READY STEADY LEVY: Have you started to think about how the apprenticeship levy will impact you as a business?

Teresa Bentley 23rd March 2017

Presenters:

Teresa Bentley – LMG

Daniel Pedley – CII

Verity O’keefe – EEF

Neil Withey - EEF

OUR MARKET AND THE LEVY

Levy awareness 85%

Vast majority of

firms will be levy payers

READY, STEADY, LEVY!

London Market Group 23rd March 2017 Verity O’Keefe & Neil Withey

PART 1: THE APPRENTICESHIP LEVY

PAYING INTO THE APPRENTICESHIP LEVY – YOUR LEVY LIABILITY

SCOPE OF THE LEVY

• The Levy applies to all employers in England, Wales, Scotland and Northern Ireland

• No exemptions

• It’s a tax

• The amount of that tax is 0.5% of your pay bill

• You don’t pay the first £15,000 of the tax which means a pay bill of:

• < £3m

• > £3m

• A company that is part of a group will pay the Levy if collectively their pay bill is over £3m but “connected companies” only get one £15,000 deduction

NON-LEVY PAYERS

• If you are not in scope of the Levy you will be required to co-invest in apprenticeship training

• If you want to buy apprenticeship training you will be required to contribute 10% of the cost with Government topping up the remaining 90%

• The amount to which the Government will “top up” will be subject to caps in the same way as for Levy payers

‘NEED TO KNOW ’ DEFINITIONS

• “Employer” is a person

who has a liability to pay

the secondary NICs

• ‘Pay bill’: based on total

employee earnings

subject to Class 1

secondary NICs

EXAMPLE

• The Levy is set at 0.5% of your total pay bill

• Less a £15,000 deduction

Example:

• Company A has a pay bill of £10m

• Levy at 0.5% = £50,000

• Less the £15,000 deduction

• Actual Levy payable = £35,000

WHAT IS INCLUDED IN THE PAY BILL?

• All payments to employees that are subject to employer Class 1

secondary National Insurance Contributions

• This includes wages, bonuses and commission.

• You must include payments to:

- all employees earning below the lower earnings limit

- employees under the age of 21

- apprentices under the age of 25

CONNECTED COMPANIES

• Two or more connected companies are entitled to ONE

allowance of £15k

• The pay bills of connected companies are “pooled”

towards the £3 million total

• It is for the connected companies to decide who claims

the allowance

• Election made at the first Levy declaration

• Cannot then change in that financial year

CONNECTED COMPANIES: EXAMPLE

ABC Ltd is the Parent Company of Company

A, Company B and Company C. Collectively

the group has a pay bill of £10m. ABC Ltd has

decided that Company C will receive all of

the £15,000 allowance. Therefore the three

companies’ Levy liabilities would be as

follows:

Company A: 0.5% of £2m = £10,000 Levy

liability

Company B: 0.5% of £1m = £5,000 Levy

liability

Company C: 0.5% of £7m = (minus £15,000) =

£20,000 Levy liability

ABC Ltd Parent

company

Company A

£2m pay bill

Company C

£7m pay bill

Company B

£1m pay bill

IMPACT OF CONNECTED COMPANIES RULE

No. of

employees

in company

In scope of the

Levy as a single

company

In scope of the

Levy because

part of a group

Not in

scope of

the Levy

Don't know

if in scope

of the Levy

1-50 7.7% 7.7% 84.6% 0.0%

51-100 9.1% 18.2% 63.6% 9.1%

101-250 45.2% 48.4% 0.0% 6.5%

251+ 40.7% 59.3% 0.0% 0.0%

Source: EEF Apprenticeship Levy Survey 2016-17

WHAT YOU GET BACK – YOUR LEVY CREDIT

THE “SWEETENER” – A 10% TOP UP FROM GOVERNMENT

• Government stated that employers that pay into the Levy will “get back more than they put in”

• This is by way of a 10% top up on whatever is in your Levy account on a monthly basis

• If you have £100 paid into your digital account each month, you will actually receive £110

• Simple

• Now let’s move on to the not so simple

THE ENGLISH “FRACTION”

• The Levy applies to your UK pay bill

• But the principle of getting back more than you put in only applies to England

• What you then get back in terms of digital funds only applies to the English “fraction” of your pay bill – i.e. the proportion of your pay bill that equates to employees with an English home postcode

TIMING – WHEN DO YOU START PAYING THE LEVY?

• Employers pay from April 2017

• Employers declare to HMRC Levy payable based on their

cumulative pay bill over the financial year

• First declaration will be May 2017 for their April pay bill

• You will report your Levy each month via payroll using your

Employer Payment Summary and include:

o the amount of the Levy allowance you’ve allocated to that

PAYE scheme

o the amount of Apprenticeship Levy you owe to date in the

current tax year

WHEN WILL YOU START PAYING INTO THE LEVY?

SPENDING YOUR LEVY MONEY

HOW MUCH CAN YOU SPEND ON APPRENTICESHIP TRAINING?

