On the 12th of August the government published proposals for a new funding model for apprenticeships and further details on the apprenticeship levy. The funding will support people of all ages to gain high-quality skills and experience and help employers to offer more training opportunities and build a skilled workforce. After further consultation which took place in September 2016 the following has been disseminated by the Skills Funding Agency.
From May 2017, the way apprenticeships are funded is changing – today we’ve set out how it will work. Our apprenticeship reforms will support an increase in the quality and quantity of apprenticeships so that more individuals have the chance to pursue a successful career – whether this is their first step on the employment ladder or progression within a current employer or sector. We want to make apprenticeships as accessible as possible, to all people, from all backgrounds and the funding reforms are an important step in enabling this.
After extensive discussions with employers and training providers we have now published the final funding policy for 2017-18 and details of the new register of apprenticeship training providers. Your feedback was vital in helping us make adjustments to the funding policy since our proposals in August, which will help ensure that the reforms benefit more employers and apprentices. Today we have announced some key changes:
– Give employers extra flexibility and the extra time they need to plan for the reforms by extending the expiry date of levy contributions to 24 months (from the 18 months originally proposed);
– Introduce a system for employers to transfer funds from 2018, working with a new employer steering group to design this system so that it meets their needs;
– Help training providers adapt to the new, simpler funding model, by increasing their funding by an extra 20% where they train 16 to 18 year olds on frameworks. This will come from government and not from employers’ digital accounts. This transitional payment will ensure stability as the market adjusts to reforms;
– Retain a simplified version of the current system of support for those from disadvantaged areas for one year whilst we conduct a fuller review into the best way to support individuals from all backgrounds into apprenticeships.
– Employers paying the levy will be able to choose a provider from the new Register of Apprenticeship Training Providers. All providers on the register will have to pass quality and financial tests. Providers who want to deliver less than £100k of apprenticeship training per year as a subcontractor can choose to apply for the register but it will not be compulsory. The new register will launch for applications later today (25th October) and at the same time we will launch a procurement for apprenticeship delivery for smaller employers who will not pay the levy.
So you can get the information you need to plan for the reforms, I am pleased to confirm that we have published:
- Apprenticeship funding in England from May 2017. This document sets out our 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. We 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. We 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 our final policy on the register, following feedback. The SFA will also be launching applications for the register and associated procurement later today (25th October).
Over the next few months, we will continue to work with employers and training providers to ensure that they are aware of the reforms and how they can prepare for them. We will provide further online guidance, events and webinars. However, we would welcome your support to use your media and social media channels to share information with your networks.
If you would like to keep up to date with the development of the Digital Apprenticeship service then more information can be found on our blog.
If you are interested in joining other organisations supporting apprenticeship reforms in a public letter next week, then please get in touch so we can join you up with the many others signed up. If interested, please contact us: firstname.lastname@example.org.
Please do feel free to contact the National Apprenticeship Service should you have any questions.
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.
It has also been indicated that non-levy paying employers will also have to make a financial cash contribution towards new apprenticeship starts from April 2017 onwards. As of the August 12th updates, businesses of all sizes will only be required to contribute 10% of the cost of training an apprentice.
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 here.
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
What is the aim of the levy?
With the government committed to achieving 3 million apprenticeships by 2020, the levy is designed to encourage employers to take on apprentices, and maximise their return on their investment.
The Apprenticeship Levy will also aim to raise £3billion a year to increase the quality of apprenticeships, addressing the skills gaps in the UK workforce while raising the profile of apprenticeships to the same level as university courses.
