Apprenticeship Levy Update – funding arrangements confirmed

Posted by Rebecca Ireland on

The Government has now confirmed many of the proposals set out in its consultation from August on Apprenticeship Levy funding arrangements in England, plus some additional new points. It has also confirmed the start date for the Apprenticeship Levy across the UK as 6 April 2017. In addition, a new Register of Apprenticeship Training Providers is open for applications until 25 November 2016.

(For information on the basic mechanics of the Apprenticeship Levy please see our article from May this year.)

Funding arrangements in England

Much of the detail of new funding arrangements for apprentices in England who begin their programme on or after 1 May 2017 is the same as that proposed in this summer's consultation, and is set out in our previous article.

For example, the 15 funding bands, limiting the maximum that can be used for an apprenticeship from the digital funds, have been confirmed – ranging between £1,500 and £27,000 as proposed – regardless of the age of the apprentice. Details of how the bandings are allocated are set out in the Government's policy paper. It is also confirmed that for 16-18 year old apprentices, or 19-24 year old apprentices who have been in care or with a Local Authority Education, Health and Care plan:

  • employers with less than 50 employees will not have to contribute to funding these apprenticeships; and
  • employers (of all sizes) and training providers will have £1000 each to cover associated costs for such apprentices (whether they use an apprenticeship 'framework' or 'standard').

As expected, employers who do not pay the Levy, or Levy-paying employers who want to engage more apprentices than they have funds for in their digital accounts, will have to co-invest 10% in apprentices, with the other 90% coming from the Government.

However, certain new points have come out of the responses received to the consultation, particularly in response to additional costs for training providers while the new funding system beds in, namely:

  • For a transitional period, training providers with 16-18 year old apprentices on frameworks, or 19-24 year olds who have been in care or with a Local Authority Education, Health and Care plan, will be given an additional 20% of funds to adapt to the new model of funding – this will come from the Government and not from the employer's digital account;
  • Training providers who train apprentices on frameworks from the poorest areas will continue to receive additional Government funding for the first year while there is a further review as to what further support they should receive – again this funding will come direct from the Government; and
  • Employers will have 24 months to use the digital vouchers, with the oldest funds automatically being used up first – 24 months was originally suggested, but the Government had then proposed a limit of 18 months.

Employers who are paying the Levy will be able to register for the digital account from January 2017. They will be able to access funding once they have declared the Levy to HMRC. The proportion of funds that may be used in England will be viewable on the account from March 2017, based on the proportion of employees living in England according to HMRC records.

Training providers will have to register with the new Register of Apprenticeship Training Providers if they will deliver more than £100,000 of apprenticeship training per year. For the time being registration for training providers who want to deliver less than this is voluntary. The Government recognises that some employers will want to register as training providers and has published guidance on this.

The Government has updated its current guidance on how the Apprenticeship Levy will work.

The position for Wales, Scotland and Northern Ireland

Those following developments may remember that these funding arrangements will apply in England only. Skills, including apprenticeships, are devolved matters, and therefore it will be down to the governments of Wales, Scotland and Northern Ireland to establish what they will do with the money allocated to them from the Levy and how employers will access the benefit. The UK Government says that each of the devolved administrations will be setting out their plans for apprenticeships later this year.

In the meantime, in August the Welsh Government published a Q&A document setting out some of its priorities, but  giving little concrete detail. The Welsh Government has no plans to adopt a digital voucher system like England and the Q&A also considers it unlikely that vouchers collected in England would be redeemable in Wales. The Welsh Government recognises the need to resolve the questions for employers with cross-border workforces, but states that the issues are complex and likely to take some time to resolve. Watch this space!

If you are considering employing apprentices as a result of the Apprenticeship Levy, please be aware that a particular form of contract is required to protect employers from entering into a contract of apprenticeship with greatly enhanced termination rights for the apprentice. There have been a number of changes to apprenticeships over the last few years which are complex and the law in England is now different to the law in Wales. Please contact us for further information and guidance. 

About the Author

Rebecca is a highly experienced employment lawyer, having specialised in the area over 21 years ago, and is also a qualified mediator.

Rebecca Ireland
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