The long awaited detail about the way apprenticeships will be funded from spring 2017 was announced on 12th August with details about both the apprenticeship levy as well as the proposed rate of contribution expected from all employers from May 2017. The full document can be found here with the main detail summarised below.
There is little change to the detail already provided about paying the apprenticeship levy. From 6th April 2017 all employers with a pay bill of more than £3 million each year will be charged an apprenticeship levy at a rate of 0.5% of their annual pay bill regardless of whether they already contribute to a current levy arrangement. There will be an allowance of £15000 meaning that the levy will only be paid on the pay bill in excess of £3 million. The levy will be paid to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process. The levy funds will appear in a digital account a month after they are paid along with a 10% government top-up to the funds available for apprenticeship training in England.
The levy can only be used to fund apprenticeships and will expire after 18 months meaning that it will be essential to carefully plan apprenticeship training to maximise the use of the levy funds. The skills funding agency has designed an online tool to estimate if your organisation will pay the apprenticeship levy, how much your organisation will have available to spend on apprenticeships and how much the government will contribute towards the cost of training which can be found here.
Employers that don’t pay the levy
The current estimate is that only 2% of employers will pay the apprenticeship levy. For the remaining employers the government is expecting a contribution toward the cost of apprenticeship training, which is referred to as ‘co-investment’. This will need to be paid direct to the provider and it will not be possible to access government funding unless this contribution is received. It will be possible to spread this contribution over the duration of the apprenticeship but there will be minimum requirements for the payment schedule.
Currently the proposal is that that government will pay 90% towards the cost of training and assessment, and employers will pay the remaining 10%. There is a proposal that this contribution will be waived for small employers with less than 50 employees when taking on a 16 – 18 year old apprentice, meaning that 100% of the training costs would be covered for these learners.
New funding bands
In order to simplify the current funding arrangements there is a proposal for each apprenticeship to be given a single funding band, regardless of the age of the learner, or geographic location. The proposed 15 funding bands range from £1500 to £27000 and will set the upper limit that can be used to fund an individual apprenticeship either through co-investment or by using levy funds.
This rate is being based on the nearest funding band to the current adult funding rate with STEM framework pathways having a 40% uplift at Level 2 and 80% at Level 3 and above. Full details of the proposed funding band for each apprenticeship can be found here.
Additional support for young learners and young adults leaving care
In the funding update there is a proposal for an additional payment of £1000 to help employers meets the extra costs associated with employing a 16 – 18 year old apprentice or aged 19 to 24 who have previously been in care or who have a Local Authority Education, Health and Care plan. This payment would be initially paid to employers through their training provider in two equal instalments at 3 months and 12 months.
Equivalent or lower level apprenticeships
There is the intention under the new funding arrangement to allow employers to use levy funds or access co-investment support to train any eligible individual to undertake an apprenticeship at a higher, the same or lower level than a qualification already held provided the apprenticeship will allow them to acquire substantive new and different skills.
The digital apprenticeship service
The digital apprenticeship service will be able to be used by all employers to select appropriate apprenticeship frameworks and standards and see which training providers can deliver this training. It will also be used to post apprenticeship vacancies online.
From May 2017 employers subject to levy payments will use the digital service to see funds available and training agreed to help manage levy funds. The digital account will be open for registration from January 2017 to give a chance for familiarisation with the service before the first levy payments become available towards the end of May 2017.
All proposals were subject to a short consultation which ended on 5th September 2016. Final confirmation of levels of funding and apprenticeship support should be announced in October 2016 along with final details of funding and eligibility rules.
In December 2016 there will be information about further employer guidance from HMRC on how to calculate and pay the apprenticeship levy.
Apprenticeship starts before May 2017
These changes will only affect new apprenticeship starts from May 2017. If you take on an apprentice before this date then they will be funded using the current system for the duration of their apprenticeship training. Currently Moulton College does not charge any employer contribution for intermediate or advanced apprenticeships regardless of learner age.
If you would like to recruit an apprentice before these changes come into effect please contact the apprenticeship team on firstname.lastname@example.org or on 01604 673575. Also please follow the team on twitter @MoutonWBL for further updates on the funding changes.