FAQ Relating to the new Apprenticeship Levy
While performing research into the Government’s new apprenticeship levy (tax) and higher degrees we have encountered a considerable amount of industry wide confusion. It appears people have many unanswered questions. Jill Whittaker, C2C’s Managing Director, attempts to clear some of the smog surrounding the levy by answering a selection of those questions in plain English.
Q1. We have operations in England, Scotland and Wales how will our levy be calculated and how can it be used i.e. could we use some of our English levy tax in Scotland, or vice versa?
- Jill: The three Home Nations will be managed separately. The proportion of your levy that related to Scotland, Wales and Northern Ireland will be allocated to those nations – this will be based on where your staff work. The levy is not ring-fenced for any particular use in the Home Nations so in theory those governments could choose to use the money as they wish. I will keep my ear to the ground and provide information as I get it.
Q2. As well as our workforce payroll, what else do we have to add into the levy calculation?
- Jill: You will have to calculate in bonuses, Senior Executive and Board Members pay, some types of pension contributions – basically, anything that is covered by class 1 NI and reported through your payroll. NI contributions will continue to be waved for apprentices under 25 in England up to the upper earnings limit (currently £45,000).
Q3. Could the monthly calculation impact us even if our annual payroll is less than the 3 million annual levy thresholds?
- Jill: Yes, the levy is paid month by month as part of your payroll contributions, if you have one month that exceeds £250,000 (£3,000,000/12) you will have to contribute in that month. For example let’s say you pay out bonuses in one particular month, the levy tax will be deducted in those months. If your total payroll falls below £3,000,000 for the whole year then you will have to claim any payments back at the end of the year.
Q4. What is a “business entity”? All our care homes are registered as different companies, does that make them individual business entities as far as the levy is concerned?
- Jill: Not necessarily, if you operate as one care brand, share resources such as a Head Office and are owned by the same parent company/person your total business portfolio is likely to be treated as one business entity. You are responsible for registering all businesses under your control via the Digital Apprenticeship Service which will be launching in January 2017. The details around this point are still a little misunderstood and Skills For Care are seeking clarification from Government. My advice would be “Don’t assume you can split up your estate into smaller entities – the levy is a tax and seeking to avoid paying it is an offence”.
Q5. If we have not determined a levy strategy would we be best advised to store our levy until we are clear as to how we want to spend it?
- Jill: It would be unwise to start spending your pot without a clearly defined plan or strategy. However, leaving it too long to establish that strategy would not be advisable; best practice would be to have a defined strategy prior to April 2017, as initially there could be limited training resources available to meet everyone’s needs. Also remember the levy tax covers all industry sector and competing industries will be trying to entice potential apprentices into their sector. I have noticed an increase in job advertisements specifically for apprentices in many other industry sectors.
Q6. As we will now have control of our levy spend will we have more freedom over how we spend it?
- Jill: Indeed, you decide who you offer apprenticeships to, you select your own training provider, you determine what levels and subjects will be covered and you select your own end point assessor, although your training provider can advise. The government have launched a website to support those choices, it contains information about employer and learner satisfaction by job role. Here’s a link findapprenticeshiptraining.sfa.bis.gov.uk
Q7. Will we be able to use the levy pot for other training that is not apprenticeship based?
- Jill: The levy is specifically available for apprenticeships and you will need to be able to demonstrate that you’re spending it for that purpose. The pot is not available for use on non-apprenticeships training such as Inductions or H&S training, however if such training is included within the government approved apprenticeship and the member of staff is enrolled on that apprenticeship then that can be included.
Q8. Is there an age limit restricting who we can offer an apprenticeship to?
- Jill: No, but there are different costs related to different age groups. i.e. 16-18, 19-23, 24+ and different costs linked to the different levels and courses. There are 15 different funding bands in total. We are happy to advice.
Q9. If we presently have good training plans in place, can we link them into an apprenticeship?
- Jill: It may well be possible and should be explored with your training provider. A mapping process has to be completed to match your programmes against the apprenticeships – where there is substantial and robust internal training this can contribute towards an apprenticeship and can help to make your levy pot go further. C2C is happy to offer advice and support on this matter.
