Gen2 Employers Guide to the Apprenticeship Levy The Apprenticeship Levy will be introduced in April 2017. Understand the key facts and how your business can prepare in advance to maximise the opportunity. www.gen2.ac.uk
What is the Apprenticeship Levy? The Apprenticeship levy is part of the Government s plan to increase the quantity and quality of. The levy is a new tax which aims to fund three million new in England by 2020. The Chancellor s October 2015 Autumn Statement outlined some notable changes to the way apprenticeships in England are funded. These changes are part of the bid to increase the number of apprenticeships to meet pledges made in the Conservative manifesto. In particular, the introduction of a levy on all employers with a UK pay bill in excess of 3 million per annum, regardless of whether they employ apprentices or not, was announced. These payments will be ring-fenced as employer contributions to supplement existing government funding for apprenticeship training. It is expected to raise 3bn annually over the next five years. 1.
Key Questions for Employers What is the apprenticeship Levy Will the levy impact my business? How will the levy work? What next? Key Dates How can I spend my levy contribution? Support from Gen2 2.
Will the Levy impact my Business? From 05 April 2017, employers with a paybill over 3m will be charged a levy of 0.5% of their paybill. All UK employers who have a total employee pay bill above 3m a year will pay the levy. This includes public and private sector, charities and educational providers such as academy groups and universities. Paybill will be based on total employee earnings subject to Class 1 secondary NICs. The 0.5% levy is on your full UK payroll bill, not just the amount over 3M. There is a 15K Government allowance. The levy will be payable through Pay As You Earn (PAYE) and will be payable alongside income tax and National Insurance. Payment will be taken monthly, in real time, meaning as your paybill changes each month, the levy amount taken will be reflected. HMRC will work closely with employers and providers of payroll services to minimise the burden of implementing these changes. The levy payment will then be ring-fenced in the form of an electronic voucher that can be used to purchase training from recognised providers, from the end of May 2017 onwards. Un-used vouchers will expire after 18 months. Employers in England who pay the levy and are committed to apprenticeship training will be able to get more out than they pay into the levy. The government will apply a 10% top-up to monthly funds i.e. all funds entering a levy payer s account will be increased, so every 1 will be increased to 1.10 in value. All employers with paybills of over 3m will be required to pay the levy, regardless of whether they subsequently re-claim voucher funds to purchase apprenticeship training. Based on current funding rules, the levy can be claimed back and spent on apprenticeship training for all employees at all levels and ages, including graduates who may be eligible for Level 6 or 7 apprenticeship programmes. Based on current funding rules, the levy can be used to fund existing employee development as long as they meet the criteria set out. Employers who pay into the levy may find that, over the course of an apprenticeship, the funds in their digital account aren t enough to cover the full cost of the apprenticeship training and assessment they would like to buy. When this happens the government will support and help employers meet the additional costs. Employers will be asked to make a contribution to the extra cost of training and to pay this directly to the government or chosen provider, however this will be payable over the lifetime of the assisted apprenticeship. 3.
Although the levy is calculated based on your full UK paybill, employers will only be able to only spend their English proportion on English apprenticeship training. are a devolved policy, which means that authorities in each of the UK nations manage their own apprenticeship programmes, including how funding is spent on apprenticeship training. The digital apprenticeship service will support the English apprenticeship system. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships. To calculate how much you will have to spend through the English system, the government plan to use data that they already hold about the home address of your employees. They ll use this data to work out what proportion of your pay bill is paid to employees living in England. They ll make this assessment in early 2017 and will announce the exact date in advance. Are you an employer with a UK payroll bill of more than 3M per annum? No Yes Non-levy paying companies will have access to Government funding for apprenticeships via the SFA once the levy has been launched. There is likely to be some contribution required. Claim to fund apprenticeship training costs 0.5% Apprenticeship Levy Plus 10% Government top -up Includes 15K Government Allowance Don t claim Employers will receive more funds in their levy pots than they have contributed as a result of the top-up mechanism Employers will receive a payment from the government to help meet the extra costs of employing 16-18 year old apprentices. The provisional level of the extra payment will be announced in June 2016. Other organisations claim levy funds to train their apprentices 4.
How will the levy work? Levy Paying Employer 10% Top up HMRC collect levy (PAYE) Employer views levy funds in digital account Employs apprentice. Commits to training. Receives training for apprentice SFA draws down levy funds monthly Unused levy funds expire after 18 months Non-Levy Paying Employer Employs apprentice. Commits to training. Receives training for apprentice Employer payment for proportion of cost direct to training provider SFA pays proportion to the training provider Training Provider Registers with SFA Offers apprenticeship training Provides training to apprentice Provides monthly ILR Provides info to SFA that training has taken place & that employer has made contribution Paid by SFA and / or employer Government Pass data on levy payments from HMRC to BIS Employer and Provider Indemnity Assurance Timely data on training Check training is complete If funding unlocked: pay provider The above applies to new recruits and existing employees. 5.
