The Apprenticeship Levy - An Overview

Posted: Nov 24, 2016


The levy will affect businesses of all sizes and will come into effect on 6 April 2017, with the new system becoming operational as of 1 May 2017. However, different funding methods apply for companies of different sizes. Below is a summary of the main facts and figures:

Businesses with a payroll bill that exceeds £3m

  • 0.5% of the company’s pay bill will go towards the cost of training apprentices.
  • The pay bill is defined as being the employer’s total pay bill that is subject to class 1 secondary national insurance contributions.
  • Employers will be given an annual allowance of £15,000 which will reduce the amount of levy they have to pay.
  • The funds are collected in a digital account which will be unique to each employer, and this is done through the PAYE scheme.
  • For any amount paid into the account by the employer; the government will contribute an additional 10%.

Charities / Group Structures:

A single allowance of £15,000 will be allocated and shared between the different divisions. This is to be determined at the beginning of each financial year.

Seasonal workers / fluctuating pay bills:

As the allowance is split into 12 monthly instalments of £1,250, only where the 0.5% of the monthly pay bill is higher than £1,250 will the levy have to be paid.

Businesses with a payroll bill less than £3m

The levy will not have to be paid by employers with a pay bill of less than £3m. The cost of training apprentices will be funded through co-investment whereby the employer contributes 10% and the government pays the rest (up to a maximum based on a specified funding band*).

Companies with less than 50 employees:

The training costs for 16 to 18-year-olds will be 100% funded by the government. This also applies to any young care leavers or young people with an EHC (Educational and Health Care) plan.

Other important facts: 

*15 different funding bands will be put in place for apprenticeships with different standards and frameworks, and additional funding will also be available for 16 to 18-year-olds and disadvantaged learners. 
All funds contributed towards the apprenticeship levy can be accumulated for two years and any unused balance will be carried over. 
The funding received is uniquely for the apprenticeship training and end-point assessment, which must go through an approved training provider.


The current skills gap in the UK workforce is ever increasing and the levy is set to address this by funding 3 million apprenticeships by 2020. The aim is to ensure businesses have access to more young talent which, in itself, brings many advantages and paves a positive path for the next generation of young workers.
In recent studies, it was shown that the average apprenticeship increases productivity by £214 a week. When looking at the “attract and retain” aspect, apprenticeships are a tried and tested way of recruiting enthusiastic young talent who can bring fresh ideas. They are also a means for businesses to address any skills shortages by tailoring the apprenticeship to specific job roles or up-skilling / re-training existing staff, which in turn increases employee satisfaction and loyalty and reduces staff turnover.
The apprenticeship training can take place in the workplace, which makes it more effective and minimises disruption within the business. Overall, it can be said of apprenticeships that they are a very effective way of improving the functionality of your business by increasing productivity, improving the quality of the talent within the business and maximising staff retention.


We’re always keen to support our clients through periods of change so we will be hosting a seminar at 8am on the 26 January 2017 to cover the apprenticeship levy in more detail.
At the event, we will be discussing the different implications from a payroll point of view, and our Payroll manager Bev Stoakes will provide details on how we will be adapting to cater to these new rules. Our Business Services partner Helen Besant Roberts will speak about how best to take advantage of the levy, and Chris Taylor, the Professional Services manager from the Greater Manchester Chamber, will give his expert opinion on the new levy.
We will also be hearing from Cat Doyle, the Workforce Development Advisor from the Skills Company, who will explain how organisations can fully utilise the Apprenticeship Levy to support their workforce development and growth. 
Click here to register for this event.

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