UK: The Cost Of Training: Apprenticeship Levy Looms

The Government's new Apprenticeship Levy (the Levy) will see large employers paying 0.5% of their annual wage bill towards the cost of apprenticeship training from April 2017.

All employers with an annual wage bill of £3 million or more will need to pay the Levy. The funds collected will be available to employers via a new Digital Apprenticeship Service (DAS), an online system which the Government envisages will be up and running from April 2017, to fund apprenticeships with approved training providers.

Here, our employment, labour and equalities experts look at how employers can make the most of the new funding for apprentice training and what they should be doing now to prepare.

What is it and how will it work?

The Levy imposes the burden of funding new apprenticeships on larger employers and although the government estimates that only 2% of employers will be affected, for those with large wage bills, the amount may be significant.

The Levy will be 0.5% of an employer's overall pay bill. As each employer will receive a fixed annual allowance of £15,000 to offset against the Levy, effectively, only employers with an annual pay bill of £3 million or more will have to pay it.

Where two or more employers are connected to one another at the beginning of the tax year, only one will be entitled to the fixed annual offset allowance and it will be for those employers to decide between themselves which group company will benefit from the allowance.

HMRC will collect the money via the PAYE system, it will then be ring-fenced for spending on apprenticeship training and made available to Levy paying employers via the DAS. The DAS will enable employers to:

  • select an apprenticeship framework or standard;
  • select apprenticeship training courses and assessment organisations;
  • advertise apprenticeship vacancies; and
  • choose the training providers they want to deliver the training.

Levy paying employers will also be able to see the funds they have available to spend and pay for apprenticeship training via DAS.

In the initial consultation, the Government envisaged all employers use the DAS so that small and medium sized employers would also be in control of their apprenticeship spend. However, it has since been confirmed that initially only net contributors will be required to use DAS. Non-Levy paying employers will be required to use DAS to pay for training and assessment of apprenticeships from 2018 onwards, with all employers using DAS by 2020.

Under the draft legislation HMRC will be given power to introduce regulations to deal with the payment, collection and recovery of the Levy as well as obligations around record keeping. The legislation will contain anti-avoidance provisions, such as employers not being able to recover the Levy costs from employees. It will therefore represent a real overhead for employers.

Why is it being introduced?

To fund the Government's target of 3 million new apprenticeships by 2020 and to raise training standards by creating sustained investment in new apprenticeships and increasing the involvement of employers in designing apprenticeships.

The Government acknowledges that employers know better than anyone else the skills they need and the changes aim to put employers in the driving seat, allowing them to choose and pay for the apprenticeship training they want.

What can it be spent on?

The funds can be used on training for apprenticeships (new recruits or existing staff who meet the eligibility criteria) which comply with an approved standard and are delivered by an "approved provider". An employer could deliver the training themselves if they register as an "approved provider" and are subject to Skills Funding Agency quality arrangements and Ofsted inspection.

It can be used to cover the costs of an apprentice's training, assessment and certification only. Employers will not be able to use the funds to cover all possible associated costs, such as wages, learning and development costs, overheads, supervision costs, licences to practise, travel and subsistence costs and workplace programmes.

How will apprenticeships for non-Levy paying employers be funded?

Non-Levy paying employers will be able to choose the training provider and assessment centre for their apprenticeships. They will be required to contribute towards the cost of the training and the Government will pay the rest up to the maximum amounts available for the apprenticeship. The Government has promised to provide more details on the proposed rates of funding in June 2016 and to confirm this by October 2016.

Points to note

In order to use DAS and Levy funding, employers need to know:

How much funding will be available?

This is not yet known, but the Government has confirmed that every apprenticeship standard and framework will be placed in a funding band. Each band will have a funding cap, limiting the amount that can be used towards training and assessment costs over the length of each apprenticeship. Details on the bands are awaited.

Smaller employers will continue to have access to Government funding, called "co-investment" to support apprenticeships. It does not appear there will be any interaction between the amounts levied on larger employers and funding made available to smaller employers.

