Making the most of the apprenticeship levy

Any business with an annual payroll bill of £3million or more will be contributing each month to an apprenticeship ‘levy pot’. The pot is available to all businesses, whether levy payers or not.

If you are a small business and don’t pay the levy, you can still use apprenticeship funding to significantly reduce the amount it costs you to train apprentices.

Apprenticeships are a fantastic way to develop inexperienced new employees quickly, or to provide development to more experienced or older staff (there is no age limit for apprenticeships). 

If you take into account the current incentive payments (see below) it could cost you nothing to train your apprentices, and you may well be better off.

If you’re a levy payer, you will contribute 0.5% of your payroll above £3million to the pot, and the government then tops this up by a further 10%.

That money is for you to use, provided it’s to pay for apprenticeship training; if you haven’t used it within a couple of years, it gets returned to the Treasury.

If you spend more than your levy pot on apprenticeships, the Treasury will then ‘match-fund’ any further training, meaning you still won’t pay the full cost of the apprenticeship. 

Incentive payments

In case that’s not enough of an incentive, the government is encouraging take-up of apprentices with an incentive scheme.

There is an ongoing incentive which pays a bonus if you employ apprentices who are

• 16 to 18 years old
• 19 to 25 years old with an education, health and care plan
• 19 to 25 years old and they used to be in care

It's an opportunity to make use of money that is frequently returned to the Treasury unused, and is really not to be missed.

Four trade bodies have called for reforms to the Apprenticeship levy system to widen its scope to include a broader skills range so that more of the levy pot can be used.

If you have no need to spend your levy (for example, all your employees are highly qualified or there are no suitable apprenticeships for your industry) you can transfer up to 25% of your levy funding to another business, which could be in your supply chain, or for a business in an industry that you want to support.  

Any business can apply through the ‘pledge page’ for funds to pay for apprenticeships. 

Further information about hiring an apprentice can be found here.