement
- skills competition participation fees
- any administration directly linked to training and assessment, including end-point assessment
The employer must pay the difference if the total costs exceed the funding band maximum. Training most be provided by an approved training provider. The list of registered apprenticeship training providers can be found on gov.uk.
What levy funds can't be used for?
Levy funding rules require that levy funds can't be used to pay for apprentice wages, travel costs, accommodation costs, capital purchases (e.g. computers) and time spent by employees to manage apprentices. Funds can't be used to pay for training for knowledge, skills, and behaviours the apprentice has already acquired.
The government may take action to recover all or part of the government funding from the employer if they are satisfied that there has been a breach of the funding rules. This includes non-eligible funding claims made through the digital apprenticeship service account.
What happens if an apprentice does not complete their apprenticeship?
If a change of circumstances means the apprentice is not able to complete their apprenticeship, funding from the employer’s apprenticeship service account will stop until apprentice resumes their apprenticeship. If the apprentice is not going to complete their apprenticeship and a withdrawal must be used by the employer to withdraw the apprentice to ensure funds are not paid when the apprentice is not employed.
The funding will also stop if the apprentice takes a break in learning. If the apprentice changes role with the employer and requires a different apprenticeship programme, the funding from the employer’s digital account will be for the new programme capped to its maximum funding band.
If an apprentice is made redundant, funding from the employer’s apprenticeship service account will stop and the employer must help the apprentice find a new job. The government will fund the remainder of the apprenticeship up to the maximum funding band if the apprentice had completed at least 75% of the practical period or were within 6 months of the end point assessment.
What happens to unused levy funds?
Levy-paying employers can transfer up to 25% of their apprenticeship levy funds, which were declared for the previous tax year, to other employers, including apprenticeship training agencies. These funds can only be used for the cost of apprenticeship training and assessment by an approved assessment organisation.
The UK government has identified apprenticeships as an effective way for filling skills gaps and upskilling workforces which is why they have introduced apprenticeship frameworks to fund these gaps. Funding rules exist to ensure that new apprenticeships are aligned with these skills requirements. Employers must be aware of these rules to ensure that apprenticeships are valid and that their apprenticeship funding is not at risk of recovery. Employers must also ensure that they have an apprenticeship agreement in place. To create a robust and easy-to-understand apprenticeship agreement, sign up to Legislate today.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.