What is the Apprenticeship Levy?
In 2015, the UK government committed to three million apprenticeship starts by 2020. To achieve this target, the Apprenticeship Levy was introduced on UK employers with the aim of contributing up to £3 billion per year by 2021.
Since April 2017, employers with an annual pay-bill of £3 million or more are required to pay 0.5% into the Levy. It is estimated that around 21,000 UK employers are affected; no employer is exempt.
How can I use my Levy contributions to pay for training?
Each apprenticeship Framework or Standard is assigned a funding band. Employers can negotiate a price with a training provider on the actual cost of delivering training. Levy funds can then be used to pay for the delivery. If a fee is agreed which is greater than the band, the employer is required to pay the additional amount in full.
Once a training delivery fee has been agreed, the employer and provider will set up payment terms. The employer must transfer equal payments to the training provider each month, with 20% held back until completion. This final payment is triggered when the apprentice takes their End-point Assessment. Please note that the 20% is still paid to the provider even if the apprentice fails their End-point Assessment.
One of the core requirements of an apprenticeship is that apprentices must spend 20% of their working time in ‘off-the-job’ training. While this can include study time at college or a training provider, off-the-job training can also include activities which are undertaking at the apprentice’s place of employment – although certain rules and restrictions apply.
It is important to note that off-the-job training must take place during an apprentice’s normal, paid working hours. If it takes place outside of normal working hours then the apprentice must be given time off in lieu. It is also important to note that the 20% does not include English and Maths, where these are being studied as a mandatory component of an apprenticeship.
To untangle this, and to provide you with some specific examples of off-the-job training, ILM has produced the a guide for employers and training providers.
Who can I develop using the Apprenticeship Levy?
Government has relaxed restrictions around prior achievement. This means employers are able to deliver Management Apprenticeships to staff who are already qualified at a higher level, provided their prior qualification is in an unrelated discipline.
This is particularly useful where employers have highly-qualified technical staff who are ready to move into management positions, or existing managers who require substantive new skills to make them more effective in their role. For example, an existing staff member who has a degree in Physics will be able to study towards a Level 3 or Level 5 Management apprenticeship, and their employer will be able pay for this out of their Levy funds.
Apprentices are employees aged 16 or over working while studying - from Level 2 (equivalent to GCSE) right up to Level 7 (equivalent to Master’s Degree).
There are several steps to taking on an apprentice:
Choose an apprenticeship framework or standard for a new or existing post within your business.
Find a training organisation that offers apprenticeships for your industry - they’ll handle your apprentice’s training, qualification and assessment.
Check you’re eligible for apprenticeship funding and apply - there are different rules for large employers with wage bills over £3m and SMEs. Read more about funding in our 'Funding information' tab.
Advertise your apprenticeship - your training organisation will do this for you through the find an apprenticeship service. Alternatively, work with your training organisation to identify how the programme will fit into an existing employee's role.
Select your apprentice and make an apprenticeship agreement with them
Apprenticeship programmes provide the perfect blend of development for the workplace. Apprentices are employed as a member of staff, paid the minimum apprenticeship wage (or more) and work alongside your existing staff to develop the skills, knowledge and behaviours they need to make an impact on your business.
New style apprenticeships have been developed with employers in mind – so they’re perfect for addressing the changing needs of UK business. Investing in your managers via apprenticeships creates engaged, productive and effective workforces that have a sustained impact on your business.
Each framework or standard is assigned a funding band maximum, which indicates the maximum amount of funding available for each apprentice. Providers and employers can negotiate and agree a fee within the band.
Employers can choose to deliver an apprenticeship at a higher rate than the funding band maximum, however they will need to pay the additional costs themselves.
ILM offers a range of management apprenticeship frameworks and standards, with funding band maximums are as follows:
ILM has an end-to-end apprenticehip offer for 4 standards. The maximum funding bands are as follows:
- Team Leader/Supervisor (Level 3) - £4,500
- Operations/Departmental Manager (Level 5) - £7,000
- Chartered Manager Degree Apprenticeship (Level 6) - £22,000
- Senior Leader Apprenticeship (Level 7) - £14,000
For further guidance visit the Institute for Apprenticeships & Technical Educations website.
Non-levy paying employers
Non-levied employers can still negotiate the cost of delivery with their training provider, however they must make a 10% contribution towards the overall cost*. A payment schedule is agreed prior to delivery and the provider must invoice the employer for their monthly contribution. The remaining 90% is paid to the provider from the Education and Skills Funding Agency (ESFA). Providers must therefore have an apprenticeship allocation from the ESFA
The ESFA will not trigger release of funds until the provider has given evidence that the employer has paid their 10% contribution.
* However Government will pay 100% of costs for small employers (with fewer than 50 staff) who take on any of the following:
- a 16-18 year old apprentice
- a 16-24 year old with an Education, Health and Care Plan
- a 16-24 year old care leaver.
What can and cannot be funded
Public funding – which includes ESFA contributions and employer levy funding – can only be used to cover the costs of training and assessment, including End-point Assessment. There are strict rules around what can and cannot be funded. Full details can be found in the funding rules for training providers, however some key examples are below:
|Can be funded
|| Cannot be funded
|Delivery and assessment costs associated with relevant qualifications
||Qualification registration fee (unless mandated within the standard)
|Distance, online or blended learning relating to the off-the-job training element of an apprenticeship
|Materials (non-capital items) used in the delivery of the apprenticeship framework or standard
|Apprentice travel costs
|Any administration directly linked to the training and assessment, including endpoint assessment. This includes costs relating to the development of teaching materials, lesson planning, the processing of the ILR and quality assurance.
|Any delivery which is done entirely by distance learning
|End-point Assessment resits
|Workbooks and learning resources, including where purchased from a third party.
||Any training or materials not relating to the standard.
English and maths, where needed, are funded separately at a rate of £471 per subject.
This guidance relates to England only. Scotland, Wales and Northern Ireland have their own separate funding arrangements. Any queries relating to the devolved administrations can also be directed to firstname.lastname@example.org.