• Frameworks and standards currently funded differently

• From May 2017, one single funding system

• New funding system will be made up of 15 funding bands

• Upper limits (caps) will range from £1,500 to £27,000

• All apprenticeships will placed in a band

• Employers cannot spend more Levy than the upper limit

• Government funding is limited to the upper limit

• Employers must negotiate price with a provider

Apprenticeships started before the 1st

May 2017 funded under current model.

Apprenticeships started after funded

under new model

WHAT DOES THIS MEAN?

• Levy paying employers receive funds in a digital account

• They then need to select a provider and negotiate a price

• If the price is below the cap, then all the funding will be covered

• If the price is above the cap, then the employer pays the excess, and the remainder comes from the digital account

• Digital funds will leave the employer’s account on a monthly basis, with the first payment made once the training has commenced.

• 20% of the cost of training will be held back until the apprentice completes their apprenticeship

• The remaining cost will leave the digital account on a monthly basis. The remaining amount will be divided by the number of months it takes to deliver that standard or framework

THE FUNDING BANDS

Number

Band Upper Limit

Number

Band Upper Limit

1 £1,500 9 £9,000

2 £2,000 10 £12,000

3 £2,500 11 £15,000

4 £3,000 12 £18,000

5 £3,500 13 £21,000

6 £4,000 14 £24,000

7 £5,000 15 £27,000

8 £6,000

Insurance: Practitioner

Level 3 (Standard)

Travel Services: Leisure & Tourism

Level 2 (Framework)

Aerospace: Aerospace

Manufacturing Fitter

Level 3 (Standard)

Financial Services: Credit Controller

Level 2 (Standard)

SHELF LIFE OF YOUR DIGITAL FUNDS

• Digital funds will first arrive in your account in May 2017, based on your April pay bill

• Your 10% top up will be added

• You can chose when you want to start training

• You may, for example, train apprentices by academic year and not start training until September

• However, digital funds only last 24 months

• Therefore funds that enter your account in May 2017 will expire in May 2019

• Funds are use it or lose it

• When you do start to train apprentices, the oldest funds will be used first

EXAMPLE: A COMPANY LTD

A.Company Ltd has a paybill of £5m. 80% of their paybill is paid to employees that live in

England

A.Company wants to train 1 apprentice in

Engineering Manufacture – Fabrication & Welding

at Level 3

For this apprenticeship they will be able to spend

£5,000 over 18 months. 20% of this (£1000) is held back

until completion.

The cost is spread out monthly, therefore the cost of training for the first 17 months is £222. This is taken from the

company’s digital account

On the final month (month 18) the payment will be £222 + 20%

withheld (£1000). Final payment = £1222

The company will receive £8,808 of levy credit each year.

0.5% of paybill (£25k) less £15k allowance = £10,000 divided by 12 is

£833. £833 x 80% (England fraction) + 10%

top up =£734 a month

When looking at spend, employers must take

into account the “completion months”

when considerably more £ will come out of their

accounts

Employers no longer agree a payment plan with their providers.

Monthly payments are taken automatically. This requires some

careful profiling

Once the digital funds are in an employer’s account they have 24

months to spend them else they will

expire

THE “WHAT IF” QUESTIONS…

WHAT IF… YOU HAVE DIGITAL FUNDS LEFT OVER?

• For the first year, employers cannot transfer their unused digital funds

• From 2018, employers will be able to transfer up to 10% of their annual digital funds

• This includes transferring funds to Apprenticeship Training Agencies (ATAs)

• EEF sits on the Government’s Steering Group looking at how transferring of funds can work in the easier, simplest way

• We are also lobbying Government to increase the amount to 50%

WHAT IF… YOU SPEND ALL YOUR DIGITAL FUNDS?

• 75% of manufacturers say their biggest concern with the Apprenticeship Levy is over spending on their Levy digital funds

• If, however, you do spend all your digital funds, you will move into co-investment

• Under co-investment, you will pay 10% and the government will pay the remaining 90%

• However, this 10% of training is IN ADDITION to the monthly amount you will still be paying in under the Levy

WHAT DOES CO-INVESTMENT FOR A LEVY PAYER LOOK LIKE?

WHAT IF… YOU HAVE VARIABLE PAY?

• You pay your Levy liability monthly

• It is based on your monthly pay bill

• The allowance deduction is also monthly (£1250)

• Therefore months when your pay bill exceeds £1250 you will pay into the Levy

• Months where your pay bill does not you will not

• Unused allowance will roll over to the following month

• If you overpay at the end of the year HMRC will issue you with a rebate

WHAT IF … YOU OPERATE ACROSS THE UK?

Paying in

• UK wide Levy on UK pay bill

• But funds you receive are only for the English “fraction” of your pay bill

Spending the funds in the digital account

• The funds can only be spent on training for an English apprenticeship standard

• The funds can only be spent on an apprentice whose main place of work is in England

Training employees outside of England

• You can continue to train employees in the

devolved nations

• But this is subject to their own arrangements

Don’t get confused with the “English

fraction” of a company’s pay bill and the ability to spend vouches on

learners who live in Scotland, Wales or Northern Ireland

OTHER PAYMENTS

ARE THERE ANY INCENTIVE PAYMENTS?

