It is fair to say that there is still a lot of confusion among employers about the mechanics of the Apprenticeship Levy. One area of concern, and particularly relevant to smaller levy paying employers, is what happens if the levy pot is overspent?
For example, those who are only paying a marginal levy might not have enough funds in their ASA account to cover the cost of training and assessment for all the apprentices they want to take on.
Just to remind you: only companies with a payroll of over £3 million will pay in to the levy, so for example if your annual payroll is £5,000,000 then you will pay 0.5% of anything over £3,000,000 – £10,000 – into the levy pot.
So what’s happens if you don’t have enough in your levy pot, as your training requirements are far in excess of the £10,000 in the above example?
Well the answer is co-investment – and this occurs when a levy payer simply runs out of money in their digital account (the pot).
The employer will then be able to use the model that applies to non-levy payers, meaning the employer will have to pay 10% of the remaining training costs to the training provider while the government will then pay the remaining 90%.
Below are some examples of how much the levy costs for differing size businesses:
Employer A: 1,000 employees, each with a gross salary of £20,000
Annual pay bill: 1,000 x £20,000 = £20,000,000
Levy applied: 0.5% x £20,000,000 = £100,000
After allowance* (Employers get a £15,000 fixed annual allowance to offset against the Levy payment) applied: £100,000-£15,000 means £85,000 Levy payment
Employer B: 500 employees, each with a gross salary of £20,000
Annual pay bill: 500 x £20,000 = £10,000,000
Levy applied: 0.5% x £10,000,000 = £50,000
After allowance applied: £50,000 – £15,000 means £35,000 Levy payment
Employer C: 100 employees, each with a gross salary of £20,000
Annual pay bill: 100 x £20,000 = £2,000,000
Levy applied: 0.5% x £2,000,000 = £10,000
After allowance applied: £10,000 – £15,000 means £0 Levy payment