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Paying for apprenticeships: An employers guide

Simplifying the routes to hiring apprentices

Employers have several routes to fund apprenticeships, each with its own advantages and considerations. The key is understanding which route applies to your organisation so that you can transition smoothly into the process.

Apprenticeship levy

The Apprenticeship Levy is a key funding mechanism introduced in April 2017. It applies to employers in the UK with an annual payroll exceeding £3 million. These employers contribute 0.5% of their payroll to the levy. The funds collected are then earmarked for apprenticeship training. Employers paying the levy can use the funds to cover the full cost of apprenticeship training and assessment. However, it’s important for levy-paying employers to use their funds within 24 months, as they expire after this period. If you’re unsure whether you’re contributing toward the levy, get in touch and we can help you figure this out.

Co-investment

For employers with an annual payroll below £3 million, the co-investment model allows them to share the cost of apprenticeship training with the government. Under this scheme, employers contribute 5% of the total cost of apprenticeship training, while the government covers the remaining 95%, up to the maximum funding band for a particular apprenticeship standard. This model makes apprenticeships more accessible for small and medium-sized enterprises (SMEs) that may not be subject to the Apprenticeship Levy.

Transfer of apprenticeship levy funds

Large employers with surplus funds in their Apprenticeship Levy accounts can transfer up to 25% of their annual funds to other employers, including smaller businesses in their supply chain. This transfer initiative aims to promote collaboration and support apprenticeship training across industries. By sharing unused levy funds, larger companies can help smaller enterprises invest in the development of their workforce. An example of this approach is Amazon. Amazon has funded dozens of apprenticeship schemes for smaller businesses over the last 24 months.

To wrap up

In conclusion, the funding of apprenticeships in the UK is a diverse landscape, offering options for employers of all sizes and industries. The Apprenticeship Levy provides a direct route for larger employers to invest in workforce development, while the co-investment model and transfer of levy funds enable smaller businesses to participate. With these various funding routes, employers can actively engage in shaping the future workforce while addressing the skills gap in their respective sectors.

There’s more information like this in our employer guide

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