Does The Apprenticeship Levy Pay For Wages?

One of the most common questions employers ask when considering apprenticeships is simple: Does the apprenticeship levy pay for wages? The short answer is no. Growth & Skills Levy funds cannot be used to pay apprentice wages. However, that does not mean apprenticeships are expensive or of poor value. In fact, when understood properly, the levy remains one of the most cost-efficient ways for employers to develop skills and grow talent.

This article explains exactly what the funds can and cannot be used for, how wages fit alongside the training, and what financial responsibilities remain with the employer.

Does The Apprenticeship Levy Pay For Wages?

No. The Levy does not pay for wages.

Those funds are strictly ring-fenced for apprenticeship training and assessment costs only. This applies whether you are:

• A levy-paying employer, or
• A non-levy employer accessing funding through co-investment or levy transfers

Any costs associated with employing the apprentice, including salary, must be paid by the employer. This distinction is central to understanding how apprenticeship levy wage bills work in practice.

What Can The Funds Be Used For?

Although the levy does not cover wages, it does fund the most expensive part of apprenticeships: structured training and assessment.

Eligible costs include:

• Apprenticeship training delivery
• End-point assessment (EPA)
• Programme design and learning support provided by an approved training provider

For levy-paying employers, these costs are paid directly from the organisation’s Digital Apprenticeship Service (DAS) account. For non-levy employers, the government covers 95% of these costs through co-investment, with the employer contributing 5% (or 0% if a levy transfer is in place).

What The Levy Cannot Be Used For

To avoid confusion, it’s equally important to understand ineligible expenses.

Growth & Skills Levy funds cannot be used to pay for:

• Apprentice wages or salaries
• National Insurance or pension contributions
• Recruitment or advertising costs
• Travel, accommodation, or subsistence
• Work equipment or uniforms
• General HR or employment costs

These costs remain the employer’s responsibility and sit outside the apprenticeship wage levy framework.

Paying Apprentices: What Are Employers Required To Do?

While the levy does not cover wages, employers are legally required to pay apprentices at least the appropriate wage rate.

This may be:

• The apprentice's minimum wage, where applicable, or
• The National Minimum Wage or National Living Wage, depending on the apprentice’s age and circumstances

Many employers choose to pay apprentices above the minimum, particularly when training existing employees or using apprenticeships for upskilling rather than entry-level recruitment. Wages are paid as part of normal payroll processes and should be factored into workforce planning alongside funded training.

How Wages And Levy Funding Work Together

Although wages are not funded by the levy, apprenticeships still offer strong financial value.

Employers benefit from:

• Funded training and assessment, often worth thousands of pounds
• Employees who remain productive while training
• Skills development aligned directly to the role and business needs

When compared with external courses, consultancy fees, or recruitment costs, apprenticeships often deliver a higher return on investment, even when wages are paid separately. This is why many organisations view the levy as a way to reduce overall training spend, not eliminate employment costs entirely.

Additional Employer Incentives That Reduce Wage Costs

Although the Growth & Skills Levy does not fund apprentice wages directly, employers can benefit from a range of government incentives and payroll savings that significantly reduce the overall cost of employing an apprentice.

Age-Related Incentive Payments

The government provides cash incentive payments to employers who take on apprentices in specific age and support categories. These payments are made via the training provider and are paid directly to the employer.

Employers receive £1,000 (per apprentice) when recruiting:

• Apprentices aged 16–18, or
• Apprentices aged 19–24 who have an Education, Health and Care (EHC) plan or who have been in care

The payment is made in two instalments:

• £500 after 90 days
• £500 after 12 months, provided the apprentice remains employed

For eligible foundation apprenticeships (typically ages 16–21, or 22–24 with an EHC plan or care experience), employers may receive up to £2,000 in staged payments.
Foundation apprenticeships are currently available in targeted sectors such as construction, digital and health, and eligibility should be checked for the relevant funding year.

Employer National Insurance Savings

Employers can also benefit from National Insurance relief when employing younger apprentices.

If an apprentice is:

• Under 25, and
• Earning below the secondary National Insurance threshold

Then the employer does not pay Class 1 National Insurance contributions on their earnings (within limits). For many organisations, this represents a meaningful saving on payroll costs over the duration of the apprenticeship.

How Incentives Work for Different Employer Types

Non-Levy Employers (SMEs)

• Pay 5% of training costs, with government funding 95%
• In some cases, receive 100% training funding for younger apprentices
• Remain eligible for cash incentive payments
• Benefit from NI savings for apprentices under 25

Levy-Paying Employers

• Use levy funds plus the government’s 10% top-up to fund training
• Can transfer unused levy funds to other employers
• Remain eligible for age-related incentive payments
• Benefit from NI savings for apprentices under 25

While levy funds must still be used within the standard expiry period, these additional incentives help offset employment costs and improve the overall return on investment.

Practical Implications For Employers

Understanding how wages fit into apprenticeship funding helps employers plan more effectively.

Key considerations include:

• Budgeting for salary costs alongside funded training
• Using apprenticeships to upskill existing staff who are already on payroll
• Avoiding unused levy funds expiring while still paying for training externally
• Planning apprenticeship starts around business needs and capacity

For levy-paying employers, unused funds expire after 24 months (this is expected to be reduced to 12 months according to announcements made during the Autumn budget), so failing to use the levy often means paying for training twice: once through the levy and again through unfunded learning.

Why Apprenticeships Still Make Financial Sense

Even though the levy does not pay for wages, it significantly reduces the cost of developing talent.

Apprenticeships allow employers to:

• Train staff using nationally recognised standards
• Build skills internally rather than hiring externally
• Improve retention and engagement
• Develop leadership and specialist capability cost-effectively

When training is funded, and wages are already part of normal payroll, apprenticeships become a strategic investment rather than an additional cost.

Making The Most Of Available Funding

To maximise value, employers should:

• Understand what levy funds can and cannot be used for
• Align apprenticeship programmes with real skills gaps
• Monitor levy balances and expiry dates
• Work with an experienced training provider who understands funding rules

With the right planning, apprenticeships can support growth, productivity, and long-term workforce development, even though wages sit outside levy funding.

Book A Discovery Call

If you want to understand how apprenticeships could work for your organisation, including funding options, wage considerations, and programme selection, Impact Academy can help. Book a discovery call to explore how to make the most of apprenticeship funding while planning effectively for wage costs.

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