Since 2017, the government has changed the way apprenticeships are funded. How apprenticeships are funded depends on whether you are paying an apprenticeship levy.
If you are an organisation with an annual pay bill of more than £3 million, you must pay an apprenticeship levy of 0.5% of that bill. The levy is collected monthly by HMRC, and put into a digital account.
The government will top up your levy with an additional 10%, which is paid directly into your apprenticeship account. You can use the funds in your account to fund apprenticeships for new or existing employees.
Once you have agreed the apprenticeship details with your training provider, the costs of the training are paid directly to the training provider from your apprenticeship account. 20% of the total costs of the apprenticeship will be reserved for the End Point Assessment.
If you intend to spend more than the funds available in your apprenticeship account, you will have to ‘co-invest’ 5% of the additional costs, while the government pays the remaining 95% (up to a funding band limit).
Once the apprentice has completed the qualification, you can claim additional funding from the Workforce Development Fund (WDF). If you are a levy-paying organisation, you will use your apprenticeship account to pay for the training costs via your apprenticeship, and you cannot reclaim these costs. You can, however, claim other associated costs from WDF, like wage replacement costs if you have to bring in cover to release the apprentice to complete their training, or relevant travel or external venue costs.
Unused levy funds expire after 24 months. If you do not intend to use the funds in your apprenticeship account, you can opt to transfer your funds to other employers. If you do nothing, your expired funds will be used to support new or existing apprenticeships with other employers.
Non-levy paying organisations
If you are an organisation with an annual pay bill below £3m, you do not need to pay the apprenticeship levy. The government will pay 95% of the apprenticeship training and assessment costs (up to a funding band limit). You will have to ‘co-invest’ the remaining 5%, which you pay directly to the training provider.
Once the apprentice has completed the qualification, you can claim additional funding from the Workforce Development Fund (WDF). Non-levy paying organisations can claim WDF to cover the 5% training costs that they have to co-invest. In addition, the WDF can be used to pay for other associated costs, like wage replacement costs if you have to bring in cover to release the apprentice to complete their training, or relevant travel or external venue costs.
The government offers additional grants to employers who support learners who are young or who need additional support. All employers will receive £1,000 if, at the start of the apprenticeship, the apprentice is aged between:
16-18 years old
19-24 years old and has previously been in care or who has an Education, Health and Care plan provided by their local authority.
Moreover, employers are not required to pay National Insurance contributions for apprentices under the age of 25 on earning below the higher tax rate of £827 a week (£43,000 a year).