A total of 12 documents were released as follows:
|1||Why is the government introducing the apprenticeship levy?||The levy is being introduced to fund a step change in apprenticeship numbers and quality – delivering on the commitment that there will be 3 million additional apprenticeship starts by 2020. The levy will put apprenticeship funding on a sustainable footing and improve the technical and professional skills of the workforce (an important component of productivity).|
|2||What is the apprenticeships levy?||0.5% of an employer’s pay bill collected monthly via PAYE. All employers will have an allowance of £15,000, which means that the levy is only applicable on pay bill over £3,000,000.
|3||When will the levy come into effect?||In April 2017|
|4||Why has the rate been set at 0.5% of an employer’s pay bill?
|The rate was set to deliver the increase in quality that business have been asking for while ensuring it does not place an unreasonable burden on employers. This, alongside the increase in quantity that we need, is the right amount to put the funding of high-quality apprenticeship training on a sustainable footing. Unlike normal taxation, employers can get back the funds that are levied simply by investing in a sufficient amount of apprenticeship training.|
|5||What counts as an employers pay bill?||Further detail has been published by HMRC in draft legislative clauses, which can be found on the government’s website.|
|6||What happens to the money once it is paid under the levy?
|The money will be collected by HMRC. Individual employers’ funding for apprenticeship training in England will then be made available to them via a new Digital Apprenticeship Service (DAS) account, through which employers will be able to pay for training for apprentices. The Service will also support employers to identify a training provider, choose an apprenticeship training course and find a candidate.|
|7||What are the arrangements for employers who do not pay the Levy?||Employers with a pay bill of less than £3m will not have to pay the levy. This is more than 98% of all employers. These employers will continue to have access to government funding to support apprenticeships. We will provide further details on the support available later this year. All employers will have access to the Digital Apprenticeship Service whether they have paid the levy or not.|
|8||What choice will employers have about what they spend their money on?||Employers will be free to spend their money on apprenticeships training which they judge best meets their needs. For example they could spend that on in-house apprenticeships training (if the employer is a registered training provider) which meets the required quality standards for an apprenticeship, or apprenticeships training offered by another registered provider of their choice. We want to give employers in England flexibility on how they use levy funds without introducing additional and unintended complexity into the system.|
|9||Can employers spend their funding on training in their supply chain?||We know that some employers want to direct their funding to other employers, for instance their suppliers. We are looking into ways to facilitate this that are not bureaucratic, maintain the aims of the system and are compatible with State aid rules.|
|10||How will a “good” employer get out more than they put in?||The levy will put apprenticeship funding in the hands of employers and will encourage employers to invest in their apprentices and take on more. Employers in England who pay the levy and are committed to apprenticeships training will be able to get out more than they pay in to the levy through a top-up of additional funding to their digital accounts.|
|11||What do you mean by top ups and how will they work?||The government will apply a 10% top-up to monthly funds entering levy paying employers digital accounts, for apprenticeship training in England, from April 2017. I.e. All funds entering a levy payer’s account will be increased, so every £1 will be increased to £1.10 in value.|
|12||If the levy money is unspent at year end, does an employer lose it?
|The amount of time that an employer will have before levy funds are “sunsetted” has not been decided – employers have said they would like 12-24 months. If an employer does not spend their entire levy funds by this point then the unspent portion will be made available to other employers who are investing in apprenticeship training.|
|13||Will employers only be able to spend their levy money on apprentices?||Yes. Specifically, employers will be able to use their funding (up to a cap which will depend upon the standard or framework that is being trained against) to cover the costs of an apprentice’s training, including English and maths, assessment and certification. Currently these costs are eligible for government funding under the trailblazer standards.
It will not be possible to use levy funds to cover the salary costs of an apprentice. The employer will need to cover the costs of an apprentice’s wages themselves.
|14||What are the funding caps on how much can be spent on individual apprentices?
|Employers will not be able to spend an unlimited amount of money on a single apprentice. Funding caps will be set which limit the amount of levy funds an employer can spend on training for an individual apprentice. The cap will vary according to the level and type of apprenticeship (for example, more expensive, higher quality training is likely to have a higher cap).
