The Apprenticeship Levy being implemented in April 2017 is intended to support the government’s plan to increase the number of apprenticeships in operation to three million by 2020.
The levy is being introduced at the same time as a new funding model for apprenticeships. Added to this will be the requirement (under the Enterprise Act) for many public sector employers including schools to employ a minimum of 2.3% of their staff as apprentices.
Further guidance is expected to be published in December 2016. What follows is a brief explanation of the new system.
The New Apprenticeship Levy System
Organisations with a payroll bill of more than £3 million per year will be required to pay the levy. It will cost employers 0.5% of their total staff salary bill less a £15,000 allowance. The first payment is due to be made in May 2017. The money will be paid into an HMRC digital account for each employer. The government will top up the funds by a further 10% and employers will be able to access the funding to support investment in apprenticeships.
Each employer is required to report and pay the levy through the PAYE system and the amount is calculated on earnings that are subject to Class 1 National Insurance contributions. This includes all salary/wages, bonus payments and pension contributions.
For maintained schools the local authority is the employer of staff. This means that maintained schools whose individual pay bill is less than £3m will still be included in the calculations and will therefore be subject to the 0.5% levy.
Voluntary Aided schools along with Academies and Multi Academy Trusts (MATs), where the governors or Trust are the employer, will not be liable for the levy if the school’s individual pay bill equates to less than £3m per annum. It is also important to note that whilst MATs are treated as one employer and must therefore report on the totality of staff costs within each academy in the MAT they will only be entitled to one £15,000 allowance.
Each local authority will provide details to schools on how they propose to apply the levy and manage the funds in the apprenticeship digital account. They are not required to ring-fence each school’s funding. Voluntary Aided schools and Academies using the local authority payroll service should communicate with the local authority to ensure that the relevant steps are taken in relation to their non-inclusion in the levy.
For maintained schools utilising One Education’s payroll service (or another external provider) advice is currently awaited from HMRC as to how the levy should be processed.
Schools who pay the levy will be able to access funding for apprenticeships through the new digital apprenticeship service account. This will enable employers to select apprenticeship frameworks or standards, choose training providers and assessment organisations, post vacancies and pay for apprenticeship training and assessment.
Schools who don’t pay the levy will still be able to choose apprenticeship training providers but will not use the digital service until 2018 at the earliest. Such schools will be asked to make a 10% contribution to the cost of the training. The government will co-invest by topping up to 90% (subject to a cap limit).
The Enterprise Act also coming into force in April 2017 includes a requirement for all public sector bodies including schools with more than 250 employees to have a minimum of 2.3% of their staff as apprentices. Again for MATs, the total number of employees across the Multi-Academy Trust will count towards the 250 requirement. However it is not necessary to bring in new staff or employ only young people as apprentices. The new system is intended to be far more flexible and supportive of the employer’s needs.
Ensure you are prepared for the coming changes
All of this is affecting schools at a time of already constricting budgets and will clearly require careful management to ensure that schools not only meet their legal obligations, but that they benefit from the new arrangements. Whilst we are still waiting for clarification on certain operational aspects, colleagues at One Education are always willing to have discussions with you should you have any concerns or queries in the interim period.