How top-ups will work

Funding will be made available in the form of digital vouchers which can be used via DAS to buy training from approved providers. The costs of training apprentices may exceed the amounts distributed to employers as a result of the Levy so the Government expects employers may have to make additional payments towards the cost of apprenticeship training.

To ensure employers 'get out more than they pay in' the Government has committed to applying a 10% top-up to monthly funds entering into the accounts of employers who are net contributors and who spend all their Levy. This means for every £1 entering into their DAS account, employers will get £1.10.

Use it or lose it

Any employers' unused allowances will fund the provision of top-ups. The Government therefore intends to apply a 'use it or lose it' approach, with funds expiring 18 months after they enter the employer's digital account.

This will work on a first-in, first-out basis so that where a payment is made from the digital account the funds that entered the account first are treated as used. It is expected DAS will automatically remind employers when their funds are due to expire.

Young apprentices and apprentices with additional needs

Additional incentive payments to assist employers with the extra costs of funding training for 16-18 year old apprentices will be made available via the training provider.

Incentive payments of the same value will be available if an employer recruits an apprentice aged 19 - 24 who has been in the care of a local authority or has a local authority Education and Health Care Plan in place.

It is not clear what the level of additional funding will be.

English and Maths training

Apprentices must have a minimum standard in both English and Maths. Where apprentices need to do an English or Maths course, the Government will pay for this training directly to the training provider.

Supply chain apprentices

The Government is looking at whether it will allow employers to use their Levy funds to fund apprenticeship training for apprentices that are not their employees (for example agency staff or employees of outsourced service providers). We expect further information later this month.

What apprenticeship standards will apply?

The Enterprise Act 2016 which came into force on 4 May 2016 establishes an independent employer-led body, the Institute for Apprenticeships (IoA), to set apprenticeship standards and plans for the assessment of apprenticeship standards and quality of apprenticeship training. The IoA will be and up-and-running in April 2017 when the Levy begins to apply.

A key feature of the Government's policy on introducing the Levy is the simplification of the current apprenticeship frameworks and improving quality by ensuring standardised provision and testing.

In 2013 new "trailblazer standards" for apprenticeships were introduced which see employer groups developing apprenticeship standards which are relevant to their needs. The Government has committed to phasing out the existing frameworks and replacing them with the new trailblazer standards by 2020. The Government intends the new IoA will support employers with the development of apprenticeship standards and regulate the quality of apprenticeships.

Employment law issues

Employers using apprentices should bear in mind they have special legal status. The law recognises the primary purpose of an apprenticeship is training and apprentices have enhanced protection from termination of their apprenticeship compared to regular employees.

Employers' legal obligations towards apprentices will not change but this may be unfamiliar territory for those introducing apprenticeships for the first time.

The provision of training is an employment benefit, so employers will need to be mindful of issues of fairness when making decisions about how to spend their allowance. Discrimination issues may arise where apprenticeship funding is made available to train some groups of employees or job applicants and not others. For example, apprenticeships are typically made available to younger workers and this may give rise to complaints of age discrimination.

It is not yet clear whether apprentices will be caught by gender pay gap reporting requirements which are due to come into force in October 2016.

What should employers be doing now?

Clearly, the success of the system will depend to a great extent on the efficiency of the DAS.

To prepare, employers should consider:

  • whether they are likely to be net contributors to the Levy in order to make financial provision for it based on their anticipated wage bill;
  • reviewing their use of apprentices in order to plan how best to use their allowance when it becomes available; and
  • reviewing their apprentice training requirements in order to identify approved training that will suit their needs.

Larger employers intending to provide a significant number of apprenticeships might consider becoming an approved provider of apprenticeship training so they can run in-house tailor made training although the requirements for becoming an approved provider mean this will involve investment of significant resources.

Look out for further information

The Government has committed to providing further information about the funding of apprenticeships, the eligibility rules governing who employers can spend apprenticeship funding on, requirements for apprenticeship training providers and how to calculate and pay the apprenticeship levy. Further information is expected later this month and in October and December 2016.Our Employment, Labour and Equalities team will report on the new guidance as it is released.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Goodman Derrick LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Goodman Derrick LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions