Confused about the Apprenticeship Levy? Here's what you need to know

Confused about the Apprenticeship Levy? Here's what you need to know

If you run a business and you’re confused about the Apprenticeship Levy, you’re not alone.

The government scheme came into force this month with the aim of raising £3bn a year to encourage employers to invest in training and improve the quality apprenticeships, making them an attractive alternative to university.

But research suggests the levy has been met with confusion and uncertainty by thousands of companies, many of whom are unaware of its existence.

Training organisation City & Guilds found one in three employers don’t know about the levy, while those who do are confused as to how it will work.

So what does it mean for your business?

Companies with an annual wage bill of £3m or more will have pay 0.5pc of their staff cost into the fund. They will then be able to draw on the fund to pay for training courses, with the aim of creating 3 million apprentices by 2020.

For firms with a pay bill below £3m, the Government will contribute 90% of the training costs of your apprentices.

Kirstie Donnelly, managing director of City & Guilds, said: “Our research demonstrated that employers were still confused, with just a third saying they felt fully informed about the levy and very few understanding the huge range of jobs that can be filled by apprentices.”

The potential benefit for businesses is huge. Suffolk New College is one of the region’s biggest providers of apprenticeships, offering more than 20 different frameworks, including accounting, customer service, IT, engineering and carpentry.

Recently rated as good by Ofsted, the College offers flexible and tailored programmes to match business needs, and provides experienced and professional support to employers looking to take on an apprentice. 

The facilities include industry standard workshops and learning environments, plus the new £400,000 fabrication and welding centre.

The College also prides itself on a personal approach to learning, offering state-of-the-art facilities, which provide apprentices with the skills and know-how to progress their career.  

Suffolk New College Business Development Executive Nadia Cenci says: “Apprenticeships are a great alternative for young people wanting to earn while they learn in pursuit of their career choice. 

“As one of the biggest apprenticeship providers in the region, Suffolk New College is ready to support businesses looking to make the most of the apprenticeship levy. Our experienced and professional staff support employers, whether they are or aren’t levy payers, to find the right apprentice and also up-skill existing staff, including those that have a degree.

“What sets the College apart is our flexible and personal approach, offering an individual point of contact for the employer and providing one-to-one coaching and mentoring for the apprentice. 

“We also offer smart assessor technology, allowing the employer to easily follow progress and future planning.”

For a shining example of how to run an effective apprenticeship scheme – one that’s mutually beneficial to employer and employee – look no further than Wickham Market Medical Centre. The practice currently has two apprentices, while another three members of staff began their careers in that capacity before being taken on permanently.

“We have taken on a number of others over the last five or so years who h ave gone on to work elsewhere, too,” says Jane Wallace, Business Manager, “so we certainly see the benefits of taking on apprentices.

“They have different skills - they’re IT literate and customer focussed. Those of our staff who have been through the apprenticeship process mentor the ones coming through, which is really effective.”

Research by the National Audit Office has shown that for every £1 a business spends on an apprentice, £18 is paid back into the UK economy. Meanwhile, businesses report an average increase in productivity by £214 a week when they hire an apprentice.

Employers say that qualified apprentices are 15% more employable than those with other qualifications. Nationally, apprenticeship participation increased by 3.2% in 2015/16 – and it’s easy to see why. With employers having complained of a crippling skills shortage for several years, the chance to nurture young talent to their own specifications is a significant appeal.

“I enjoy training and developing young people,” says Jane. “I’m not one of those managers who trains them and lets them go – I am looking at the longevity of the business so I want them to learn the job and stay.

“Traditionally, surgeries were manned by ladies of a certain age but these days it’s a career pathway. We have had apprentices go on to work in the dispensary and study NVQs to support them and two have gone on to become healthcare assistants, so it’s not just about back office administration.”

Vic Fennell is Project Management Office Manager for Suffolk Community Educational Provider Networks, which supports healthcare provider communities through the consolidation and skilling up of their workforces.
She says an apprenticeship was the perfect way to launch her career.

"I decided to apply for an Advanced Apprenticeship in Business Administration at Suffolk New College as I wanted to continue to develop the skills I had gained from my intermediate apprenticeship in the NHS.

"I didn’t want to go to university and was keen to develop myself further whilst getting paid. During my time at the College I gained a wide range of experience in dealing with administrative tasks and developed my communication skills by dealing with queries from staff, students and parents face-to-face, on the phone and via email.”

Her experience and skills earned her the role of School Administrator for Construction and Engineering at the College, before her career continued to flourish within the NHS, initially as an Apprenticeship Coordinator and then her current role.

"I would recommend apprenticeships to anyone who is willing to work hard to progress into a successful career."

To find out more, call Nadia Cenci on 01473 382369, email or visit

What do you need to know?

The Apprenticeships Levy aims to encourage employers to invest in apprenticeship programmes and to raise additional funds to improve the quality and quantity of apprenticeships. The levy was announced in the 2015 Summer Budget, and is being introduced to fund the 3 million new apprenticeships pledged by 2020.

The levy took effect from 6 April 2017 and will begin funding new apprenticeships from 1 May 2017.

Employers with a total wage bill in excess of £3m.

The levy is paid through PAYE every month, and will be a 0.5% tax of the company’s total wage bill, after an allowance of £15,000. Connected companies or charities will only have one £15,000 allowance to share between them. HMRC provide guidance on how to pay the apprenticeship levy.

The funds you contribute to the Apprenticeship Levy will be deposited in an online account called the Apprenticeship Service. You can use the online Apprenticeship Service to:

  • select an apprenticeship framework or standard;
  • choose the training provider or providers you want to deliver the training;
  • choose the organisation that will assess your apprentices;
  • post apprenticeship vacancies;
  • set the price you’ve agreed with your training provider;
  • pay for apprenticeship training and assessment;
  • tell the Government to stop or pause payments.

The Government will contribute a 10% top-up to the funds that are deposited in your levy account. The top-up funds will be deposited at the same time the levy payments enter your apprenticeship service account each month.

As a firm with a pay bill below £3m, and therefore not contributing to the levy, the Government will contribute 90% of the training costs of your apprentices; you will be required to fund the remaining 10%. This also applies to levy payers whose levy funds have run out.

The levy will not affect the way that you fund training for your apprentices who started their programme before 1st May 2017. You will need to carry on funding these apprentices under the terms and conditions that were in place at the time in which the apprenticeship started.

  • After finishing, the majority of apprentices (90%) stay in employment, with seven in ten staying with the same employer;
  • A quarter of former apprentices are promoted within 12 months of finishing;
  • 85% of apprentices said their ability to do the job had improved, and 83% of apprentices said their career prospects had improved;
  • Apprenticeship participation increased to 899,400 in the 2015/16 academic year, up 3.2 per cent on 2014/15 and the highest number on record;
  • Apprenticeships are available in 1,500 job roles, covering more than 170 industries
  • those completing a higher apprenticeship could see increased earnings of an estimated £150,000 over their lifetime.