How are apprenticeship funded?
An apprentice is an incredibly cost effective way to bring more skills and knowledge to your business. If you’re an apprenticeship levy payer, you already have a pot of allocated funding to build a talent pipeline and upskill your existing workforce. If you’re not, you may need to pay a small percentage of the training costs.
For organisations that do not pay the apprenticeship levy, apprenticeships are funded through a co-investment approach. Under this arrangement, the government covers 95% of the apprenticeship training costs, up to the funding cap for the chosen programme.
As an employer, you are only required to pay the remaining 5% of the training costs, which should be paid upfront to the chosen training provider. This non-levy paying model also applies to levy-paying employers who have exhausted their available funds in their apprenticeship service account.
If your business falls under the non-levy paying category, you have a wonderful opportunity to benefit from government funding for apprenticeships. By contributing 5% towards the training costs, you will gain a dedicated and enthusiastic team member who will bring long-term benefits to your business.
Large organisations with an annual salary bill surpassing £3 million are required to contribute to the apprenticeship levy, which serves as a dedicated funding pool for apprenticeship training purposes for both current and new employees. The levy is calculated at a rate of 0.5% of the salary bill exceeding the £3 million threshold.
The apprenticeship levy offers a ringfenced fund that enables your business to enhance and nurture your workforce through apprenticeships. The allocated levy funds can be utilised for covering the training and assessment expenses of new apprentices or for professional development apprenticeship programmes aimed at upskilling your existing employees.
Young apprentice scheme
Assisting young individuals in securing employment brings numerous advantages.
In addition to the government funding that covers apprenticeship training expenses, employers can also receive a government grant of £1000 when hiring apprentices aged 16 to 18.
This grant is also accessible to employers who onboard apprentices aged 19 to 25 with an education, health, and care (EHC) plan or who have been under the care of their local authority.
Furthermore, businesses are exempt from making national insurance contributions for apprentices that are under the age of 25.
Apprenticeship funding FAQs
If you are an employer whose annual pay bill exceeds £3 million, you will be required to contribute to the apprenticeship levy. Consequently, you will have a dedicated levy fund specifically allocated for training expenses.
Smaller businesses that do not meet the apprenticeship levy criteria will receive a 95% contribution from the Government towards the cost of apprenticeship training. Employers will be responsible for the remaining 5% as a co-investment payment.
For eligible small and medium-sized enterprises (SMEs) with fewer than 50 employees, the Government can fully fund the training costs if the apprentice is aged 16-18. This also applies to apprentices aged 19-24 who possess an Education, Health and Care (EHC) plan issued by their local authority.
In addition, all employers have the opportunity to access cash grants of £1000 when hiring an apprentice aged 16-18. The same grants apply to apprentices aged 19-24 who possess an EHC plan from their local authority.
Employers with an annual pay bill exceeding £3 million will contribute to the Apprenticeship Levy, resulting in a dedicated apprenticeship levy fund exclusively allocated for training expenses.
Smaller businesses that do not pay the Apprenticeship Levy will receive a 95% contribution from the Government towards the cost of apprenticeship training, with employers providing the remaining 5% as a co-investment payment.
Eligible small and medium-sized enterprises (SMEs) with fewer than 50 employees can receive full funding from the Government for training costs if the apprentice is between the ages of 16 and 18. This provision also extends to apprentices aged 19-24 who possess an Education, Health, and Care (EHC) plan from their local authority.
Additionally, all employers have the opportunity to access cash grants of £1000 when hiring apprentices aged 16-18. The same grants apply to apprentices aged 19-24 who possess an EHC plan from their local authority.
In England, the funding for apprenticeships primarily operates through two channels: the Apprenticeship Levy and Government Co-Investment. The Apprenticeship Levy is applicable to large organisations, whereas Co-Investment is accessible to small and medium-sized enterprises (SMEs).
In addition to these funding avenues, there are various apprenticeship grants available to employers who meet specific criteria.
If your business has an annual salary bill below £3 million, you are exempt from the apprenticeship levy and can instead benefit from government co-investment for apprenticeship training expenses.
As an employer, you will only be responsible for paying 5% of the training and assessment fees for your apprentice, while the government will contribute 95%.
Furthermore, if your business has fewer than 50 employees and your newly recruited apprentice is between the ages of 16 and 18, the government will waive the 5% contribution, covering the entire cost of training.
The primary channel for administering apprenticeship funding is the Digital Apprenticeship Service, which is managed by the government. Through this system, employers can register apprentices, apply for national funding schemes, and explore opportunities to share Levy Funds with other employers.
Additionally, numerous local councils or combined authorities provide grants for employers hiring apprentices or operate their own levy transfer schemes.
The purpose of the apprenticeship levy is to establish a dedicated fund for large employers, promoting investment in apprenticeship training. If your organisation's annual salary bill exceeds £3 million, you will be obligated to contribute to the apprenticeship levy fund.
Employers subject to the levy are required to contribute 0.5% of their salary bill. The funds accrued through the apprenticeship levy can be utilised to cover the training costs of newly recruited apprentices or to enroll existing staff members in apprenticeships focused on professional development.
To access your funds, you will need to utilise the Digital Apprenticeship Service account. It is essential to create an account before enrolling your apprentice in their programme, as it is a mandatory requirement.
The Digital Apprenticeship Service provides an online platform that enables you to effectively manage the financial aspects of your apprenticeship programmes and estimate your expenditure.
Once you have confirmed your salary bill and levy contribution to HMRC for the previous month, you can expect to see the funds appearing in your digital account within a few working days on a monthly basis. With the account, you can then proceed to set up apprenticeships and authorise payments to training providers.
When hiring an apprentice with a care background, there are additional funds available that you should be aware of.
Care leavers who enroll in an apprenticeship program may be eligible for a bursary of £1000.
Furthermore, employers can claim additional funding of £1000 if the apprentice is between the ages of 19 and 24 and either has an Education, Health, and Care (EHC) plan or has been in the care of their local authority.
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