BIS has updated its guidance on the apprenticeship levy and how it will work.

From April 2017, the government is changing the way apprenticeships are funded in England. Employers with a pay bill of more than £3 million each year will be required to contribute to a new apprentice levy.

Affected employers will be charged a levy at a rate of 0.5 per cent of their annual pay bill, with a deductible levy allowance of £15,000 per year. The levy allowance will operate on a monthly basis, but any unused allowance will be carried from one month to the next.

The levy will be paid through the employer’s PAYE arrangements.

According to the British Chambers of Commerce, the levy has already had a “chilling effect” through business, not withstanding the fact that it has not as yet come into effect, with employers scaling back successful training schemes to cope with the new burden. Employers are concerned that their current offerings may not meet the Government’s proposed strict criteria for an apprenticeship and, as such, they will not be redeemable against the levy.

Whilst the target of three million apprentices by 2020 is a noble aim, the new levy will have a significant impact on affected employers and could, potentially, have the unintended consequence of actually causing employers to scale back their training offerings.