You’ll hear many success stories from fellow businesses that have opened their doors to apprenticeships. These programmes can be life-changing for learners across the country and for your business, too, as apprenticeships help you nurture a motivated and skilled workforce.
Whether you’re looking to upskill existing employees or seek out new talent, apprenticeships engrain learning and professional development into your culture. There’s just one question remaining: how can you pay for it?
Apprenticeship funding has many rules, and this article will explain how it works and what the apprenticeship levy means for your business.
How Apprenticeships are Funded
There are thirty different funding bands determined by the Institute for Apprenticeships and Technical Education (IfATE). The bands range from £1,500 to £27,000 in financial support, so it’s important you understand what you’ll pay and what support you can receive from the government.
Understanding the Apprenticeship Levy
The government provides financial assistance towards the cost of training and assessments for employers hosting apprenticeships. Ultimately, how much you pay will come down to whether your business pays the apprenticeship levy.
The apprenticeship levy is a fee paid at a rate of 0.5% of your annual pay bill. It applies to your business if:
- Your annual pay bill exceeds £3 million.
- Your business is connected to companies/charities for Employment Allowance purposes, and the combined annual pay bill exceeds £3 million.
If you pay the apprenticeship levy, you can use these funds to pay for the apprenticeship. Think of it as a pot of money earmarked for apprenticeships. If you don’t use it, you lose it. The government will top up the levy with an additional 10%.
If you don’t pay the apprenticeship levy, you pay 5% towards training and assessment costs. The government contributes 95%.
In both cases, the employer also has to pay the apprentices wage.
There’s quite a lot of need-to-know info if you do pay the levy, such as:
- Any unspent levy is automatically carried over to the next month, but it has a 24-month time limit.
- It cannot be used on anything other than the apprenticeship training, e.g., wages, expenses or setting up the apprenticeship scheme.
- Your business is responsible for additional training fees (usually incurred by the training provider).
- You can get extra support that reduces the amount of levy you need to pay each year.
Funding If You Do Pay the Apprenticeship Levy
You can access the apprenticeship levy via an online portal (you’ll need to create an account). Although the funds automatically carry over to the next month, the money expires after two years. If you don’t think your business will use your levy funds, you can pledge up to 25% to help smaller businesses.
The levy is applicable to around 650 different apprenticeships that are deemed “high quality,” and it can’t be used to pay for:
- Unapproved qualifications
- ‘Top-up’ or additional qualifications
- Apprentice wages
Funding If You Don’t Pay the Apprenticeship Levy
If your business doesn’t qualify for the levy, the apprenticeship funding route is different. You’ll contribute 5% towards the apprenticeship, and the government pays the remaining 95%.
There’s extra funding available for non-levy businesses if:
- You have fewer than 50 people at your company, and the apprentice is aged 19-24 and has previously been in the care system/has a Local Authority Education, Health and Care plan.
- The apprentice is 16-18 years old orhas previously been in the care system/has a Local Authority Education, Health and Care plan.
How to Define an Apprenticeship Wage
Just like the rest of the country, apprentices are entitled to the Apprentice Wage and the National Minimum Wage, which varies based on the learner’s age bracket. The Apprentice Wage currently covers:
Apprentices under 19 or 19+ and in the first year of the apprenticeship.
Apprentices are paid for the time spent working plus the time spent studying. The government offers multiple financial incentives to motivate businesses to offer apprenticeships – here’s some info directly from the Education Hub website:
- “Employers do not have to pay employer national insurance contributions for apprentices aged under 25 when the apprentice earns up to £4,189 / month.
- We pay £1,000 to both employers and training providers when they take on any apprentice aged under 19, or apprentices aged 19-24 who have an Education, Health and Care Plan or have been in care.
- We fund 100% of the training costs for small employers (fewer than 50 staff) when they take on apprentices aged under 19.
- From August 2023, we are increasing the bursary that we pay to apprentices aged 16-24 who are care leavers, from £1,000 to £3,000.”
How does the Autumn 2024 Budget affect apprenticeship funding?
Keep in mind that, as of 30th October 2024, the UK Government unveiled the Autumn Budget 2024, which included upcoming changes to the Apprentice Wage, the National Living Wage and the National Minimum Wage. Wages will go up across the board.
What do your apprentices need to know?
Ultimately there’s one thing your apprentices really want to know: how much they’re getting paid.
It sounds obvious, but apprenticeship opportunities must be set in stone, starting with the contract of work. Your organisation will need to provide a well-developed, genuine contract of employment that lasts for the entirety of the apprenticeship. This agreement should, as usual, define exactly what the learners will get paid.
Apprenticeship Funding is the Catalyst to a Thriving Business
There are thousands of talented and capable professionals out there who may struggle to connect with your company via traditional means. When you’re all set up with an apprenticeship, the next step is to seek out qualified applicants. Ready to advertise? Get in touch with our team to get your programme off the ground.
