Making the Most of Your Apprenticeship Levy

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As your organisation grows and your annual wage bill hits the £3m threshold, you will begin making Apprenticeship Levy contributions. In this blog, we’ll take you through everything a new levy-paying organisation needs to know. We’ll cover how to calculate and access your levy funds, what levy funds can be used for, and how to maximise the opportunity.

WHAT IS THE APPRENTICESHIP LEVY?

The Apprenticeship Levy came into effect in 2017 as a way to encourage large employers to nurture their skilled workers, invest in new talent, and bridge the anticipated skills gap. Your Levy contributions are collected into a ring-fenced training fund, which can then only be spent on apprenticeship training within all levels of your business.

Related content: what is the background behind the apprenticeship levy?

In April 2021, Government figures revealed that 57.4% of apprenticeship starts in 19/20 came from Levy-paying organisations. Employers have decided to embrace the fund as a means to bring in new talent and provide additional training for their staff.

Shortly after the introduction of the Apprenticeship Levy Sophie Gray, Aviva’s UK Apprenticeship Lead, gave Baltic Apprenticeships an insight into the effects of the government scheme on their training strategy:

“The Apprenticeship Levy has given us a fresh focus on building skills. In the past, we have done some great professional development, but the Levy has definitely given us a renewed focus by identifying a ring-fenced learning and development budget on a scale that we’ve never really seen in the past. I’m very pleased that everyone at Aviva is encouraging of development, and therefore we’ve decided to use it rather than lose it.”

The Apprenticeship Levy has come under criticism for being just another tax deduction. However, the scheme was designed as a protective budget for the development of skills, and by viewing it in this way and utilising the system – employers can really reap the benefits of this fund.

WHY IS THE APPRENTICESHIP LEVY IMPORTANT?

If you’ve recently started paying into the Apprenticeship Levy, it’s vital to have a plan in place for how you’ll use your freshly ring-fenced funds.

Creating a strategy for your Apprenticeship Levy investment is essential for capturing the benefits of affordable talent development.

Many large organisations are failing to utilise their Levy. Between May 2020 and February 2021, it has been reported that over £1b Levy contributions expired and were returned to the Treasury – resulting in many organisations losing control of their funds. Don’t let your company make this common mistake!

Ultimately the Apprenticeship Levy is important as it is beneficial to businesses to help fund apprentices, resulting in increased employee engagement and a further developed team.

CREATING AN APPRENTICESHIP LEVY BUDGET: HOW DO I WORK OUT HOW MUCH I NEED TO PAY?

The Apprenticeship Levy is charged at 0.5% of your company’s annual wage bill and payable monthly to HMRC. But as mentioned previously, this is only applicable if your companies wage bill exceeds £3m annually.

The Levy also applies if you are connected to other companies or charities for Employment Allowance and have a combined wage bill of £3m. In addition to the money you’ve invested in the Levy, you’ll also receive a 10% government top up to spend on apprenticeships.

You can use our handy Levy calculator to work out the amount your organisation will pay each month. You’ll need to have a rough idea of your annual salary costs and percentage of your staff that live in England.

WHAT CAN I SPEND APPRENTICESHIP LEVY FUNDS ON?

Once you have the figures sorted, you can begin to plan how you’ll spend your Apprenticeship Levy.

Levy funds can only be used to pay for apprenticeship training and assessment costs. The Levy cannot be used to pay for related employment costs, such as wages, travel or equipment.

Apprenticeships are a fantastic way to hire future talent, but can also be used to develop current staff, from junior professionals all the way up to senior management.

RECRUITING AN APPRENTICE WITH YOUR LEVY FUNDS:

One way to utilise your levy funds is recruiting a new apprentice to join your team. Here at Baltic, we operate in the tech sector and provide a range of Level 3 and Level 4 apprenticeship programmes in IT, Software Development, Digital Marketing, and Data Analysis.

Apprenticeships are an effective way to future-proof your workforce, bridging the digital skills gap by training your organisations next generation of tech talent.

Find out more: browse our digital and tech apprenticeship programmes

TRAIN EXISTING STAFF WITH YOUR LEVY FUNDS:

Your Apprenticeship Levy can also be used to enrol existing employees onto an apprenticeship. Our programmes offer a highly effective and affordable means of training within all levels of an organisation.

Apprenticeship standards are much more than just a qualification, they can be used as a comprehensive development plan to upskill members of your team who want to advance to senior positions or move into other areas of your organisation, rather than hiring for these positions externally.

MANAGING THE APPRENTICESHIP LEVY: HOW DO I ACCESS MY FUNDS?

Your funds can be accessed through your apprenticeship service account. You can use this online service to:

  • View your available levy funds
  • Manage your apprentices
  • Offer a levy transfer
  • Pay your training provider

It’s important that you put a plan in place to manage the Levy funds in your account as after 24 months, they will start to expire on a monthly rolling basis. However, with a little planning and vision you’ll be able to build this amazing resource into your overall talent development strategy.

WHAT HAPPENS IF MY APPRENTICESHIP LEVY FUNDS RUN OUT?

If you’ve already assigned your Apprenticeship Levy funds, but would like to invest in more apprentices – you are free to do so! To fund extra apprenticeships, you’d need to follow the co-investment funding model that Non-Levy paying organisations use. With the co-investment model, employers pay 5% of the apprenticeship training costs while the government covers the remaining 95%.

LEARN MORE:

For more advice and guidance on the Apprenticeship Levy, or to explore how apprenticeship training could fit into your organisation, please get in touch with our team of Levy specialists.