Q10. What is available to us if we do not reach the levy threshold of £3 million?
- Jill: In this case the government will pay 90% and you will be required to contribute 10%. The maximum cost would therefore be £500 for most programmes. This can be reduced, of course, if we have been able to map your substantial and robust training into an apprenticeship. Apprenticeships could be a good way to encourage people into key jobs that suffer from a supply shortage and the 90% government support, coupled with national insurance breaks, could aid you.
Q11. What will happen if we are presently investing more than our estimated levy pot value in apprenticeships?
- Jill: Once again the levy pot is not a ceiling and you can happily spend more. Once you have spent all your pot the Government will fund 90% of any additional apprenticeships. Question 9 above may also be relevant in reducing your costs.
Q12. How much will be taken out of our levy pot for each apprenticeship we offer?
- Jill: That will depend on the course they partake in and the level at which it sits, and how much input you have yourselves. We would be able to send you details if you contact us. conne2care.net/apprenticeship-levy
Q13. Can we offer apprenticeships to existing staff members or do we have to employ new school leavers?
- Jill: You are free to do either. Apprenticeships are for all ages and all skills levels. It will soon be possible for you to offer care or management degree apprenticeships to employees on your graduate development programme, or at senior levels within your organisation.
Q14. Can we offer an apprenticeship to someone that already has a degree?
- Jill: There are circumstances in which you can do this. If the candidate’s first degree is unrelated to the job they are now doing or the industry they are working in, and the apprenticeship is at the same or a higher level. There is talk of extending this, if this happens we will advise.
Q15. Can employees join an apprenticeship at any level?
- Jill: It is you with the advice of your training provider that decides at which level a candidate can enter an apprenticeship programme. This decision is based on a pre-set criteria.
Q16. Who can I spend my levy pot with?
- Jill Any approved and registered apprenticeship supplier. Here’s a link to a useful website to help you decide who to work with: findapprenticeshiptraining.sfa.bis.gov.uk For further information please give us a call.
Q17. Apprentices will now undergo an end-point assessment, who decides when and with whom that assessment is performed?
- Jill: The employer does. We would strongly recommend that you take the advice of your training provider on the readiness of individuals for end point assessment; the provider will have a very good idea of the likelihood of a successful outcome for your member of staff. We would all like to see a very high success rate as its good for your business and also for the future prospects of the individual. The end point assessment cannot be performed by the training provider, it has to be a separate registered assessment agency, and the employer must decide which agency to use. C2C is happy to offer advice.
Q18. How much time do we have to spend our levy pot?
- Jill: You have two years in which to spend your pot, so April’s 2017 pot has to be spent by April 2019. Any money in the pot is not earning interest although the government do top it up by 10%.
Q19. Can we transfer our levy pot to subsidiaries, partners or suppliers?
- Jill: There are plans for a provision that allows you to transfer a percentage of your levy pot, although this will not be available in the first year of the levy. We would be happy to offer advice.
Q20. Is there any advantage in spending our levy pot on higher level apprenticeships?
- Jill: There is, for the first time as an industry we will be able to demonstrate a career path that lead from support worker to CEO, while people have trod that path before it has been in an unstructured, hit and miss way and without the full support available for some kinds of learners. As an industry, we can now show potential employees a pathway that starts the moment they enter the industry and could lead them to the top, if they demonstrate the right level of commitment and enthusiasm. There is now a development pathway that will give any potential employee the skills to lead them to the top if they so wish. If we want to attract people into our industry and compete with other presently more attractive industry sectors this pathway is critical.
Q21. Can we link our graduate programme into a degree apprenticeship funded by the levy?
- Jill: This may be possible in the not too distant future. You could have two clear routes through which you can develop your top management team. The apprenticeship route or the graduate route with the option of an apprenticeship top-up to a Master’s.
Q22. Can we share our levy between different types of training providers?
- Jill: How you spend your pot is a commercial decision you have to make. There is no reason why you could not use different types of approved suppliers i.e. a University and/or a work place provider.
