What is the apprenticeship levy and why is it relevant to software engineering?

07 November 2017 by Isla Lightfoot

The new apprenticeship levy has the potential to transform the way software engineers learn their craft in the UK. But what is the levy, why is it relevant and how can businesses use it to address the digital skills gap?

The apprenticeship levy was launched in spring this year with the objective of improving productivity across the UK by increasing investment in vocational skills training.

Broadly speaking, the levy achieves this in two ways. Firstly, it increases the amount of money that will be invested in vocational training in England from £2bn in 2016/17 to more than £3bn in 2017/18. Secondly, it places employers at the heart of the new apprenticeship system by introducing a range of carrot and stick measures that incentivise investment in vocational training.

Under the new levy, any business with an annual payroll greater than £3m must now pay an annual tax of 0.5% on that annual payroll bill. This money can only be spent on approved apprenticeship training or it reverts to government. You can calculate your businesses annual apprenticeship levy by clicking here.

A new kind of Apprenticeship

Not only has the way apprenticeships are funded changed, but the criteria for how this money can be used has also changed.

New rules mean that anybody can undertake training funded by the Levy — regardless of age, level of education or past experience. This means that businesses can use their Levy to upskill existing staff, provide on-the-job training for graduates or school leavers, or nurture their own talent for specialist roles.

There are other incentives beyond the use-it-or-lose-it nature of the Levy. First, businesses are exempt from paying Employer National Insurance Contributions for staff under the age of 25 who are undertaking training through the Apprenticeship Levy. Secondly, businesses that have already spent all of their Levy can invest more into apprenticeships at only 10% of the cost for each additional apprenticeship — with the Government providing the remaining 90%

Why is this relevant to software engineering?

At a time when digital skills are continuously growing in importance to almost every business, the digital skills shortage makes recruiting talented individuals in to these roles very challenging. Few roles illustrate this difficulty better than Software Engineers.

Demand for talented Software Engineers far outstrips supply. Over 50% of respondents to Tech UK’s Tech Nation 2017 report cited a shortage of highly skilled employees and 25% described sourcing talent as a “major challenge”. This can be expected to continue as highly technical jobs such as Software Engineering are being created twice as fast as other jobs.

This unprecedented growth creates an unsustainable labour market where businesses face escalating salary costs and high attrition rates as top engineering talent gets poached by their competitors.

How does the new levy help address this problem?

In a world where there are not enough software engineers, the apprenticeship levy provides a new and effective career-entry pathway for aspiring software engineers.

Instead of recruiting based on experience and qualifications, the levy enables businesses to recruit based on aptitude and potential, and then train people on the job to equip them with the engineering skills your business needs.

This approach transforms the size of the talent pool businesses are now able to attract to apply for software engineering roles, moving away from a narrow pool of Computer Science graduates and experienced engineers, and towards a much bigger and more diverse pool of high-potential candidates.


The apprenticeship levy has come at exactly the right time for any business reliant on thriving teams of software engineers.

Not only does it incentivise businesses to invest in developing fresh talent but it also means that new specialist providers like The Corndel Software Engineering Academy are delivering high-quality programmes designed to meet the needs of the most demanding businesses

Most importantly, the levy empowers businesses to take ownership of the problems caused by the shortage of software engineers and gives them the tools to start developing their next generation of software talent in-house.

Interested in learning more about how your business can make the most of the new Levy? Contact us today to speak to one of our team.

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