Employer's Guide to Apprenticeship Funding
18 February 2025
Apprenticeships are an amazing way of bringing fresh talent into your business and investing in the future of your industry.
Hiring an apprentice isn’t just about giving someone a foot in the door - it’s a smart investment in your business, which allows you to develop skilled employees tailored to your firm’s needs, boost productivity by bringing in motivated learners, and access incentives to grow your workforce.
When it comes to apprenticeship funding, it’s easy to feel overwhelmed and confused about the entire process. For instance, you may be wondering how you can claim apprenticeship funding? What is the apprenticeship levy and is it available to me? And how do I access the Government’s co-investment scheme?
Whether it’s training new starters or upskilling existing staff, our guide below will demystify the entire apprenticeship process, and help businesses fully understand and navigate the avenues of financial support that are available.
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How does apprenticeship funding work?
Apprenticeship funding is government financial support that helps employers cover the cost of training, making apprenticeships more accessible and affordable.
Employers with a payroll over £3 million pay 0.5% of their wage bill into the apprenticeship levy, which is ring-fenced for training and assessment costs. Non-levy employers (with a payroll under £3 million) can receive 95% government co-investment to help cover training costs, up to the funding band maximum - any costs beyond this must be paid by the employer.
Funding is managed through the Apprenticeship Service, where businesses can choose training providers, track payments, create apprenticeship adverts, and reserve funds. Levy funds expire after 24 months if unused, so businesses must plan ahead. Levy-paying employers can also transfer up to 25% of their unused levy to other businesses, such as supply chain partners or SMEs.
Small employers (with fewer than 50 employees) hiring 16-18-year-old apprentices - or 19-24-year-olds with an education, health, and care plan - receive 100% government funding, meaning no co-investment is required. Employers may also be eligible for incentive payments when hiring apprentices, depending on government schemes, which change regularly. Check the latest update and whether it’s available for your business on Gov.uk here.
The apprenticeship levy
Businesses who meet the threshold of an annual payroll of £3 million are required by the UK Government to contribute 0.5% of their total wage bill to fund apprenticeships. This applies to all employers, regardless of sector - and is designed to encourage businesses to invest in the development of their workforce.
Calculating the levy is relatively simple - worked out at 0.5% of your annual pay bill, but it’s important to note that all employers, regardless of size, receive a £15,000 annual tax-free allowance to offset costs.
So for example, a company with a £4 million payroll would pay (£4,000,000 x 0.5%) - £15,000 = £5,000 into their levy fund. These funds are ring-fenced for apprenticeship training and must be used within two years, or else they’ll be returned to the Government. Employers should be proactive in planning to spend their levy - to avoid unused funds expiring.
How can employers access levy funds for their apprenticeship training? These are managed through the Apprenticeship Service account, where employers can:
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View and manage their contributions
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Select approved training providers
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Allocate apprenticeship funding to training
Transferring your unused funds
It’s important to note that funds can only be used for assessment and training costs for the apprentice - not their wages. If a business doesn’t use all of its funds, it can transfer up to 25% of it to other employers, whether they are partners in the supply chain or SMEs, which is a great way of ensuring funds don’t go to waste.
Transferring apprenticeship funding is straightforward, but there are a few important steps you need to follow…
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Employers must first identify a recipient, such as an SME, charity, or business in their supply chain, that would benefit from the funding.
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Both parties need to agree on how the funds will be used, and make sure the recipient meets apprenticeship funding requirements.
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The recipient must have an Apprenticeship Service account to accept the transferred funds.
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The levy-paying employer then needs to submit the transfer request through the Apprenticeship Service, specifying the amount and selecting the training program.
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Once approved, the funds are automatically allocated to the recipient’s chosen training provider to cover training and assessment costs.
How does apprenticeship funding work for non-levy employers?
Businesses with a payroll under £3 million do not pay the apprenticeship levy, but Government support is still available. That’s via what’s known as co-investment, meaning you pay just 5% of training costs while the Government covers 95% of the amount - up to the funding band limit.
Small firms with under 50 employees get 100% funding for apprentices aged 16-18 (or 19-24 with an education, health and care plan) - making apprenticeships 100% free of charge to train new talent.
That’s not all when it comes to apprenticeship funding, as incentive payments are available in certain instances for hiring apprentices, however eligibility and amounts vary based on Government schemes.
Generally speaking, these payments are there to help cover costs and encourage investment in apprenticeships. With rules changing regularly, it’s best to check the latest update and whether it’s available for your business on Gov.uk here.
Understanding apprenticeship funding rules
Apprenticeship funding comes with strict rules to ensure funds are used correctly. Employers can only use funding for approved apprenticeship training and assessment, not for apprentice wages, recruitment costs, or other expenses. Funding is capped by funding bands, meaning employers must cover any training costs beyond the set limit. Levy funds expire after 24 months if not used, so businesses should plan their apprenticeship strategy accordingly.
Non-levy employers must contribute 5% of training costs, unless they qualify for full government funding. If you’re unsure, check the latest guidance on gov.uk.
Navigating the Apprenticeship Service
The Apprenticeship Service is an online platform where employers can manage everything from apprenticeship funding to training provider payments to applications.
Setting up an account is easy - and essential for accessing government support.
To get started, employers need to:
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Register on the Apprenticeship Service portal using their PAYE details and Government Gateway credentials.
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Add funding details to access levy funds or co-investment support.
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Connect with training providers and approve training costs directly through the account.
When it comes to finding a training provider, employers must ensure they use a government-approved organisation. When selecting one, here’s what you need to consider:
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Accreditation. Before enrolling, verify accreditation with official regulatory bodies to ensure you’re investing in a recognised and high-quality qualification that meets industry standards.
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Relevance. It’s important to make sure the new training matches your industry and skills needs. Companies prefer candidates trained by professionals who understand the industry’s demands and go beyond theory.
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Funding agreements. Always research available funding sources before enrolling to make the best financial decision for your education and career growth. We recommend setting up a clear payment schedule to avoid unexpected costs.
Overcoming apprenticeship funding barriers
Employers can sometimes come up against challenges when trying to secure apprenticeship funding, such as understanding eligibility criteria, managing co-investment costs, or navigating the Apprenticeship Service platform.
One common issue is smaller businesses struggling to cover their 5% co-investment, but they can explore levy transfer opportunities from larger employers to reduce costs. Others may find the funding process complex, but working closely with a training provider, like ourselves, can help ensure the correct steps are followed.
Staying up to date with funding rule changes on gov.uk also ensures employers maximise the financial support available.
Here at PfP Thrive, we work with employers of all sizes to provide apprenticeship qualifications tailor-made for your business needs. As part of Places for People, the UK’s leading social enterprise, our unique insight into the UK housing industry has allowed us to identify skill gaps in key trades and develop training programmes that will bridge these gaps and futureproof the industry.
To find out more about how we can help your organisation, including advice around funding for apprenticeships within the housing and construction sector, please contact us today.