If you’re a medium to large company with an annual wage bill of over £3 million, you probably know by now that from the 1st April, your organisation will have to pay an additional compulsory tax in the form of the Apprenticeship Levy. How much additional tax your company pays will depend on the size of your payroll. But did you know that you can claim this money back and perhaps more importantly, did you know you can use this money as an additional training budget in your organisation?
How to increase your L&D budget for free
So the first thing you’re probably thinking is – if we can claim this money back, then we can use it to increase operational spend anywhere in our business, but unfortunately that’s not the case. You see, the additional money you’ve paid on tax sits in a Digital Apprenticeship Service account and the only way you can get it out, is by spending it on training. Specifically, you need to spend it on apprenticeship training through a registered apprenticeship provider. But before you turn away thinking that you’re not the kind of company to take on apprentices – you don’t have to. Apprenticeships aren’t just for new starters. In fact, an apprenticeship can provide your existing workforce with a way to learn new skills and critically, help someone take the step from a junior role into something more senior. Maybe you have junior members of your HR team that could benefit from a Human Resource Management apprenticeship? Perhaps there’s a natural crossover between your sales team and your project management team. Providing Project Management apprenticeships could help. Do you know someone that’s got a head for figures but not putting it to good use? What about a finance apprenticeship? The list goes on. And apprenticeships these days aren’t just entry level qualifications – there are degree apprenticeships too.
If you’re an L&D Director / Head of L&D, this is great news for you. The money paid by your organisation into the apprenticeship levy cannot be used for anything else. It’s yours. You just need to make sure your finance team (i) are aware of the facts and (ii) put preparations in place to claim it back. Your finance team will be paying into the fund regardless and if it’s not reclaimed to use on Government approved apprenticeship training, it will simply sit there until the funds expire after which they will be taken back and used by the Government elsewhere. Claiming the funds to use on apprenticeships essentially means that you can increase your L&D budget dramatically, without it costing you a penny.
A quick look at the figures
Of course, every organisation is different but if we base the calculations on the average UK salary of £26,500, a company with 2,000 employees will have an annual wage bill of around £53 million. For this figure, the Apprenticeship Levy would be (0.5% x £53 million) – £15,000 allowance = £250,000. In addition to this money, the government is adding a 10% top-up on every £1 that enters the account. So, your organisation will receive an additional £25,000 to spend on training at no extra charge. That means you will have £275,000 credit to spend on Government approved apprenticeships each year. Just imagine how many of your current staff could benefit from the training this additional budget would enable you to pay for. Of course, it’s important to remember that it’s not just super-sized companies that are affected. Any organisation will a wage bill of £3 million or greater (that’s about 125 people) will need to pay the levy and consequently, could benefit from an increased L&D budget.
But if you want to make full use of this budget, you’ll need to move fast. The levy comes into play on 1st April 2017 and the later in the year you begin the process of claiming it back, the more difficult it becomes to make full use of your quota. And that’s where we come in.
All organisations with a wage bill of more than £3m annually will pay into the apprenticeship levy.
Why use LCoAT?
The London College of Apprenticeship Training is a specialist apprenticeship provider. Unlike many other organisations who are generalist training companies, LCoAT only does apprenticeships. That means, without the distractions of other service offerings, we’re able to provide you with most comprehensive apprenticeship service available. We’ll work with you to provide an apprenticeship blueprint. A plan specially tailored to help you maximise the value you get from the apprenticeship levy. To learn more and to have your questions about the apprenticeship levy answered, contact us today on 020 3651 4747 or fill in the contact form on our website and we’ll be in touch shortly.