Organisations pay 0.5% of their pay bill, less an annual allowance of up to £15,000, in monthly payments using the PAYE system. These funds then become available through an Apprenticeship Service account and can be spent on training. The funds can only be used for apprenticeship training and end-point assessment, up to the capped cost, not on the other associated costs of setting up or running an apprenticeship programme.
How does it work?
Once the annual pay bill and levy payment has been estimated, the monthly amount available to employers is calculated. For example, using annual pay bill of £5 million:
- Step 1. Calculate 0.5% of estimated annual pay bill: £5,000,000 x 0.5% = £25,000
- Step 2. Deduct £15,000 annual allowance: £25,000 – £15,000 = £10,000
- Step 3. Divide by 12 and round down* to nearest pound to calculate monthly amount payable through PAYE system: £10,000 ÷ 12 = £833.33. Round down to £833
- Step 4. Add 10% government top-up and round up* to nearest pound: £833 + £83.30 = £916.30. Round up to £917
- Step 5. Monthly amount available to the employer through the Apprenticeship Service account: £917
Payments for training can be drawn down during the period of the apprenticeship, with 20% of the capped cost being withheld for the end-point assessment.
How long do the funds last?
The funds in your digital account – plus the 10% government top-up – expire after 24 months. This is on a rolling basis. Employers who pay the levy can transfer unused funds to other employers. Please follow this link for further information: Transferring unused apprenticeship funds to other employers – GOV.UK (www.gov.uk)
What if the amount in my Apprenticeship Service account isn’t enough to cover costs?
If you use up the funds in your Apprenticeship Service account, you can apply for government funding for further apprenticeship training under the co-funding model (5% paid by the employer and 95% paid by government) up to the value of the capped cost for each apprenticeship.
What can the Apprenticeship Service be used for?
You will use your Apprenticeship Service account to:
- Select the apprenticeship programme
- Choose your training provider and set training price
- Manage payments for training and assessment
- Post vacancies