Apprenticeships and the Levy system explained for employers
The basics first…
What is an apprenticeship?
A job with structured training, allowing you to earn while you learn.
Who can apply?
Anyone aged 16+ (no upper age limit) but they must be in employment with you or being hired for that role. Apprenticeships can be used to upskill your current workforce as well as for recruiting new staff. You handle all employment responsibilities.
How much do we pay the apprentice and who pays that?
The minimum wage you can pay your apprentice is £6.40/hour (as of April 2024) for apprentices under 19 or in their first year. After the first year, National minimum wage applies based on their age.
Who delivers the training and how is it done?
The apprenticeship comprises practical training in their job role with theory learning attached. You will work with a training provider who delivers the theory of the course whilst you show the apprentice how to put that theory learning into practice on the job. They are your apprentice, not the apprentice of the training provider, so it is important the apprentice has a manager who is themselves trained in the material and practices it in their role so that the apprentice can watch them apply it.
The training provider will talk you through exactly how they deliver it but it could be online once a month, or they may come to your offices and deliver training there, or through a training centre.
Now the more complicated bit… funding
What is the Levy system and how does it work?
Large employers with 50+ employees and, therefore, a high wage bill pay 5% of their payroll amount to the Government to help fund the apprenticeship scheme across the UK. The amount they pay is put into their “Apprenticeship Service Account” on a system called the “Digital Apprenticeship Service (DAS)” and topped up by 10% from the Government. They can use the funds in their account to pay for apprenticeship training for their staff.
Small businesses under 50 staff don’t pay the Levy so they can access apprenticeship training for their staff either for free, if their employee is 16-21 years old, or with just a 5% fee for the cost of the apprenticeship if the employee is 21+.
How much is the 5% fee if a small business needs to pay that?
It depends on the apprenticeship course the employee undertakes. Available courses and their cost can be found on the Institute for Apprenticeships website. If a small business needs to pay the 5%, they can work out what that would be from the relevant course cost found at the link below: https://www.instituteforapprenticeships.org/apprenticeship-standards/
What is the Levy Transfer system and how does it work?
Businesses who pay the Levy can choose to transfer up to 25% of their Levy funds per financial year, including the 10% government top-up, to any business with an “Apprenticeship Service Account”. This could be to a Levy payer or a non-payer.
Why would a large company transfer Levy funds to another business?
By transferring some of their Levy funds, it is a way to support other organisations, or maybe specific sectors of interest, to train apprentices by funding the skills training they need. For example, they might be the strategic partners of the funding organization, charities they support, or their local community. If the company doesn’t transfer any unspent funds, the remaining Levy funds will expire after two years and be lost.
How would we go about transferring Levy funds?
There are two options for gifting unspent levy funds:
- You can gift funds through the government's online service for charities and SMEs providing that they have an account on the Digital Apprenticeship Service (DAS), not already receiving funding transfers and the apprentice is a new start (or moving from another job to continue training with them).
- You can transfer funds directly through the Digital Apprenticeship Service (DAS) to the charity partners or SMEs of your choice which then allows you to work directly with them rather than through an open application process and pledging public funds.
- Ask your local County Council to put you in touch with their Apprenticeship Team who can aid you with introductions to SMEs in need of transferred funds. Equally, if you are an SME and need funds for training, you can also reach out to them for introductions to a levy payer who is ready to gift levy funds.
Exactly what do I do to transfer the funds?
To transfer funds to a business, you need their apprenticeship service account ID. In your account, select "Finance" then "Manage transfer connections." Enter their ID, wait for acceptance, and then agree on apprenticeship training details and costs.
What are my commitments if I transfer some of our Levy funds?
As a gifting organization, you will be committing to pay the cost of the apprenticeship's you will be funding for the recipient organization until completion. Payments for the apprenticeships you fund, leave your account monthly and those funds will be prioritised above your own apprentices. It is a multi-year commitment depending on the length of the apprenticeship programme(s) you are supporting. Breaks in learning will impact that duration and your monthly payments.
If we are the organization transferring Levy funds, are we now responsible for employment of the apprentice?
No, the original employing organization continues to employ the apprentice and takes on all of those responsibilities. The transfer of funds is purely to help pay for training costs.
#naw2025 #skillsforlife
Come to the:
“Understanding Business Apprenticeships“ event
on Tuesday 11th February @ 11am - 11.30am
for really good coverage of everything you need to know.
Register here: https://www.eventbrite.com/e/forum-for-employers-understanding-business-apprenticeships-tickets-1152483201279
