Starting in April 2017 and continuing to develop until 2020, the Government is reforming the way Apprenticeship training is handled. Colleges, Training Providers and Awarding Bodies will no longer have control over Apprenticeship funding, instead control will be in the hands of the Employers. The initial focus will be on the introduction of an Apprenticeship Training Levy for employers with a salary bill of over £3m.

This webpage will focus on how the upcoming reform will affect the funding that employers receive and how it will work.

Some of the information may change over time as more detail becomes available and as the new delivery and funding rules are released. As such, we will be providing regular updates and will also be announcing some changes to the way in which we operate in order to provide the best possible support and training delivery for employers of all sizes.

So, for more information on how the Apprenticeship Reform and Levy will affect your business, and to see how ROI Solutions can assist, contact our team of Business Relationship Managers on 01772 22 55 77 or email training@roisolutions.ac.uk.

Reform

Why is reform needed?

The UK Government believes there is a considerable skills gap when viewed against other developed economies. Equally, employers feel that existing Apprenticeship frameworks are not fit for industry requirements.

As such, the Government has set a target of creating 3 million new apprentices by 2020. To help achieve this, they want employers to contribute towards their Apprenticeship training budget to access government funding.

What is being changed?

Employers will no longer access funding via their approved training provider or College*. Instead, the employer will use a voucher system through a Digital Apprenticeship Service (DAS).

The current Apprenticeship ‘Frameworks’ are also being redesigned to a set of ‘Standards’, defined by employer groups and recognised by industry. Click HERE to learn more about Apprenticeship Standards and Trailblazers.

*In some instances, Employers will receive monies from the training provider.

Who will reform affect?

Reforms will affect any employer, training provider or assessment organisation that is involved in the delivery of Apprenticeships. There will be two systems running side-by-side in 2017, one for levy paying employers (an estimated 25,000) and one for smaller employers (an estimated 100,000). Some features of the system will be the same; some will be different.

Apprenticeship Levy Paying Companies

  • From April 2017, employers with a total pay bill of over £3m will automatically pay a 0.5% ‘levy’ to fund their Apprenticeship training.
  • The first time eligible employers will have to declare their liability to HMRC will be in May 2017 for levy due on their April payroll and will see funds in their account from 22nd May.
  • This contribution will be offset by a £15,000 allowance.
  • The levy will be collected by HMRC each month, directly via PAYE processes.
  • No employer, whether they train apprentices or not, is exempt from the levy. This includes charities, public sector organisations, local authorities and the education sector.
  • Employers who already pay into a levy system, such as CITB, will not be exempt.

How will the Levy work in reality?

Below is an example of how a company whose wage bill of £6m, will contribute towards the levy.

  • 0.5% levy sum x £6m wage bill = £30,000 levy
  • £30,000 levy – £15,000 allowance = £15,000 payment

Employers in England who pay the levy and are committed to apprenticeship training will also receive a 10% top-up, directly into their DAS account. That means for every £1 that enters an employer’s digital account, they will actually receive £1.10.

What happens to an employer's levy contributions?

It has been suggested that 100% of the value of the monthly levy deduction will go into an employer’s DAS account. Employers should see funds appear in their digital account monthly, a few working days after confirming their pay bill and levy contribution to HRMC for the previous month.

Applying this same wage bill to a monthly scenario can be seen below:

May 2017*

  • 0.5% levy sum x £500,000 monthly wage bill = £2,500 levy
  • £2,500 levy – £1,250 allowance = £1,250 payment
  • £1,250 payment + £125 Government Top-up = £1,375 DAS Spend
This example is for a company with 100% of its employees living in England. Further regulations apply for companies whose employees live in Scotland, Wales or Northern Ireland.

What can the Levy be used for?

The Levy can be spent on Apprenticeship Training and the associated costs. This can be used to fund things such as recruitment and CPD training to support the Apprentice but cannot be used towards their salary.

Who can deliver an Employer's training?

The DAS will provide details of training providers that can offer the desired Apprenticeship. The system will enable virtual payments to providers that are delivering Apprenticeships for the employer. This will allow the employer to approach the provider(s) to negotiate funding, contributions and payment schedule.

Paying for an Apprenticeship?

