The Richard Review of Apprenticeships in England (2012) made a number of recommendations to ensure Apprenticeships would meet the future needs of the changing economy and consistently deliver high quality training.
The Government’s Reform strategy to meet these changing needs includes:
- Government commitment to 3 million Apprenticeship starts by 2020.
- Creation of the Institute for Apprenticeships (IfA), now known as the Institute for Apprenticeships and Technical Education (IfATE) to oversee Apprenticeship standards and technical education.
- Launch of an online Apprenticeship Service (AS) to support employers, choose an Apprenticeship, find a training provider and recruit.
- Changes to how Apprenticeships are funded.
- Replacement of Apprenticeship Frameworks with a new range of Apprenticeship Standards designed by groups of employers to truly meet industry need.
- A target of 2.3% Apprenticeship starts per year in public sector organisations.
The government introduced an apprenticeship levy on 06 April 2017 to fund an increase in the number and quality of apprenticeships. The levy is paid by all private and public sector employers in the UK with an annual pay bill of more than £3 million.
All the documents can be found on-line here.
Summary of the proposals
- Levy started the 1st May 2017
- Levy payers can pay for Apprenticeship training with approved providers and will not have to make further contributions
- Non Levy Small Businesses will not have to make any cash contributions
- Employers with 50 or more employees will have to make a contribution of only 5% of the cost of training
- Each Apprenticeship framework or standard will have a maximum funding amount
Employers will pay HMRC 0.5% of their payroll costs as a Levy on a monthly basis. There will be a £15,000 allowance (where the employers will not pay the first £15,000 of Levy) and the Government will also top up the funds by 10%, so most employers will be able to invest more funds than they contribute in Levy.
These employers will be able to fund their Apprenticeship training using an approved provider (private training provider, university or college). They can fund new or existing employees of any age who are eligible for an Apprenticeship as long as there is a significant training need. Employers wanting to spend more than their fund will have to make a 5% contribution to the cost.
NON LEVY PAYING EMPLOYERS
Employers with less than 50 employees will not have to pay for the training of Apprentices aged 16-18, or for those aged 19-24 who are care leavers or have an Education Health Care Plan (EHCP). A 5% contribution towards the training will be paid by the employer for any apprentice that is 19+.
Employers with more than 50 employees (but not paying the levy), including those employing apprentices aged 16-18, or those aged 19-24 who are care leavers or have an Education Health Care Plan (EHCP) will have to pay the 5% contribution.
There is also a £1000 employer payment for learners in certain categories.
Frequently Asked Questions
The levy has been designed to fund all Apprenticeship delivery and will be calculated on 0.5% of the payroll bill of all employees across the whole of the UK including Scotland, Wales and Northern Ireland. However there will be a £15,000 allowance for Levy payers meaning that employers with a payroll bill of less than £3m will not pay the Levy at all. In broad terms this means that employers with around 150 reasonably paid employees will pay a Levy.
There are currently two systems of payment for Levy and non-Levy employers. Non-levy employers will have access to a government contribution of 95% towards training in most cases.
Levy employers (and non levy employers from 2020) delivering state-funded Apprenticeships from their staff must register for a Apprenticeship Service (AS) account. This will track the amount of funds in the account and how much is therefore available for their Apprenticeship delivery, as well as helping employers to decide on which framework or standard will suit their employees best, and to select providers to deliver them.
The first levy payments were calculated based on the calculations of payroll in April 2017, meaning that the first amounts reached the employers apprenticeship service accounts around the 22nd May 2017.
The Levy is collected on a monthly basis, based on ‘live’ HMRC payroll data. It includes all directly employed employees but not contractors. It includes all directly employed employees but not contractors and payments made through payrolls but not ‘benefits’. It applies to ‘groups’ of companies but not franchisees. HMRC sets out the rules and collects the Levy.
Levy payments will be available for expenditure by levy payers for up to 24 months from the time that they reach the apprenticeship service account.
In England, levy funding can only be used for the funding of English Apprenticeships at workplaces within England (The devolved nations may make other arrangements). The employer will pay the tax and the AS will be credited with that amount, plus a 10% government ‘top-up’. Levy funding can be used to fund starters on frameworks and standards.
Levy payers who use up the funding within the AS account will be able to continue to recruit Apprentices but will pay 5% of the agreed price with the provider. The remaining 95% will be paid by the government.
Employers will negotiate a price with the provider for the Apprenticeship to be delivered. Each apprenticeship is allocated to one of 30 funding bands, which range from £1,500 to £27,000.
Employers are free to negotiate prices above the funding cap given above, but any amount above the cap cannot be funded using levy (AS) money and must be funded in full by the employer.
