Apprenticeship Levy

From 6th April 2017, all UK employers with annual salary bills of more than £3 million will pay an apprenticeship levy.

It’s aimed at funding apprenticeships across the UK. The rate will be 0.5% of the employer’s pay bill. Only employers with a salary bill over £3 million will pay.

The UK Government estimates that 2% of employers will be eligible. Over 2017-18, Scotland will receive £221 million of levy funding through the block grant.

Scottish Govenment Consultation and response on the levy

The Scottish Government consultation with businesses, industry and stakeholders on the best use of the apprenticeship levy in Scotland closed on 26 August. Feedback showed employer support for work-based learning. You can view further details in the independent analysis report on responses to the consultation at our corporate website.

The Scottish Government gave its response to the UK Government Apprenticeship Levy on 15 December 2016. This outlines that they will use levy funding to further support skills, training and employment in Scotland.

This includes commitments to expand the Modern Apprenticeship programme as growth continues towards 30,000 new starts each year by 2020, increasing the number of Graduate Level and Foundation Apprenticeships during 2017-18 and continuing with the implementation of the Youth Employment Strategy: 'Developing the Young Workforce'.

In Autumn 2017, the Scottish Government will also establish a new £10 million Workforce Development Fund to help employers upskill and reskill their workforce. Employers, through the Scottish Apprenticeship Advisory Board, will play a key role in shaping this fund. Read further information in our news story.

FAQS

How will it work?

The levy is set at 0.5% of an employer’s annual wage bill and each employer will receive an allowance of £15,000 per year to offset against the levy. This means that although the levy applies to all employers, only employers with a wage bill over £3 million will pay it.


For example:


Employer A has 250 employees, each with a gross salary of £20,000. They would pay:



  • Pay bill: 250 x £20,000 = £5,000,000

  • Levy sum: 0.5% x £5,000,000 = £25,000

  • Allowance: £25,000 - £15,000 = £10,000 annual levy payment


Employer B has 100 employees, each with a gross salary of £20,000. They would pay:



  • Pay bill: 100 x £20,000 = £2,000,000

  • Levy sum: 0.5% x £2,000,000 = £10,000

  • Allowance: £10,000 - £15,000 = £0 annual levy payment


Employers who operate multiple payrolls will only be able to claim one allowance.


You can use the Skills Funding Agency's indicative online tool for employers to estimate your levy contribution, begin your training requirements, and estimate your financial spending.


You can find further details on the calculation and payment of the apprenticeship levy on Gov.uk.

How will employers pay the apprenticeship levy?

Each month, HM Revenue and Customs (HMRC) will collect the levy through Pay As You Earn (PAYE),  payable alongside income tax and National Insurance. HM Treasury will allocate funding to the Scottish Government through the block grant.


For further details on the calculation and payment of the apprenticeship levy, read HMRC draft legislation.

What will employers get back from the levy?

The Scottish Government's response to the UK Government Apprenticeship Levy sets out how they will use the £221m of levy funding over 2017/18 to support skills, training and employment in Scotland. This includes the delivery of 30,000 Modern Apprenticeship starts per year by 2020, and the establishment of a Workforce Development Fund to help employers up-skill and re-skill their workforce.


The Minister for Employability and Training, Jamie Hepburn, has emphasised that the fund will be developed with the input of employers through the Scottish Apprenticeship Advisory Board and that a working group will be set up in due course. Read further details on this in the Scottish Government's news release.

Do employers who fund their own apprenticeships still have to pay the levy?

Yes. All employers with a wage bill greater than £3million will pay the levy. Employers could review their skills needs and consider how their current training could be delivered through an approved apprenticeship to maximise their return on the levy.

Will employers who don’t pay the levy still get funding for apprenticeships?

Yes. All employers will still be able to access funding for approved apprenticeships. We recognise that apprenticeships are an essential way for SMEs to develop their employees and contribute to growth.

How will this affect employers with staff in different parts of the UK?

The levy will be paid by employers across the UK. So, employers who operate across the devolved nations will pay their contribution based on their total number of UK employees.

Will Scottish apprenticeships be funded in a similar way to apprenticeships in England?

No. Scotland and England have different administrative arrangements for funding apprenticeships.


In England, funding for apprenticeship training will be administered through a digital apprenticeship system for levy paying employers. There are no plans to adopt this system in Scotland, and apprenticeship funding will continue to be administered by SDS through contracted training providers and direct employer contracts.

Will employers who pay a training levy still have to pay this new levy?

Yes, if they have a pay bill greater than £3million, as the apprenticeship levy applies to all employers.


There are two existing industry training boards – the Construction Industry Training Board (CITB) and the Engineering Construction Industry Training Board (ECITB) – which operate their own levies.


Both bodies are in consultation with their member companies on how the new apprenticeship levy will interact with their current levy mechanisms. Both will offer more information when it is available.

What support will be available to help employers understand what these changes mean?

SDS will work with employers, including industry bodies, to provide support as administrative arrangements are developed.


We’ll keep updating this page with the latest information for employers on the apprenticeship levy.

How is Skills Development Scotland involved?

Skills Development Scotland (SDS) has established an employer-led Scottish Apprenticeship Advisory Board  (SAAB) to strengthen employer contribution to the development of apprenticeships in Scotland, ensuring they are aligned with industry and economic need, Fair Work and job opportunities.


Both SDS and SAAB continue to engage with the Scottish Government, employers and partners ahead of the levy's introduction.


As part of this, the the Minister for Employability and Training, Jamie Hepburn, has emphasised that the Workforce Development Fund – aimed at helping employers up-skill and re-skill their workforce - will be developed through the Scottish Apprenticeship Advisory Board and that a working group will be set up in due course. Read further details in our news story.

What is the Scottish Apprenticeship Advisory Board?

Led by employers and representatives from industry bodies across a range of sectors, the Scottish Apprenticeship Advisory Board (SAAB) will provide employer leadership and contribution to the development of apprenticeships in Scotland; ensuring they are aligned with industry and economic need, Fair Work and job opportunities. The Board consists of four groups – a Group Board, Employer Engagement Group, Employer Equalities Group and Frameworks and Standards Group.


The Board will also contribute to the Scottish Government’s consultation process on the Apprenticeship Levy and also actively encourage others with a shared interest in apprenticeships to participate.


SDS will work with the Board to ensure a demand-led, responsive and adaptive work-based learning system for employers and the Scottish economy.

What's the background to the apprenticeship levy?

The UK Government announced plans for a UK-wide apprenticeship levy on employer payroll bills in 2015.


The levy is aimed at funding increased uptake of apprenticeships.
Legislation will be introduced in 2016 and the levy itself will be payable from April 2017 onwards.