Q23. Can we offer apprenticeships to people in support departments such as maintenance and cleaning, or people working in head office departments?
- Jill: There will be a suite of apprenticeships available for different job types. You may have to hunt around for the best supplier. For example if you want to offer a maintenance apprenticeship you would need to look beyond normal care providers but they are available in the market. Here’s a link to a government tool to help you: findapprenticeshiptraining.sfa.bis.gov.uk
Q24. Do our head office labour costs have to be taken into the calculation?
- Jill: Yes they do. This calculation is based on full payroll costs, bonuses and senior management salaries – any payroll cost subject to class 1 NI.
Q25. Do casual staffs, part time staff, interns or people on maternity leave have to be taken into the calculation?
- Jill: Yes they do, if you are paying them a wage that is covered by class 1 NI.
Q26. What happens if we have passed the monthly levy threshold of £250.000 in a couple of months of the year but do not reach the annual threshold total of £3,000,000 at the end of the year?
- Jill: You will have to pay the levy at the end of each month you have a payroll over £250,000. If at the end of the year your annual labour bill is under £3,000,000 you will have to claim back for the months you went over.
Q27. Can we insist on an employee staying with the company for a set time period if we offer them an apprenticeship?
- Jill: It is your choice as to how you write your staff contracts and many employers who offer training do so with the proviso that employees repay part of the cost if they leave the employer within a certain period of time. You should seek the advice of your HR department on this point.
Q28. Do we have to provide apprentices with time in their working week to complete their studies?
- Jill: The rules say a candidate should be given 20% of their on duty time to put towards study. This does not mean compulsory day release, rather all “off work station” training taken together would make up 20% of the employee’s role. This is a concern for many employers, however our programmes are written to ensure that all off-station training, including online learning and face to face input, meets this requirement. C2C is happy to offer advice on this.
Q29. Can we use our levy pot to pay the apprentices salary?
- Jill: No, this is not possible. You may pay an apprentice the apprenticeship pay rate which is less than the living wage if you so desire, this would be an internal company decision based on your strategy, culture and the supply demand situation for specific jobs. We wouldn’t recommend it as it tends to lead to apprentices moving on for more money at the first opportunity.
Q30. What is a recognised apprenticeship?
- Jill: The apprenticeship provider must be on the register of approved training organisations and government approved apprenticeships must be used. The C2C website has more information www.connect2care.net
Q31. Can an apprentice transfer to another company and if so what happens with their costs?
- Jill: Yes an apprentice can move to a new company at any time. At the point they move they come off your payroll and you stop paying a contribution for them. It is up to their new employer to decide if they want to take on their apprenticeship responsibilities and costs.
Q32. Are there ways I can best utilize my apprenticeship levy & apprenticeship budget?
- Jill: Indeed there are, it may be the case that you are already performing training that meets the criteria of a specific standard and as long as your training provider approves this training by first assessing its suitability against the standard and ensuring it is applied consistently and in a robust manner you may well be able to reduce your costs. C2C is happy to offer advice on this point.
Q33. We are a very small business, do we lose out compared to a larger organisation?
- Jill: Not at all, for example if you employ less than 50 people any apprentice between the age of 16 and 18 at the time they start their apprenticeship is 100% funded by government contributions throughout their full apprenticeship with you. Don’t forget, businesses of all sizes get NI breaks on apprentices under the age of 25.
The levy is here to stay and while it may be tweaked over time, it is a new tax that will have to be paid. The purpose of the tax is to bring the UK’s productivity levels up in line with other European market leaders and increase the capabilities and performance of staff at all levels. Apprenticeships, if used well, will develop employees so they become more analytical, better operators and stronger decision makers that have a confidence and focus to drive businesses forward and manage people better. The term “apprentice” has historically be associated with a young school leaver or a trade specific skills worker, this has all changed. The new apprenticeship scheme has a much broader context and provides the opportunity for you to develop your people at all levels within your organisation.
Connect2Care website for helpful advice: https://connect2care.net
Levy handbook and basic calculator: https://connect2care.net/apprenticeship-levy
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