From 6th April 2017 the government plan to introduce the Apprenticeship Levy, which will affect employers across all sectors whose annual wage bill is over £3m.

The levy is being put in place to fund new apprenticeships in the UK. The amount payable by those employers affected will be 0.5% of the amount of their annual wage bill that exceeds £3m.

For example, an employer with an annual wage bill of £5m:

Wage bill exceeding £3m = £2m
Apprenticeship Levy sum of 0.5% x £2m = £10,000

ICS Umbrella Ltd, like all established umbrella companies, will have to pay the Apprenticeship Levy from 6th April 2017.

The feeling across the industry currently is that, for an umbrella solution to remain a viable model for all concerned, the levy sum relating to a particular worker will be built in to the uplifted rate. This is paid to the umbrella company in a similar way to other employer costs such as Employer’s National Insurance and Employer’s pension contribution from auto-enrolment.

ICS retain one of the four main professional services firms as our advisors and their opinion supports this position.

An Example of the Apprenticeship Levy

The two illustrations below demonstrate how a payment for a worker might be structured now versus how it might look post 6th April 2017 (assuming that all tax and NIC thresholds remain the same).

As you can see, the impact upon the worker’s take-home pay would be fairly minimal.

The impact for recruitment agencies and their clients would be that, for workers engaged via umbrella companies, the Apprenticeship Levy sum should be considered when calculating the rate which is to be paid to the umbrella company. Otherwise, there is a risk that the worker would be paid beneath the equivalent rate of the full time, permanent employee. This would pose a risk under the Agency Workers Regulations 2010.

It is important for all parties in the supply chain to understand, both here and with regards to all updates to legislation, how each other is operating in order to have complete confidence in our own compliance. At ICS we, in line with our ethos of trust, care and compliance, are committed to ensuring that both we and our partners are 100% confident that we remain compliant with legislation. We are also looking into options to utilise the funding which would be available under the Apprenticeship Levy within the supply chain.

We will provide further updates on this as they become available.

If you have any queries, then please contact ICS by calling 0800 195 3750 or email