The Apprenticeship Levy was introduced in April to help train more people and create a better skilled workforce. The apprenticeships will be paid for by companies with annual paybills of more than £3 million and aims to train three million employees. 

But why does the policy matter and how exactly does it work? We answer the three most important questions.

Why focus on apprenticeships?

According to skills minister Nick Boles, “overall, there has been a steady decline in the amount and quality of training undertaken by employers over the last 20 years. This has been bad for UK productivity.”

Government statistics suggesting apprenticeships boost productivity and deliver strong ROI. 70% of surveyed employers said apprentices improved and 83% of apprentices said their career prospects had improved. And a typical apprentice provides a return of between £26 and £28 per £1 of government investment in apprenticeships at levels 2 and 3. 

Amanda Nuttall, director of apprenticeships and professional development at the Association of Proposal Management Professionals, stated that by putting employers more in control of apprenticeships it will drive buy-in: “They get to determine what skills are developed and how they will be assessed, and I think being more involved will create real buy-in.”

What's changed?

For companies with a pay bill of over £3 million, you are now required to pay a levy which is set at 0.5% of the employer’s bill. The government have also announce that they will top up your levy pot by 10% and is uncapped. In reality this only affects 2% of companies, of 19,000 businesses in the UK.

There are now 200 apprenticeships, with 50 pending which have been created by employers for employers, unlike the old framework which was written by educationalists.There are 15 different funding bands for and each Apprenticeship is allocated a band which range from £1,500 to £27,000.

However the levy is not a cash payment and can only be used on specific items relating to the delivery of apprenticeship training and there is no cap on apprenticeship numbers. The government is also providing £15,000 to each levy payer to offset the payment of the levy. 

It is also good to know that if you do not use your levy pot within 24 months it is taken away from you and put into a central pot, so if you don’t use it, you will lose it! 

What if you are not a levy payer?

Fear not. The government has agreed that non-levy payers can pay a 10% and the government will pay the remaining 90% to cover the cost of training and assessing their apprentices.