Once an employer has selected their Framework or Standard, monthly payments will be taken out automatically and sent to the training provider over the lifetime of the Apprenticeship. It is proposed that 20% of the total cost is held back and taken at the end of the Apprenticeship. The limit on how much an employer can spend on an Apprenticeship Framework or Standard will be determined by 15 funding bands.

If an employer doesn’t spend their levy, what will happen to it?

Employers will be given 24 months from April 2017 to use the levy. If they don’t use it in that time, it will be given to other employers to use. For example, funds which enter an employer’s account in September 2017 will expire in March 2019. The digital account will let an employer know in good time when funds are due to expire.

What happens if an employer has used all, or has insufficient, funds in their Digital account?

Employers who pay a small levy or invest in a lot of apprenticeship training may find that there are insufficient funds in their digital account to cover the cost of training. In these circumstances, it is proposed that the Government pay 90% of the additional costs incurred with the employer contributing 10% directly to the training provider.

The Funding Bands

All new and existing Apprenticeship Standards and Frameworks will be placed into 15 funding bands. This will apply to both levy paying and non-levy paying employers.

Employers can negotiate the price of their Standard or Framework with their training provider. This price can fall above or below the ‘Band Upper Limit’ set by the Government for that particular Apprenticeship.

The ‘Band Upper Limit’ is the highest amount that public funds can be used towards Apprenticeship training. For example:

• a levy paying company can use its funds up to the band upper limit
• a non-levy paying employer can draw ‘co-investment’ up to the band upper limit

If employers want to spend more than the upper band limit then this must be done so using their own money.

The table below shows the proposed funding bands. The steps between bands are smaller at the bottom of the range as this is where the majority of Apprenticeships are concentrated.

Band Number Band Upper Limit
1 £1,500
2 £2,000
3 £2,500
4 £3,000
5 £3,500
6 £4,000
7 £5,000
8 £6,000
9 £9,000
10 £12,000
11 £15,000
12 £18,000
13 £21,000
14 £24,000
15 £27,000

Non-Levy Paying Companies

Employers with an annual wage bill of less than £3m will not pay the levy. Instead, Apprenticeship Standards and Frameworks will be jointly funded by employers and the Government. This is called Co-Investment.

What is the payment process for recruiting an Apprentice?

The provider and employer decide on a payment schedule and put this in a written agreement. This acts as the contract for delivery between the two partners and should be legally watertight. All employer contributions must be in cash and not in kind.

When is the level of Co-investment?

It is proposed that employers ‘co-invest’ 10% of the cost of Apprenticeship training and assessment and benefit from Government funding to cover the remaining 90% of the cost.

In the first year of the new funding system, employers will need to pay their co-investment directly to the training provider.

How is a price for training agreed?

Employers will agree a price and payment schedule for an Apprenticeship or Standard directly with the training provider. The Apprenticeship’s co-investment limit will depend on what Funding Band the Standard or Framework falls into. If the agreed price is higher than the Band Upper Limit, the employer will have to pay this themselves.

Here are two examples:

Below Upper Band Limit

  1. The employer agrees a price of £2,250 for an Apprenticeship that falls into Funding Band 3
  2. The Government pays £2,025 and the employer pays £225

Above Upper Band Limit

  1. The employer agrees a price of £3,250 for an Apprenticeship that falls into Funding Band 3.
  2. The Government pays £2,250 and the employer pays £1,000

Are there any extra incentives?

  1. Employers who take on a 16-18 year old will receive an additional £1,000 payment, received in two equal instalments on 3 months and 12 months. This will be sent from your training provider.
  2. For businesses with less than 50 employees, it is proposed that the Government will pay 100% of the training costs for Apprentices aged 16-18.

Can an employer gain Government funding to upskill existing staff??

Employers should be able to use funds in their digital account (levy paying) or access Government co-investment (non-levy) to train an individual if the level of Standard or Framework is higher than their current set or qualifications or at a lower/equivalent level if the content of the training is materially different from any prior training they have received.

More Information

The answers to some of these question may change over time as more detail becomes available and as the new delivery and funding rules are released.

For more information on how the Apprenticeship Reform and Levy will affect your business, and to see how ROI Solutions can help, contact our team of Business Relationship Managers on 01772 22 55 77 or email training@roisolutions.ac.uk.