How apprenticeship levy works for SMEs

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Going back to where it all began, the apprenticeship levy was first introduced in 2017 by the UK Government. This was all part of a plan to increase the number of apprenticeships on offer across the country.

The levy has been so important to apprenticeship funding across the country, and the biggest help in sustaining apprenticeships of various types, involving large, medium, or small businesses.

Stick with us and we’ll look at what the levy is, who needs to pay into it, who can benefit from it and how it all affects SMEs.

So, what is the apprenticeship levy?

Put simply, the apprenticeship levy was set up to help increase the number of apprenticeships in the UK.

If you’re a small or medium-sized business (meaning you have fewer than 50 employees) AND you have an annual salary bill of less than £3 million, then lucky you – you’re not required to pay into the government’s apprenticeship levy.

But for all those bigger businesses that exceed this, the apprenticeship levy is applied. This can then only be used to fund apprenticeship training – whether that’s for their own company or whether they’d like to be charitable and donate it to others.

It’s a benefit to apprentices and SMEs everywhere!

Apprenticeship levy transfers

Now to the business of levy transfers. We cannot stress enough that if you’re a large employer, either use your levy funds or donate – any left unused after 24 months are transferred to the government and are essentially lost to the system.

If you’re not in a position to use the money set aside to fund apprenticeships within your own business, don’t just think ‘what will be, will be’. Choose to transfer up to 25% of that levy to other employers so they can use it to fund their own apprenticeships instead.

Small businesses can then apply for an apprenticeship levy donation to help fund their own apprenticeships – it’s a win, win!

As it stands, there’s good news. Any employer who isn’t required to pay the apprenticeship levy is only responsible for paying 5% of the training and assessment costs for each apprenticeship they run. The government will pay the rest, up to a specific band.

Be mindful – if the training and assessment costs exceed this band, the employer will have to make up the difference.

As the recipient employer of an apprenticeship levy transfer, you can use the funds donated to pay for the training and assessment of new apprentices. An important point to note – your donor employer MUST agree with the type of apprenticeship being offered and other details of how the transferred funds will be used. The transferred amount should cover 100% of the training and assessment costs.

Think of it as a loan from the bank that doesn’t need to be paid back, there are still rules you have to follow!

The funds received in a levy transfer cannot be used for any of the below purposes:

  • Paying for an existing member of staff to do an apprenticeship or for current apprentices already having started the programme
  • Paying the wages of an apprentice
  • Paying any of the travel or accommodation costs of apprentices
  • Paying for the apprentice’s PPE or safety equipment (if required for the role)
  • Paying for additional training that falls outside of the apprenticeship programme
  • Paying for a manager’s time
  • Paying for the employer to develop original teaching materials

Don’t forget, both the donor employer and the receiver employer must be registered on the government’s apprenticeship service portal to access the transfer.

Paying for the apprenticeship training provider

So, what happens to small businesses that don’t pay the apprenticeship levy and haven’t received funding transferred through the levy? It’s as simple as a direct transfer to the training provider.

You’re usually responsible for around 5% of training and assessment costs, and how this is paid will be agreed directly with your chosen provider through a payment schedule.

The rest of the money gifted from the government won’t touch your bank account so don’t worry, you won’t be responsible for this extra payment. This will be sent directly to your training provider automatically.

In most cases, the cost of the training and assessment will fall within the upper limit of the banding that the government has agreed to. This varies by apprenticeship and could be anywhere between £1,500 – £27,000.

In very rare instances where the costs do exceed the funding band limit, it falls to you to make sure this extra is paid and accounted for.

Remember: The end-point assessment of any apprenticeship has to be carried out by an independent end-point assessor, which can be organised by your training provider, and this cost should be covered by the funding band limit too. Again, just like above, if this exceeds the upper limit set, the employer is liable to put in for the additional cost.

Want to know all the low down on the apprenticeship levy and additional funding?

Then get in touch! We have all the info to help ease your mind and hopefully give you the confidence to find the perfect addition to your workforce!

Or, for those looking to find the right apprentice to suit your business but aren’t sure where to start, we’ve got a solution.

We’ve created a shiny, new Jobs Board, an online directory of the best trade apprenticeships available right now. We know the UK construction industry needs more completed apprenticeships to fuel economic growth, and we’re here to make that goal easier to achieve – for both apprentices and employers.

Employers can easily advertise their roles on our free apprenticeship Jobs Board.


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