Understanding levy funding

Employers in the UK with an annual pay bill of more than £3 million pay the apprenticeship levy at a rate of 0.5% of their annual pay bill.

The pay bill is calculated as all payments to employees that are subject to employer Class 1 secondary National Insurance contributions (NICs), such as wages, bonuses and commissions. Earnings below the Class 1 secondary threshold are not counted when calculating.

Apprenticeship levy is paid each month as part of the PAYE bill. To access funds to pay for apprenticeship training, employers need to set up an apprenticeship service account.

Levy funds paid by employers, plus a 10% government top-up, are made available for employers to use for 24 months, after which time any unspent funds expire. Expired funds are used by the Government to pay for apprenticeship training for smaller, non-levy paying employers, amongst other things.

Can SMEs access apprenticeship funding?

If a business has a pay bill of under £3 million, they can access 95% of funding from the Government towards training but they will need to contribute 5% of the apprenticeship costs. Additional costs may apply based on the vocational sector and type of qualification, and it’s worth noting employers cannot salary sacrifice this from the apprentice. 100% of the cost of apprenticeship training is provided by the Government for businesses with fewer than 50 employees or if the apprentice is aged 16-18.

SMEs should also look to partner with large levy paying organisations as these larger organisations can transfer unused apprenticeship funds to other organisations including SME’s.

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What can apprenticeship funds pay for?

Apprenticeship funds can be used to pay for apprenticeship training and assessment costs in any of the 600+ available apprenticeship standards. Standards are created by groups of employers and define the knowledge, skills and behaviours required to carry out a job role. A full list of all standards, including those in development, is available via this link.

Each standard is assigned a funding band that sets the maximum amount of apprenticeship funding that an employer can invest in an individual apprenticeship. Apprenticeship training providers and employers can agree higher or lower rates, but costs that surpass the upper limit must be paid for directly by the employer, instead of via their apprenticeship service account.

Each standard has an assessment plan which sets out how each apprentice will be independently assessed at the end of their training to determine whether they have reached occupational competence.

Who can be funded?

A wide range of people are eligible for apprenticeship funding. This includes those who::

• Are aged 16 and above, with no upper age limit
• Are already employed or recruited to a vacancy
• Have the right to work in England and will spend at least 50% of working hours in England during their apprenticeship
• Have eligible residency status.

People with prior qualifications and work experience can also be eligible for apprenticeship funding. Our initial assessment processes ensure that only those requiring at least 12 months’ training to meet the relevant apprenticeship standard are able to enrol on our apprenticeship programmes.

Incentives are provided for certain types of apprentice – such as those aged 16-18 who are recruited to a vacancy, along with appropriate funding for apprentices who require additional support to complete their programme. More details are available via gov.uk

Levy funds in Scotland, Wales and Northern Ireland are handled differently. The following links provide further details:

Scotland | Wales | Northern Ireland