How to spend your apprenticeship levy

14 November 2023
How to spend your apprenticeship levy

Apprentices can be used in businesses of all sizes to help fill skills gaps. Just make sure you funnel the levy to the right areas, says Jenni Clarke

Using the apprenticeship levy effectively involves careful planning and strategic allocation of funds but more often than not, employers have no idea on what to do with it or what it's for.

Used right, it can help fill skills gaps in your workforce, save on training costs, motivate and retain team members, and improve business productivity. For every £1 invested into apprenticeships, research shows businesses see around £26-£28 created in value.

The government mandates that any employers with a payroll of £3m or more deposit annually the equivalent of 0.5% of their annual payroll into the apprenticeship levy pot, managed by a government online account called the Digital Apprenticeship Service (DAS).

Smaller businesses who don't have a £3m pay bill, have no fear! This does not stop SME's from using apprentices in their business. There are many large employers who can transfer up to 25% of their unspent levy money to smaller businesses in their sector or area and if you work with a good provider, they can find these sponsors for you.

The DAS account is a brilliant system. Just like any budgeting system, it tells employers how much they have to spend; has robust forecasting tools and it even informs how much businesses could be losing if they don't use their allocation within two years.

Employers can only use these funds specifically for the training of apprentices, whether that be for recruitment of new hires (apprentice hires) or an ever increasing use of upskilling existing employees.

With apprenticeships there is a training cost and assessment cost. The apprenticeship standard and the fees associated includes the apprentice's end point assessment fee which is carried out by an independent organisation.

So how can you ensure you're using your levy effectively? It all begins with good planning, and then it's about continual assessment to keep things on the right path:

1. Assess your training needs

Identify the skills and areas where your organisation requires improvement or additional expertise.

2. Choose the right training provider

Research and select an expert training provider that can deliver high-quality apprenticeship programs as well as develop and support your business strategy. 3. Plan your apprenticeship strategy

Develop a comprehensive plan together with your selected provider that aligns with your overall business goals and long-term workforce development strategy and choose apprenticeship standards that match the skills and qualifications your workforce needs.

4. What levy spend do you have available?

Once you know your strategy with the right developmental programmes, you can start to see how much you will be spending over the year. This allows you to see exactly what you have, and what you might need support with.

As providers, we draw down this money from your account every month to put towards an apprentice's development. Money is only taken if your apprentice is demonstrating clear signs of development. This allows you to see how much you can balance with your DAS forecast throughout the year – bearing in mind your end point assessment costs. Long term considerations

Look beyond the short-term benefits. Consider how apprenticeships can contribute to building a sustainable, long-term talent strategy for your organisation. For example, use the levy to promote diversity and inclusion within your workforce by offering opportunities to groups currently underrepresented.

Consider higher-level apprenticeships. Support higher-level apprenticeships to upskill your existing employees and attract new talent.

Be aware that the higher the level of apprenticeship qualification (which are available all the way to a Level 7 master's degree), the more expensive they are per apprentice. This is a key part of your succession planning as a business but must be factored in when balancing your development needs against your levy budget.

Collaborate with other employers. If you're a small to medium-sized business and you're unsure about the opportunities you can offer or the extent to which you can use your levy, remember that you can collaborate with other employers and form partnerships with other businesses in the sector. This can be to share best practice and expand the range of opportunities that you can offer, as well as getting sponsorship for more levy funds.

Review and adapt your strategy as you go. Keep it aligned with your organisation's changing needs and priorities, monitor the progress of your apprentices by gathering feedback from both them and their managers, and ensure funds are being utilised efficiently for training and development purposes.

The apprenticeship levy provides an excellent opportunity to invest in the skills and development of your workforce, ultimately benefiting your business's growth and competitiveness – you just have to invest time into planning how best to deploy it.

Jenni Clarke is commercial director at Umbrella Training.

Continue reading

You need to create an account to read this article. It's free and only requires a few basic details.

Already subscribed?

The Caterer Breakfast Briefing Email

Start the working day with The Caterer’s free breakfast briefing email

Sign Up and manage your preferences below

Check mark icon
Thank you

You have successfully signed up for the Caterer Breakfast Briefing Email and will hear from us soon!

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.


Ad Blocker detected

We have noticed you are using an adblocker and – although we support freedom of choice – we would like to ask you to enable ads on our site. They are an important revenue source which supports free access of our website's content, especially during the COVID-19 crisis.

trade tracker pixel tracking