How Apprenticeship Co-Investment Works For Small Businesses

For many small businesses, developing skills internally can feel like a balancing act. You want to invest in your people, but training budgets are often tight, and external recruitment is expensive and time-consuming.

This is where apprenticeship co-investment plays a valuable role. Even if your business does not pay the Apprenticeship Levy (now called the Growth and Skills Levy), you can still access government-funded apprenticeship training and build capability in a cost-effective way.

This guide explains how apprenticeship levy co-investment works, what small employers are entitled to and what they are required to contribute, and how SMEs can reduce or even remove their training costs through levy transfers.

What Is Apprenticeship Co-Investment?

Apprenticeship co-investment is the funding model that allows non-levy-paying employers to access apprenticeship training funding in England.

If your organisation has an annual pay bill of less than £3 million, you do not pay the Apprenticeship Levy. Instead, the government supports your apprenticeship training through co-investment.

Under this model:

• The government pays 95% of the apprenticeship training and assessment costs
• The employer contributes the remaining 5%. 

This approach ensures that small businesses can still benefit from high-quality, structured training without needing a large upfront budget.

Who Is Eligible for Apprenticeship Co-Investment?

Apprenticeship co-investment is available to small businesses in England with an annual pay bill of less than £3 million that do not pay the Growth and Skills Levy. To be eligible for funding, the apprentice must be aged 16 or over, employed on a PAYE contract, and spend at least 50% of their working time in England. The training must follow an approved training standard and deliver new knowledge, skills and behaviours relevant to the role, rather than accrediting skills the employee already has.

The Difference Between Levy and Non-Levy Funding

Understanding the difference between levy and non-levy funding helps clarify how co-investment apprenticeship levy funding fits into the wider apprenticeship system.

• Levy-paying employers fund apprenticeships using money from their Digital Apprenticeship Service (DAS) account, built from their levy payments.
• Non-levy employers use the co-investment model, where costs are shared between the employer and the government.

While the funding routes differ, the apprenticeship standards, quality requirements, and outcomes are the same. Small businesses have access to the same nationally recognised training programmes as larger organisations.

How Much Do Small Businesses Need to Contribute?

Under apprenticeship levy co-investment, the employer contribution is 5% of the total apprenticeship cost, spread over the duration of the programme.

For example:

• If an apprenticeship standard is funded up to £10,000
• The government pays £9,500
• The employer pays £500, usually in monthly instalments. However, in January, we are offering new incentives to negate this contribution!

This makes apprenticeship training one of the most affordable ways for SMEs to invest in long-term skills development. In some circumstances, the employer contribution can be reduced even further.

Using Levy Transfers to Reduce Costs to 0%

Small businesses can also benefit from levy transfers.

Levy-paying employers are allowed to transfer up to 50% of their unused levy funds to other organisations, including SMEs in their supply chain or sector. When a levy transfer is used:

• The transferred levy funds cover the full cost of training and assessment
• The SME’s 5% co-investment contribution is removed
• The apprenticeship becomes 100% funded

This can significantly reduce barriers for small employers who want to train staff but are cautious about ongoing costs.

The Practical Benefits of Co-Investment for SMEs

Apprenticeship co-investment offers several practical advantages for small businesses:

• Affordable staff development: SMEs can upskill existing employees or train new hires without the financial pressure of traditional training programmes.

• Reduced recruitment costs: Developing talent internally through co-investment levy helps reduce reliance on external recruitment, saving both time and money.

• Building long-term capability: Apprenticeships are designed around real job roles, meaning skills developed through co-investment directly support business performance.

• Flexible workforce planning: With clear funding rules and predictable costs, small businesses can plan training with confidence.

What Happens If a Training Provider Changes or Withdraws?

In some cases, an apprenticeship training provider may withdraw from delivering a programme. When this happens, the co-investment levy rules protect the employer.

If a provider terminates delivery:

• Employers are not required to pay additional co-investment beyond what has already been invoiced
• The government continues to support the apprenticeship funding
• Employers can transfer the apprentice to a new approved provider to complete the programme

This ensures continuity of learning and reduces financial risk for small businesses.

How to Get Started with Apprenticeship Co-Investment

For SMEs new to apprenticeships, getting started doesn’t need to be complicated.

Choose the right training provider

Work with an approved provider that understands SME challenges, funding rules, and how to maximise co-investment opportunities.

Select suitable apprenticeship standards

Apprenticeships are available across a wide range of roles, from leadership and digital marketing to sustainability and operational management.

Plan for the employer contribution

Although small, the 5% contribution should be factored into budgets early. Where possible, explore levy transfer opportunities to reduce costs further.

Align training with business goals

Apprenticeships are most effective when linked to skills gaps, growth plans, or succession planning.

Making Apprenticeship Co-Investment Work for Your Business

Apprenticeship co-investment removes many of the financial barriers that previously prevented small businesses from accessing structured training. With government support covering the majority of costs, and levy transfers potentially removing employer contributions entirely, SMEs can invest in people with confidence.

The key is understanding how the system works and partnering with a provider who can guide you through funding, standards, and delivery.

If you’re a small business looking to develop skills affordably and want to understand how apprenticeship levy co-investment could work for you, Impact Academy can help. Book a discovery call to explore funding options, suitable apprenticeship standards, and the best route for your organisation.