The term ‘use it or lose it’ has been used by training providers over the last few months because if an organisation does not spend their Apprenticeship Levyfunds by May 2019 they will, put simply, lose it. (Your first months contribution & up to 1 months’ worth for each under spent amount each month thereafter)
As you have probably seen all over the internet, and from the hundreds of calls you might have received from training & development companies asking you questions such as ‘what are you doing with your Levy?’, a lot of employers can only respond with ‘what is the Levy?’. This is because a lot of organisations simply do not know enough about the Levy, what to do with it and how to set up a Digital Apprenticeship Service Account (DAS).
The Levy has been active now since April 2017, where the government has allowed 24 months for organisations to spend their Levy before the money goes back into the HMRC system and will be deducted from your account as tax.
Payments only start from the month that an Apprentice or existing staff member enrols onto their Apprenticeship programme, so for organisations who have a back log of funds building up in their digital account, you are like to get a false impression of what you can afford through your levy funds. Apprenticeship Levy training costs will always be debited and deducted from your account on a monthly basis and you cannot back date payments.
The Apprenticeship Levyworks by drawing down funding from the account on a monthly basis. For example, if an employee was to enrol onto a Level 5 Operational Departmental Manager Standard which is £9,000 and takes 18 months to complete, then the funding drawn down is calculated by spreading 80% of the cost over the 18 month period and the final £1,800 will be deducted from your account on the day of assessment occurs. This means that £400 would be drawn out of your Levy account on a monthly basis and the remaining £1,800 at the end point assessment (EPA).
A recent study was conducted by the Open University with HMRC to look into what employers are using their Apprenticeship Levy funding for. It was discovered that 54% of organisations who are drawing down funds from their Levy account are using the money to train new recruits and take on new Apprentices within the business. The remaining funds are being used to train and up-skill existing staff or completely replace a graduate scheme that the organisation already had in place.
This is an advantage to all employers as it shows commitment to their employees that they are willing to invest on them to enable progression within their role. As Richard Branson famously quoted: ‘train people well enough so they can leave. Treat them well enough so they don’t want to’. Using this method and utilising your Levy funds on existing staff will not only improve morale, but it’s been proven to increase staff performance and satisfaction within their job role.
As I have mentioned before, you can spend your Levy funds on existing staff members or by recruiting new Apprentices & new employees. Levy payments can only be used for Apprenticeship training, it can’t be used to subsidise staff salaries or commercial training. So utilising your existing staff is a good way to get the benefits from all funds paid into your account.
The Apprenticeship Levy has been active now for over almost 2 years and has completely changed the way organisations look at taking on Apprenticeships and up-skill their existing staff. This can only be a positive, as it means that employees who are working in large organisations now get the chance to enrol onto an Apprenticeship Standards in order to improve their knowledge, skills & behaviours within their roles.
Now is your chance to maximise your Levy funds before you simply ‘lose it’. Select the right staff to put through a qualification and make sure when you are drawing down funding for training you are using all funds available, because when May 2019 arrives (and it’s only around the corner) your money will start to disappear.
If you’re looking to take on new staff please have a read of our blog ‘The Benefits of Hiring an Apprentice’ or if you want to read more on maximising your Levy, click here.