The Institute for Apprenticeships will support the work of BIS and DfE in setting funding caps on the level of government funding available for each apprenticeship standard. Further detail on indicative funding caps for 2017-18 will be announced in the summer 2016.
|15||Will levy paying employers have to put in their own money as well as the levy to pay for training?||There are two circumstances where employers are likely to have to contribute additional funds i) where the cost of the training they wish to buy is greater than the funding cap for a particular standard or framework and ii) where an employer has spent all of their levy contribution and all of their top-up and wishes to spend more on additional apprenticeship training.
|16||What do non levy paying employers or those who don’t have enough funding in their digital accounts do if they want to spend more on apprenticeship training?||Employers that have not paid the levy will be able to access Government funding for apprenticeship training. They may also need to cover part of the cost of apprenticeship training with their own funds.
Similarly, employers who have paid the levy and spent all of the funds in their levy account will be able to access Government funding to do more apprenticeship training, but it is likely that they will also need to cover part of the cost this extra training directly.
We will publish more details on this in the summer 2016.
|17||Will employers be required to pay admin costs for the management of the levy?||There will be no top-slice from the funds in levy accounts to pay for administration costs.|
|18||How will existing levies in the construction and engineering sectors interact with this levy?||The apprenticeship levy will be economy wide and larger employers in the construction and engineering construction industries will be in scope of the levy. We are working with the relevant Industry Training Boards who will consult with their members ahead of the introduction of the apprenticeship levy on how their existing arrangements will be affected and whether any changes are required. We are also working with other sectors, where there are existing collective training arrangements (i.e. the tonnage tax in the maritime sector), about what the apprenticeship levy means to them.|
|19||What happens to the levy for those employers who operate across the UK?||The levy will apply to employers across the UK. As skills policy is a devolved area the Devolved Administrations will continue to have complete flexibility over how to support businesses through training and apprenticeships. We are committed to doing all we can to make the system work for employers wherever they are in the UK and we are working closely with the Devolved Administrations to achieve that.|
|20||Are there likely to be any exemptions from the levy?||All employers with a pay bill over £3,000,000 will be expected to pay the apprenticeship levy. There will be no exemptions. Public sector employers with a pay bill over £3,000,000 will be in scope of the apprenticeship levy. The public sector needs to play its part in apprenticeship expansion. To ensure that it does, the government will set apprenticeship targets for public sector bodies. The public sector will be able to draw down levy funding like any other employer and we fully expect them to do so.|
|21||What happens to those companies with their own training schemes?||Apprenticeships offer transferrable, valuable skills which are beneficial to both the apprentice and the employer. Employers who are also providers of apprenticeships training will be able to register as a training provider and receive levy funding through the Digital Apprenticeships Service.|
|22||What if an apprenticeship doesn’t exist in a sector? What happens in this situation?||Employers are encouraged to work together to design the standards and assessment plans for new apprenticeships they feel are needed. We welcome your interest in developing an apprenticeship standard for an occupation in your sector or for one that covers a number of sectors.|
|23||How do I employ an apprentice?||Employing an apprentice is very simple. The National Apprenticeship Service can provide all the information you need to know in order to employ an apprentice. There is a wealth of useful material on their website at https://www.gov.uk/take-on-an-apprentice or you can call them on 08000 150 600.|
|24||What is the Institute for Apprenticeships?||The newly established independent body, led by employers to regulate the quality of apprenticeships. The Institute for Apprenticeships will put in place transparent mechanisms for the approval of apprenticeship standards and assessment plans, and maintain clear quality criteria so that only standards that are valued by employers will be approved and funded. The Institute for Apprenticeships will be fully operational by April 2017 and it will gradually start to assume functions in 2016. More detail can be found at on the government’s website.|
|25||How can I get in touch to express my views on this?||Please send queries to ApprenticeshipsLevyConsultation@bis.gsi.gov.uk If you would like to be involved in the development of the Digital Apprenticeship Service you can register your interest by e-mailing: DAS@bis.gsi.gov.uk|
|26||When will further information on the levy be available?||Further details about the levy will be available at the following times during 2016:
· BIS/DfE will publish an Employer Guide, outlining the operating model for the levy in April 2016
· BIS/DfE will publish draft funding rates in June, and final funding rates in the Autumn of 2016.