The apprenticeship levy: Options for charities

Since April this year, the apprenticeship levy has come into force in England. With the two-year time-limit to spend payments already ticking on accounts, charities who have begun to pay the levy need to plan how to spend their funds to avoid losing them.

We look at options and considerations for both levy and non-levy paying charities.

Is your annual wage bill over £3m?

Organisations with an annual wage bill of over £3m, you will have to contribute 0.5% of it towards funding apprenticeships.

The levy is being administered by HMRC and is paid through Pay as you Earn (PAYE) alongside income tax and National Insurance. Funds will be returned to the employer via their apprenticeship service account, along with the government’s 10% top-up, at the end of the next month.

Any funds left in the digital account after two years will expire. Start planning how to use the funds, which can only be spent on approved training and assessment, to ensure the money is not lost.

If your wage bill is below £3m, then you will not have to pay the levy. However, if you want to employ an apprentice, the government will take on some of the cost of their training and there may be other grants and benefits available depending on the age of the apprentice and size of your charity.

The apprenticeship levy is a devolved policy and Scotland, Wales and Northern Ireland each have arrangements for supporting employers to access apprenticeships.

Levy payers: Options and considerations

1. Hire an apprentice

• Your apprenticeship service account can only be used to pay for government approved apprentice training and assessment. The account cannot be used to cover other costs, including wages, expenses, licenses etc. So, these costs need to be planned for.
• The account can only contribute up to the funding band maximum for apprenticeship standards. If the cost of training goes over the maximum amount, you will have to pay the difference. Check the cost of the training you’re considering against the band maximum for that standard.
• Apprenticeships can only be chosen from government approved apprenticeship standards, of which there are currently no charity sector specific courses.
• It may be possible to upskill existing staff or hire new people. Think about the areas in your organisation where training is most needed and whether you could take advantage of the levy to meet these needs.
• Of course, in some organisations there may not be a need for a structured training programme such as an apprenticeship. You may still wish to transfer some of your payments to other organisations that can (see below).

2. Take on an apprentice later

You could plan to take on an apprentice later, on the basis that sector specific courses will become available during the two-year time-scale (although this is obviously not guaranteed).

3. Transfer payments

• If you have unused levy funds, you can transfer them to other employers through the online account. The government has capped the amount that can be transferred at 10% of the annual value of funds and advised that employers will need to be aware of state aid rules when transferring and receiving funds. It is unclear at this stage whether leaving the EU will lead to a more relaxed position around state aid.
• Funds can be transferred to other charities to avoid donations being used to fund apprenticeship training in the private sector. However, the 10% cap means that most of your payments will still leave the sector and be recycled within the levy system. Many industries, including the voluntary sector have been calling for the government to allow 100% of remaining funds to be made eligible for transfer.

4. Financial planning

No matter what you decide to do, your organisation needs to ensure that it can afford the levy and that it incorporates the payments into financial plans.

Non-levy payers: options and considerations

1. Co-investment

For non-levy payers, the government will share the cost of training and assessing apprentices. You will have to pay 10% of the cost and the government will cover the remaining 90% up to the funding band maximum. So, although you would need to fund wages and other associated costs, there would be a sizeable discount on training.

2. Small charities co-investment waiver

• If you are an organisation with fewer than 50 employees, the government will pay 100% of training and assessment costs for 16–18-year-old apprentices.
• You may also be entitled to receive a £1500 grant if you are a small charity taking on an apprentice aged 16–24 years old. This is available for up to five apprentices within an organisation.

3. Access to the online apprenticeship account

If you are a non-levy payer, you won’t be able to access the digital apprenticeship service account to pay for training and assessment until at least 2018. If you decide to take on an apprentice before then, you will need to agree a payment schedule with the training provider and pay your contribution directly.

What next for charity sector apprenticeships?

While some charities are subject to the levy, there are currently no sector specific courses for them to purchase.

Fair Train is developing an apprenticeship standard for the charity sector targeted at level 3 (school leavers), which NCVO is feeding into. It’s hoped the standard will be in place before April 2019, when funding starts to be reclaimed. In the future, we expect there will be more trailblazers developing sector-specific standards, although of course these could take longer than the two-year time limit for spending funds. Keep an eye on our blog for future updates as these develop.