December 2015 Apprenticeship Levy

Intervention is needed on training Market failures are leading to underinvestment which has broad economic impacts and justifies intervention. Number of employees who worked fewer hours than usual because they attended a training course away from their workplace

What the Chancellor said at budget This goal will require funding from employers. In recognition of this, the government will introduce a levy on large UK employers to fund the new apprenticeships. This approach will reverse the long-term trend of employer underinvestment in training, which has seen the number of employees who attend a training course away from the workplace fall from 141,000 in 1995 to 18,000 in The levy will support all post-16 apprenticeships in England. It will provide funding that each employer can use to meet their individual needs. The funding will be directly controlled by employers via the digital apprenticeships voucher, and firms that are committed to training will be able to get back more than they put in. There will be formal engagement with business on the implementation of the levy, which will also consider the interaction with existing sector levy boards, and further details will be set out at the Spending Review.

Announcement Spending review The levy will be 0.5% of paybill. An allowance of £15,000. Levy paid on paybill in excess of £3m (2% of UK employers). Employers in England who pay the levy and are committed to apprenticeship training will be able to get out more than they pay into the levy, through a top-up to their digital accounts

What does it mean in practice? EXAMPLE 1 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 EXAMPLE 2 Employer of 100 employees, each with a gross salary of £20,000 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.

Funding is put into the hands of employers alongside the design of apprenticeship standards HMRC COLLECT LEVY APPRENTICESHIP FUNDING EMPLOYERS INDIVIDUAL VOUCHER ACCOUNTS PROVIDERS Payment made to providers Funding claim and proof of training STAKEHOLDER OVERSIGHT Money flow Information flow EMPLOYERS with paybill over £3m APPRENTICESHIP DESIGN Digital Payment