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.

Events from this Firm
31 Oct 2017, Seminar, Toronto, Canada

Gowling WLG and ACA Aponix have joined forces to provide a practical session for regulated financial services businesses, putting the legal requirements into context and giving you concrete actions.

1 Nov 2017, Seminar, London, UK

Our next ThinkHouse Foundations session has again taken on board your feedback from the last session which means we are turning our attention to employment, cloud and warranties and liabilities.

2 Nov 2017, Seminar, Toronto, Canada

Our next ThinkHouse Foundations session has again taken on board your feedback from the last session which means we are turning our attention to employment, cloud and warranties and liabilities.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.