The Apprenticeship Levy - Investing in Training

From today, 6th April 2017, the Apprenticeship Levy has come into force throughout the United Kingdom. This is a tax that the Government has introduced to help meet its target of creating 3 million quality apprenticeships by 2020.

What is the Apprenticeship Levy?

The Apprenticeship Levy is a tax which employers will need to pay if they have a payroll in excess of £3 million per annum. This money, supplemented by a contribution from the Government, will be set aside in a digital account to be spent with registered providers of apprenticeship training within 24 months. Access to this money is time limited, so should be viewed as a “use it or lose it” fund.

What if your payroll is less than £3 million?

Organisations do not need to have a payroll of over £3 million to benefit from the funding. A ‘co-investment’ rate will also be introduced which means that these organisations will only have to contribute 10% towards the cost of training an apprentice. The Government will ‘co-invest’ the remaining 90% (up to the funding band maximum).

Businesses with less than 50 employees will not have to pay anything to train an apprentice between the ages of 16-18. This further encourages investment in young apprentices and provides extra support for small employers.

How much will it cost?

Levy-paying employers will need to pay 0.5% of their annual wage bill on a monthly basis, offset by an annual allowance of £15,000. These organisations will also benefit from the ‘co-investment’ rate when they have exhausted their funds but continue to invest in apprenticeship training.

What are the implications?

Organisations need to be aware of potential cost increases across service provider sectors, as suppliers may decide to revise their pricing due to the introduction of the levy. This, in addition to factors such as the recent increase in minimum/living wage and rising costs of goods and services due to the depreciation of the pound sterling, puts further pressure on businesses to operate more cost effectively. While employers may accrue near-term additional costs, this is an exciting opportunity to invest in apprenticeships, enhance the quality of training provided and address social value objectives.

How Cirrus can help you

As a leading procurement consultancy we have delivered millions of pounds of savings for our clients and helped them achieve value for money across a wide range of cost categories. To help alleviate rising costs, including the potential costs associated with the levy, Cirrus can provide a range of advice and support services to capture savings and efficiencies for clients.

Please visit our services page for more information on how we can help your organisation, or contact a member of the consultancy team for assistance.

Further information

Apprenticeships are a devolved policy, which means each nation within the United Kingdom manages its own apprenticeship programme. The information provided here applies to England only. Scotland, Wales and Northern Ireland may differ in the way each country administers the levy.

For further information about the Apprenticeship Levy please visit the following links:

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