In spring 2017 the way the government funds apprenticeships in England is changing. There will be changes to the funding for apprenticeship training for all employers with some employers required to contribute to a new apprenticeship levy. The reforms are aimed at simplifying the apprenticeship system providing employers with ‘more control over designing, choosing and paying for apprenticeship training’, potentially doubling the investment in apprenticeships by 2020 from 2010 levels, to £2.5bn.
The apprenticeship levy will be introduced on 6 April 2017. The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships. From 1 May 2017 any apprenticeship will be funded according to the new rules. This will apply to all employers, both those paying the levy and those who do not.
You can find out more about the benefits apprenticeships can bring to your organisation and about the ways apprenticeships are being reformed, in the government’s vision for apprenticeships. The reforms include giving employers the opportunity to add to the new apprenticeship standards already available by developing standards that meet their precise needs.
Apprenticeship Reforms and Key Information for Employers
The new apprenticeship standards
The new standards put employers in control of designing apprenticeships, so people are equipped with the skills that meet the needs of their organisation. The reforms are:
- replacing the existing complex frameworks with short, simple, accessible apprenticeship standards describing the skills and knowledge that an individual needs to be fully competent in an occupation; and written by employers in a language they understand.
- improving the quality of apprenticeships through higher expectations of English and Maths, more rigorous testing to ensure the apprentice is fully competent and raising aspirations for apprentices by introducing grading at the end of the apprenticeship.
- giving employers control of the funding so that they become more demanding customers. Over 200 Trailblazers involving more than 1,400 employers with 260 standards have already been published (of which over 70 are higher and Degree apprenticeships) and more than 180 new standards are being developed. The new apprenticeships are in a broad range of sectors from nuclear to fashion, law, banking and defence. There have been 4,200 starts on new standards in occupations such as software developer and aerospace engineer. The first apprenticeship starts on the new standards began in September 2014.
Guidance for employers on the standards development process as well as a list of approved standards and those in development are available at GOV.UK, search ‘apprenticeship standards’.
The digital apprenticeship service
All employers in England have access to a new, easy-to-use digital apprenticeship service to help them manage their apprenticeship programme Functions for all employers.
- Through Estimate my apprenticeship funding, employers can calculate whether they will pay the levy or not, and what funds they will have to spend on apprenticeships. It also shows how much the government will contribute towards the cost of training.
- Find apprenticeship training gives employers easy-to-digest information on the choices available to them. Employers can search for and find an appropriate standard or framework, a quality-assured training provider, and compare one provider with another.
- Through Recruit an apprentice, training providers can post vacancies for apprenticeships and traineeships on behalf of employers. This will be opened up to employers at a later date.
If you would like to keep up to date with the development of the Digital Apprenticeship service then more information can be found on the SFA Digital blog.
Employers are now able to register for the apprenticeship service; an online digital system that has been set up to support the apprenticeship levy. I would appreciate your help in encouraging levy-paying employers to register now so that they can:
– create an account
– add organisations (if their organisation is connected)
– link their PAYE schemes
– invite members of their team to use the service
It shouldn’t take more than 10 minutes for employers to set up their account, but there are some things they can do in advance to speed it up. The register to manage your apprenticeship funds page gives them everything they need.
If employers have any questions about their account, they can:
- email Helpdesk@manage-apprenticeships.service.gov.uk
- call 08000 150 600
For levy-paying employers
In addition to the functions available to all employers, from May 2017 levy-paying employers will be able to access funding for apprenticeships through their digital account and:
- negotiate and pay for apprenticeship training and assessment
- manage their funding and apprentices, view their account balance and plan their spending
- stop or pause payments (for example, if their apprentice stops their training, takes a break from training or the employer hasn’t received the service agreed with the provider). To access their funding, levy-paying employers will need to set up an account on the digital apprenticeship service from January 2017 using their Government Gateway ID, PAYE scheme details and Companies House number or equivalent, which company payroll teams should have.
For non-levy paying employers
By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships. Until then, non-levy paying employers will continue to negotiate and agree their apprenticeship programme with their chosen training provider.
90% of non-levy paying employers’ apprenticeship training and assessment costs in England will be paid for by the government. The government will ask these employers to make a 10% contribution to the cost, paid directly to the provider, and the government covers the rest. This cost will be spread over the lifetime of the apprenticeship.
The government is offering additional support to organisations with fewer than 50 employees by paying 100% of training and assessment costs for their apprentices aged 16 to 18 and for those aged 19 to 24 formerly in care or with a local authority education, health and care plan.
The Skills Funding Agency released more information about the revised apprenticeship system including guidance for employers carrying out the changes and the apprenticeship levy.
The Apprenticeship Levy will be applied to all UK businesses in both private and public sectors. Businesses with an annual wage bill of over £3 million will have to make payments, which will result in less than 2% of employers across the UK paying the levy.
These larger organisations will need to pay the levy, regardless of whether they reclaim their digital funds to purchase apprenticeship training and services or not. Every business who pays the levy will be entitled to an allowance of £15,000 to offset against their payment.
They will then be able to access government funding in the form of co-investment, and may receive financial incentives.
How will the levy be collected?
The first Apprenticeship Levy PAYE return will be due in April 2017. It will be applied at a rate of 0.5% of the annual paybill, and will be collected monthly by HMRC through the PAYE system.
To keep the process as simple as possible, “paybill” will be based on total employee earnings subject to Class 1 secondary NICs. You can find more information on HMRC’s guidance page.
Below are a couple of examples of how the levy will work. You can also estimate how much your organisation will spend on apprenticeships using this calculator.
Employer of 250 employees, each with a gross salary of £20,000
Paybill: 250 x £20,000 = £5,000,000
Gross Levy Due: 0.5% x £5,000,000 = £25,000
Application of Allowance: £25,000 – £15,000 = £10,000
Net Levy Due: £10,000
Employer of 100 employees, each with a gross salary of £20,000
Paybill: 100 x £20,000 = £2,000,000
Gross Levy Due: 0.5% x £2,000,000 = £10,000
Application of Allowance: £10,000 – £15,000 = £0
Apprenticeship funding in England from May 2017. This document sets out the final policy on how apprenticeship training will be funded from May 2017. This includes the final funding bands for existing apprenticeship frameworks and standards. The SFA has also published the detailed funding rules that underpin the policy (link).
A revised apprenticeship funding calculator. Gov.uk have produced a revised version of this popular tool to help employers understand what levy they will pay and how they could use the new digital service to plan and fund training.
Updated guidance on the apprenticeship levy: how it will work. Gov.uk have also updated the existing online guidance, which gives employers a clear explanation of how they will pay the levy, manage and use their funds in the new system.
The approach to the Register of Apprenticeship Training Providers. This document sets out the final policy on the register, following feedback. The SFA will also launched applications for the register and associated procurement October 2016.
Additionally released Documents
apprenticeship funding in England from May 2017