Apprenticeship Levy – update on funding arrangements

Posted by Rebecca Ireland on
On 12 August 2016, the Department for Education (where responsibility for apprenticeships now lies) published a Consultation on funding arrangements for the forthcoming Apprenticeship Levy. The consultation had been expected in June (see our last update on the Apprenticeship Levy from May 2016), and now allows only a short window for responses which must be submitted by 5 September 2016.

The consultation makes no mention of any delay to the Apprenticeship Levy as has been called for by some business groups, most notably the CBI. The levy will still be payable from April 2017 (employers will declare their liability in May 2017 for the April 2017 payroll), and the funding arrangements are due to come into effect on 1 May 2017. Any apprenticeships beginning before 1 May 2017 will be funded on existing rules.

The funding arrangements apply to England only. However, they will apply if an apprentice lives in other parts of the UK and his or her main place of work is in England, as long as the apprentice is working towards an English Apprenticeship Framework or Apprenticeship Standard. How much levy-paying employers have to pay into the English system will be determined by the proportion of their wage bill paid to employees living in England. Employers with employees based elsewhere in the UK will need to liaise with the other funding bodies and the logistics of the rest of the levy monies being available elsewhere in the UK is still being worked out.

Arrangements relevant to all employers

The consultation sets out 15 funding bands from £1,500 to £27,000. All Frameworks and Standards will be placed within one of these bands. The upper limit of the band caps the maximum amount of digital funds an employer who pays the levy can use towards the apprenticeship, and the maximum amount the Government will 'co-invest' (see our previous article) for employers not paying the levy. This means that employers may have to negotiate on the price of the training with training providers, or face topping it up themselves.

Employers who do not pay the levy, or those who want to pay more than they hold in their digital account (e.g. employers who pay a smaller levy), will be able to fund apprenticeships by co-investing 10%, with the Government co-investing 90% of the training costs. This will not need to be handled through the Digital Apprenticeship Service until at least 2018 – in the first year, the 10% co-investment will be paid by employers directly to training providers. The Government is also proposing that the funding level will no longer be based on age of the apprentice.

Employers with less than 50 employees will not have to contribute to funding for 16-18 year olds, or 19-24 year olds who have been in care or with a Local Authority Education, Health and Care plan. For these there will also be £1000 for employers and £1000 for training providers to cover associated costs.

There will also be additional funding for:

  • English and Maths to Level 2 (£471 for each, paid to the provider at a flat rate), and
  • £150 a month where additional learning support is required (e.g. for apprentices with learning difficulties or disabilities)

Employers will be able to provide higher level apprenticeships for those who have already been apprentices with them at a lower level, and will even be able to provide equivalent or lower level apprentices if the apprentice will learn substantive new skills and the content of the training is materially different.

Arrangements for levy-paying employers

As explained in our previous article, levy-paying employers will receive a 10% top up to the monthly funds entering their digital account. The funds and any top-ups expire 18 months after they appear if they are not spent on apprenticeship training.

The Government is also proposing that 20% of the total cost will be held back from training providers until the end of the apprenticeship, to reflect the cost of the end point assessment for those on working towards an Apprenticeship Standard.

From 2018, employers paying the levy will be able to transfer up to 10% of their annual funds to other employers on the digital system (subject to State Aid rules). This could be employers in their supply chain or other employers in their sector/community.

Next steps:

The Government has pledged to publish the following in October 2016:

  • The final funding bands that will apply
  • The final full technical rules that underpin the funding system
  • Confirmation of how the proportion of the employer's pay bill paid to employees living in England will be calculated.

Then, in December 2016, further guidance on how to calculate and pay the levy will be published by HMRC.

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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