Apprenticeship Levy

The government recently announced the introduction of an apprenticeship levy as a long term solution to the decline in training investment.

The Chancellor of the Exchequer, George Osborne, confirmed in the Spending Review, as part of the Autumn Statement, that the rate for the apprenticeship levy will be set at 0.5% of an employer’s paybill.

The levy will be effective on businesses with payroll bills above £3m. To offset the impact, each employer will receive a one off allowance of £15,000.

The Department for Business, Innovation and Skills (BIS) has provided some examples to help clarify how it will work.

  •     Employer of 250 employees, each with a gross salary of £20,000:

Paybill: 250 x £20,000 = £5,000,000
Levy sum: 0.5% x £5,000,000 = £25,000

Allowance: £25,000 – £15,000 = £10,000 annual levy payment

  •     Employer of 100 employees, each with a gross salary of £20,000 would pay:

Paybill: 100 x £20,000 = £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000

Allowance: £10,000 – £15,000 = £0 annual levy payment

The implications

The levy will be implemented in April 2017 and is expected to generate £3bn of funding for apprenticeships by 2019/20. The system will be managed by the Digital Apprenticeship Service, with more details to follow.

Large employers across the visitor economy will make a significant contribution to the £3bn figure, which as we have warned may see a reduction in spending on training budgets to offset the impact of the levy.

The major beneficiaries of the levy will be those small to medium business that will be able to access the levy without making a contribution until they hit the £3m paybill.