• Employers recruiting a 16 to 18 year old will receive £1,000

• Employers training learners aged 19 to 24 who have previously been in care who have a care plan receive £1,000

• Paid in two equal instalments at 3 and 12 months

• Payments made to provider who will pass money on

• In the future, payments will go directly to employer

PART 2. SPENDING YOUR APPRENTICESHIP LEVY DIGITAL FUNDS WISELY

WHAT CAN YOU SPEND YOUR LEVY FUNDS ON?

WHAT CAN YOU SPEND YOUR MONEY ON?

• Digital funds can only be used on the cost of the apprenticeship training and assessment

• You can only spend your funds on apprentices you employ

• There is greater flexibility on digital funds to spend if an employer chooses to become a provider in their own right

• However, the goalposts have already moved on this and there are lots of things to consider if you choose to go down this route

• For example: your company would be subject to Ofsted, the reports of which are made publicly available.

WHAT IS AN APPRENTICESHIP? THE CORE PRINCIPLES

An apprenticeship is:

• A genuine job in a skilled occupation

• A recognised ‘accreditation’

• Requires substantial and sustained training, lasting a minimum of 12 months and involving at least 20% off the job training (training which is outside of the normal day-to-day working environment)

An apprenticeship:

• Develops transferable skills and maths/English to progress careers

• Leads to full competency and capability in an occupation, demonstrated by achievement of an apprenticeship standard

• Trains the apprentice to the level required to apply for professional recognition where it exists

• Is designed by employers to meet their needs and the needs of their businesses

• Is assessed through a single end point assessment

WHAT IS A GENUINE JOB?

• The apprentice must have a contract of employment which is long enough for them to complete the apprenticeship successfully

• The cost of the apprentice’s wages must be met by you as their employer

• The apprentice must have a job role (or roles) within the organisation that provides the opportunity for them to gain the knowledge, skills and behaviours needed to achieve their apprenticeship

• The apprentice must have appropriate support from within the organisation to carry out their job role

• When the apprenticeship is achieved the apprentice should remain with the employer, where a job opportunity continues to exist and where the apprentice wishes to stay

• SFA will monitor this

WHAT COUNTS AS 20% “OFF THE JOB TRAINING”

• Learning which is undertaken outside of the normal day-to-day working environment. It can include:

• Theory

• Practical training

• Assessments

• It does not include:

• English and maths

• Progress reviews

• Training outside normal working hours

WHO CAN YOU SPEND YOUR LEVY FUNDS ON?

WHO CAN YOU USE YOUR LEVY FUNDS ON?

• To be eligible, the individual learner must:

• start apprenticeship after the last Friday in June of the academic year in which they have their 16th birthday

• be able to complete the apprenticeship in the time available

• not be enrolled on another apprenticeship at the same time as any new apprenticeship they start

• not be asked to contribute financially to the direct cost of learning or assessment or use a student loan to pay for their apprenticeship

• spend at least 50% of their working hours in England over the duration of the apprenticeship

• have the right to work in England

• be employed by you the employer or the connected company

WHO CAN BE UP-SKILLED OR RE-SKILLED?

• ‘‘Re-skilling’

• You can also spend your funds on ‘re-skilling’ if the training is at an equivalent or lower level qualification as long as the training is “materially different”

• The term “materially different” is yet to be sufficiently defined

• Up-skilling’

• You can spend your funds on ‘up-skilling’ if the training is at a higher qualification level than the learner currently holds

• You can also spend your funds to ‘up-skill’ an existing job role where the individual needs significant new knowledge and skills

PART 3: A QUICK LOOK AT THE DIGITAL APPRENTICESHIP SERVICE (DAS)

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Red and White Holdings PLC

Red and White Holdings PLC

INSURANCE RELATED APPRENTICESHIPS

• Approved schemes:

• Insurance Practitioner (Level 3 – includes Cert CII/CILA)

• Insurance Professional (Level 4 – includes Dip CII/CILA)

• In development:

• Senior Insurance Professional (Level 6) – will be available by the year end

AN INSURANCE APPRENTICESHIP

How it works…

On programme learning Working & learning

At least 12

months

Gateway Passing CII exams & judged ready for end point

End point assessment Portfolio & interview

Up to 3 months

CII ACCREDITED PROVIDERS

Providers holding CII accredited status:

• Acorn Learning (Level 4 only)

• BPP (Level 3 & 4)

• Babington (Level 3 & 4)

• FWD Training (Level 3 & 4)

• Kaplan (Level 3 & 4)

Q&A

POST EVENT INFORMATION

• A demo of the Digital Apprenticeship Service can be found here:

https://www.youtube.com/watch?v=XDYEtj16E38&app=desktop

The video was produced by the Skills Funding Agency in December 2016

and therefore may be out of date

• Information about the services EEF provide around the levy:

www.eef.org.uk/apprenticeshiplevy

• The following links give the latest list of providers to levy payers:

• Insurance Practitioner (Level 3) right click here

• Insurance Professional (Level 4) right click here

• To search for providers - https://findapprenticeshiptraining.sfa.bis.gov.uk/