The Apprenticeship Levy has been in place for a few years now, after initially being incorporated into law by the Finance Act of 2016. The apprentice levy, intending to support funding for apprenticeship training, plays an integral part in supporting skills development and growing a capable workforce.
With the implementation of the Apprenticeship Levy comes some guidelines to help employers determine the best way to allocate this new category of funding. The most interesting development of all may be the system in place for Apprenticeship Levy transfers, extending access to these funds for smaller businesses and other relevant employers.
To help businesses better understand this resource and find ways to implement it usefully, we are using this post to provide some insight into the best practices for approaching the apprentice levy.
What is the Apprenticeship Levy?
While we already briefly mentioned the Apprenticeship Levy's purpose, this system's particulars deserve a more in-depth explanation.
With the Apprenticeship Levy in place, employers must pay a tax of around 0.5% of their total pay bill (though an annual levy allowance of £15,000 is available). This Levy applies to employers with yearly pay bills in excess of £3 million, so many SMEs will not have to worry about this expense. Speaking of SMEs, organisations with less than £3 million in annual pay bills will still be able to access funding for up to 10 employees, as the government will contribute 95% of the cost required for apprenticeship training.
The employer can then reinvest this money to secure their employees' apprenticeship training. The goal of this tax is to help fund apprenticeships and boost the capabilities of the workforce, and so far, it has accomplished a lot of good when it has been applied. To increase the impact of the apprentice levy, the option for apprentice levy transfers has also been introduced.
In this case, if an employer has apprentice levy funds they are not using, they can offer to transfer this money (up to 25% of their annual levy funds) to another employer to help them finance an apprenticeship. This is an excellent idea for employers who want to support the workforce development of their local community or supply chain and ensures that paying employers can determine the application of their excess funds.
The National Apprenticeship Service is in place to help employers determine how they should allocate their funds for apprenticeship training. While applying apprentice levy funds for your employees is relatively straightforward, an apprentice levy transfer can become a bit more involved. Therefore, to help guide you through this process, we will discuss some tips for implementing best practices for apprentice levy transfers.
Best Practices for (Levy) Sending Employers
To reiterate, a levy-paying employer can transfer up to 25% of their annual levy funds to another employer. Otherwise, excess funds are used to support existing apprenticeships and help fund apprenticeships for other small businesses in the system. An apprentice levy transfer benefit is that an employer can choose the apprenticeships they want to support with their levy.
A more comprehensive range of benefits to using this system include:
- Apply funding to your chosen community
- Provide for critical skills shortages
- Support relationships in your supply chain
- Control the direction of your levy funds
- Support small and medium-sized employers
What to know before making a transfer
Apprentice levy transfers are facilitated through an online service launched in 2021. The platform helps employers find other employers to transfer their funds to (or receive funds from, if you are looking for funding). This public-facing platform offers many tools to help employers identify the ideal candidate to receive their funds. If you are an employer with a recipient in mind, then you can also choose to make a direct transfer connection, which will require you to have the receiving employer's account ID.
But before you seal the deal on your transfer, it is essential to note a few key things.
- You need to ensure you have enough levy funds to cover the duration of the apprenticeship. Some apprenticeships last several years, and you should be ready to support the entirety of the training.
- With this being such a significant commitment, you can receive help with making your final decision. Intermediary bodies can help you identify suitable candidates for levy transfers and even follow through on due diligence checks to ensure the receiving employers are reliable and trustworthy.
- The last thing to note is that if you are sending the levy funds, you cannot provide the training for the receiving employer.
This is an important responsibility, and many apprentices may be lying in wait while you are deciding on your transfer decision. So be swift but diligent and identify the most impactful recipient for your levy funds.
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