The apprenticeship levy is one of those subjects that gets explained in a way that makes it sound more complicated than it is. If you are an employer in the North East trying to work out what you actually pay, what you get back, and whether it is worth using at all, here is the plain English version.
What the levy actually is
The apprenticeship levy is a tax on larger employers, introduced to fund apprenticeship training across the UK. If your business has an annual pay bill over £3 million, you pay 0.5% of that pay bill into a levy fund each month, collected through PAYE alongside your normal payroll taxes. That money sits in an online account and can only be spent on approved apprenticeship training, it cannot be redirected anywhere else.
If your pay bill is under £3 million, you are a non-levy payer, and the system works differently in your favour. You do not pay into the levy at all. Instead, government funding covers 95% of the cost of an apprentice’s training, and you cover the remaining 5% as co-investment. For most small and medium sized North East employers, that means training a new apprentice costs a small fraction of what it might look like at first glance.
What an apprentice actually costs you
Two separate things sit behind the cost of taking on an apprentice: the training itself, and the wage you pay them.
Training is covered either by your levy pot (if you pay the levy) or by the 95/5 government and employer split (if you do not). Either way, you are not paying full commercial training rates out of pocket.
Wages are a separate matter and are your responsibility as the employer, just as with any other member of staff. Apprentices are entitled to at least the government’s apprentice rate for their age and year of training, rising to the normal National Minimum Wage or National Living Wage for their age once they are past the first year, if they are 19 or over. Many employers choose to pay more than the minimum to attract stronger candidates, particularly for engineering standards where good apprentices are in demand.
What happens to unspent levy funds
Levy funds expire 24 months after they enter your account if unused, on a rolling basis. Employers who pay the levy and do not have an active apprenticeship pipeline are, in effect, funding other people’s training and gaining nothing themselves. If that describes your business, using the levy for actual apprentices, or for approved staff training where eligible, is simply using money you have already paid rather than leaving it on the table.
Staff training, not just apprenticeships
The levy conversation usually starts and ends with apprentices, but TDR Training also runs 42 short staff training courses across engineering disciplines, health and safety, and business improvement, aimed at upskilling the team you already employ rather than only bringing in new starters. If you have levy funds or a training budget and want to strengthen your existing workforce, that route is worth a proper look. See our full staff training courses in Newcastle.
How TDR Training helps
We work with employers across the North East every year on exactly this question: what do we actually have, and what is the best way to spend it. We can talk you through your levy position, recommend standards that fit your workforce, and handle the training end to end from our Newcastle centre or on site. Ofsted rated Good, Matrix accredited, and 25 years into doing this for regional employers.
If you want a straight answer on what your business could get from the levy, or from a staff training budget, get in touch with our team.