What Next? The government is expected to clarify more detail on the Apprenticeship Levy in summer 2016. However,there is already a wealth of information available for employers to start planning for the change, we have recommended some next steps below. 1. Calculate your levy payments You will need to model the estimated cost of the levy based on your UK payroll bill. Remember you will only receive the English proportion of your payments back to spend on training. To estimate the net cost to your organisation, you will need to take into account: 10% top-up levy funds Any additional employer incentives that the government may offer National Insurance savings that came into effect in April 2016 (no NI payments for apprentices under the age of 25) Using this information you can start to profile the apprenticeship model aligned to your workforce planning needs within your business that maximises the value of your levy pot. Gen2 can help with your modelling and planning process with advice tailored specifically to your business. 2. Start planning Currently the private sector employs 2.3% of their workforce as apprentices with the public sector employing 1.7%[1] - so employing 3% of your staff as apprentices is, in our opinion, a realistic target to aim for. If you would like a levy calculation tailored specifically to your business then please get in touch. 3. Research Understand how apprenticeship programmes have changed and now span across Accountancy, Financial Services, Law and Business, attracting talented, high calibre school leavers to benefit your business. New apprenticeship Standards, created by employer groups know as Trailblazers are now being introduced. There are now over 350 Apprenticeship Standards being developed and delivered. Understand the current and future (when announced) funding models and plan ahead now to be ready in 2017 to utilise your levy fund and the government contributions that will be available to train apprentices. Contact Gen2 to discuss the many apprenticeships available for your business. 4. Update your Payroll software We would recommend you update your Payroll software as from April 6th 2016 organisations are no longer required to pay National Insurance Contributions for apprentices aged under 25. 6.
Key Dates Summer 2016 Autumn 2016 By End 2016 April 2017 High level scope Operating detail Transition Operation June BIS/DfE publish provisional funding cap bands Further advice on eligibility and scope of apprenticeship funding from 2017. BIS/DfE publish confirmed funding rates SFA publish provisional funding rules SFA publish confirmed funding rules Full set of confirmed funding guidelines published Digital apprenticeship service registration opens Apprenticeship Levy operational Digital apprenticeship service operational New funding model live Institute for Apprenticehips in place Here are some examples of how much employers may pay for the levy: Employer A: 1,000 employees, each with a gross salary of 20,000 Annual pay bill: 1,000 x 20,000 = 20,000,000 Levy applied: 0.5% x 20,000,000 = 100,000 After allowance applied: 100,000-15,000 means 85,000 levy payment Employer B: 100 employees, each with a gross salary of 20,000 Annual pay bill: 100 x 20,000 = 2,000,000 Levy applied: 0.5% x 2,000,000 = 10,000 After allowance applied: 10,000-15,000 means 0 levy payment 7.
The apprenticeship levy will affect employers in all sectors who have an annual pay bill in excess of 3 million 8.
How can I spend by Levy Contribution? Here are some of the ways you can spend your levy contribution with Gen2 for either new recruits or developing your existing workforce: Engineering and Higher Degree in Engineering Related Disciplines Project Management Human Resources Business Management Team Leading 9.
Support from Gen2 are now offering their customers a free consultation visit to discuss how the apprentice levy will affect your business. Gen2 are closely following the apprentice levy and regularly review and update the information available for our customers. To view the latest Gen2 levy information visit: www.gen2.ac.uk/employers/apprenticelevy To book a consultation visit contact Mel Hanley Senior Business Development Manager Tel: 01900 701300 email: mel.hanley@gen2.ac.uk 10.
Gen2 locations Gen2 Lillyhall Skills Centre Unit 1, Joseph Noble Road Lillyhall Industrial Estate Workington Cumbria CA14 4JX. 01900 701 300 Gen2 Energus Training Facility Energus, Blackwood Road Lillyhall, Workington Cumbria CA14 4JW. 01900 605 665 Gen2 Salterbeck Skills Centre Unit 3a Salterbeck Industrial Estate Moorclose Road, Workington Cumbria, CA14 5DS 01900 607599 Gen2 Carlisle Skills Centre Kingmoor Park, Unit F2 Kingmoor South Carlisle Cumbria CA6 4RD. 01228 599 890 Gen2 Carlisle Education Centre Westmoor, Rockcliffe Carlisle Cumbria CA6 4BH. 01228 599 890 Gen2 Warwick Mill Warwick Mill, Warwick Bridge Carlisle, Cumbria CA4 8RR 01228 564 478 Gen2 Sellafield Skills Centre Building B111, Sellafield Cumbria CA20 1PG. T: 01946 786 616 Contact our team: Gen2 Furness Skills Centre Lightburn Trading Estate Ulverston Cumbria LA12 7NE. 01229 483 760 Senior Business Development Manager 01900 701305 / 07739 199531 Business Development Manager North 01228 599890 / 07590 439929 Business Development Manager South 01229 483760 / 07540 686554 01900 701300 info@gen2.ac.uk www.gen2.ac.uk Gen2 are committed to equality of opportunity and the safeguarding of learners.