Employer Levy

From April 2017, all UK employers now pay a levy of 0.5% on total employee earnings subject to Class 1 secondary NICs. All employers then get a £15,000 fixed annual allowance to offset against the levy payment. So in practice that means no levy is payable until the pay bill exceeds £3m. The levy applies to all public and private sector organisations including charities and education providers.

The levy is collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), alongside tax and National Insurance. These monies are then held in a Digital Apprenticeship Service (DAS) account.

Full details on the Apprenticeship Levy can be found at, Pay Apprenticeship Levy. 

In England, employers need to register with the DAS and accept a digital contract with the Education and Skills Funding Agency (ESFA) to cover the use of these levy funds in the delivery of apprenticeships - ESFA Apprenticeship Agreement for Employers January 2020 (updated 26th October 2022). 

Once set up, an employer can then contract with training providers on the Register of Apprenticeship Training Providers. Employers then link apprenticeships and apprentices to a provider and approve the agreed price for the delivery of the apprenticeship programme.

If an employer does not have sufficient funds in their digital account to cover the training and assessment costs in any particular month then it will be required to make a 5% co-investment with government paying the remaining 95%.

Employers will be able to use the funds in their digital account and access government co-investment support to train individuals to undertake an apprenticeship provided the training will allow them to acquire significant new skills and knowledge, and the content of the training is materially different from any prior training or previous apprenticeship.