English and math qualifications will be paid directly to the provider – this will not be deducted from the employer’s AS account.
Payments will be made to the provider from the employer’s AS account on a monthly basis. 80% of the payment will be available for as long as the Apprentice is studying – if they stop studying, the payments must be stopped by the employer in a timely manner. The remaining 20% is held back as a completion payment in recognition of the fact that costs of End-Point Assessment (EPA) may be proportionately higher than the rest of the Apprenticeship. The 20% is released on completion of the Apprenticeship. (N.B. Only Apprenticeship completion is required – not achievement for standards.)
Apprenticeships are a devolved matter which means that each nation is responsible for how their share of the levy is spent. Because the tax is collected by HMRC, the UK government therefore has to allocate the levy take between the four devolved nations. This will be done on the basis of residency of workers. If, for example, 80% of a workforce lives in England and 20% lives in Wales, then 80% of the employer’s levy account will be made available in the (English) AS system for expenditure on Apprenticeships. The remaining 20% will be allocated to the Welsh government.
However the expenditure of money from the English AS account will only depend on the workplace of the employee. In other words, using the example above, an employer who has a worker residing in Wales but working in England will be able to use AS funds for them to follow an English Apprenticeship.
It is hoped that reciprocal arrangements will be agreed whereby workers with residency in England will be allowed to access Apprenticeships where they work in the devolved nations. However the devolved nations are currently consulting on how best to allocate and spend their shares of the levy, and it may well transpire that they deploy very different systems from England.
Where an employer has used up their levy funds, they may continue to recruit Apprentices but must pay a co-investment rate. This means they will pay 10% of the cost of the Apprenticeship and the government will fund the remaining 90%. This is the system that will be used for non-levy payers and is explained in more detail below.
If an employer agrees a price for an Apprenticeship that is in excess of the funding band cap for that standard or framework, then the employer must pay the full amount in excess of the cap.
Any company with less than 50 employees that recruits a 16-18 year old Apprentice will not make any contribution towards the cost of their training from the AS account or elsewhere
Additionally, any 16-18 year old Apprentice will attract an additional £1000 payment to both the employer and the provider towards the extra expenses incurred in training Apprentices in this age group. These amounts will be paid across two instalments at months 3 and 12 of the Apprentice’s study. This will not be deducted from AS accounts.
Levy contributions made remain in scope for 24 months from the date at which they reached the AS account. After this time they may be reallocated to other employers or used elsewhere.
Learners who are 19-24, and who have previously been in care, or who have a local authority Education, Health and Care (EHC) plan – broadly speaking, learners with special needs, or learning and physical difficulties – will attract additional payments of £1000 to both the provider and the employer, payable in two equal instalments at months 3 and 12 of the Apprentice’s study.
If such learners are employed as Apprentices by small employers (less than 50 employees), then the government will pay 100% of the training costs for these individuals.
Existing learner support arrangements of £150/mth for Apprentices will continue (paid directly to the provider).
As with the levy system, non-levy paying employers will negotiate a price for the Apprenticeship, bearing in mind the banding caps referred to earlier. The employer is then liable for 5% of this price, and the remaining 95% will be paid to the employer by the government.
This system will also come into play when a levy-paying employer has exhausted the funds in their AS account.
The provider will have to evidence that the employer has paid their contribution before any government funding is released to them.
English and maths costs will continue to be paid at an additional rate directly to the provider.
In its August 2016 document, the Government implemented a new Register of Apprenticeship Training Providers (RoATP) and has consulted on its scope and content.
All organisations wanting funding to deliver apprenticeship training must apply to RoATP. Due diligence and financial health assessments will take place with all involved in sub contracted delivery by the main provider.
The amount of levy collected from large employers, less the amounts given to Scotland, Northern Ireland and Wales will be allocated against the payments made into the AS accounts of levy-paying employers.
The levy is expected to pay for all Apprenticeship delivery costs – the delivery costs, EPAs, the 16-18 and EHC incentives, plus maths and English qualifications within standards and frameworks, some of which will be up to 80% more expensive than is currently the case. It is not clear therefore whether in reality the government will have to find more funds than money generated by the Levy.
The latest progress report, from April 2019 can be found here. The report details the amount of apprenticeship starts in line with the 2020 vision of 3 million apprenticeship starts.
The register of apprenticeship training providers lists organisations that are eligible to train apprentices and receive government funding to do so. Follow the link for more information: https://www.gov.uk/government/publications/register-of-apprenticeship-training-providers
The new funding rates can be checked for standards and frameworks here.
Updated levy transfer information has been sent by ESFA to levy employers. The links below contain the latest information. If you have any questions, contact the Forum for more information.