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 email@example.com.
Why is reform needed?
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?
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?
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?
- 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?
Applying this same wage bill to a monthly scenario can be seen below:
- 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?
Who can deliver an Employer's training?
Paying for an Apprenticeship?
If an employer doesn’t spend their levy, what will happen to it?
What happens if an employer has used all, or has insufficient, funds in their Digital account?
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|
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?
When is the level of Co-investment?
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?
Here are two examples:
Below Upper Band Limit
- The employer agrees a price of £2,250 for an Apprenticeship that falls into Funding Band 3
- The Government pays £2,025 and the employer pays £225
Above Upper Band Limit
- The employer agrees a price of £3,250 for an Apprenticeship that falls into Funding Band 3.
- The Government pays £2,250 and the employer pays £1,000
Are there any extra incentives?
- 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.
- 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??
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 firstname.lastname@example.org.