Starting in April 2017 and continuing to develop until 2020, the Government is reforming the way Apprenticeship training is handled. Colleges, Training Providers and Awarding Bodies will no longer have control over Apprenticeship funding, instead control will be in the hands of the Employers. The initial focus will be on the introduction of an Apprenticeship Training Levy for employers with a salary bill of over £3m.
This webpage will focus on how the upcoming reform will affect the funding that employers receive and how it will work.
Some of the information may change over time as more detail becomes available and as the new delivery and funding rules are released. As such, we will be providing regular updates and will also be announcing some changes to the way in which we operate in order to provide the best possible support and training delivery for employers of all sizes.
So, for more information on how the Apprenticeship Reform and Levy will affect your business, and to see how Kiwi can assist, contact our team of Business Development Manager on 023 8017 0380 or email [email protected]
Below is an example of how a company whose wage bill of £6m, will contribute towards the levy.
Employers in England who pay the levy and are committed to apprenticeship training will also receive a 10% top-up, directly into their DAS account. That means for every £1 that enters an employer’s digital account, they will actually receive £1.10.
It has been suggested that 100% of the value of the monthly levy deduction will go into an employer’s DAS account. Employers should see funds appear in their digital account monthly, a few working days after confirming their pay bill and levy contribution to HRMC for the previous month.
Applying this same wage bill to a monthly scenario can be seen below:
This example is for a company with 100% of its employees living in England. Further regulations apply for companies whose employees live in Scotland, Wales or Northern Ireland
What can the Levy be used for?
The Levy can be spent on Apprenticeship Training and the associated costs. This can be used to fund things such as recruitment and CPD training to support the Apprentice but cannot be used towards their salary.
The DAS will provide details of training providers that can offer the desired Apprenticeship. The system will enable virtual payments to providers that are delivering Apprenticeships for the employer. This will allow the employer to approach the provider(s) to negotiate funding, contributions and payment schedule.
Once an employer has selected their Framework or Standard, monthly payments will be taken out automatically and sent to the training provider over the lifetime of the Apprenticeship. It is proposed that 20% of the total cost is held back and taken at the end of the Apprenticeship. The limit on how much an employer can spend on an Apprenticeship Framework or Standard will be determined by 15 funding bands.
Employers will be given 24 months from April 2017 to use the levy. If they don’t use it in that time, it will be given to other employers to use. For example, funds which enter an employer’s account in September 2017 will expire in March 2019. The digital account will let an employer know in good time when funds are due to expire.
Employers who pay a small levy or invest in a lot of apprenticeship training may find that there are insufficient funds in their digital account to cover the cost of training. In these circumstances, it is proposed that the Government pay 95% of the additional costs incurred with the employer contributing 5% directly to the training provider.
Employers with an annual wage bill of less than £3m will not pay the levy. Instead, Apprenticeship Standards and Frameworks will be jointly funded by employers and the Government. This is called Co-Investment.
It is proposed that employers ‘co-invest’ 5% of the cost of Apprenticeship training and assessment and benefit from Government funding to cover the remaining 95% of the cost.
In the first year of the new funding system, employers will need to pay their co-investment directly to the training provider.
Employers will agree a price and payment schedule for an Apprenticeship or Standard directly with the training provider. The Apprenticeship’s co-investment limit will depend on what Funding Band the Standard or Framework falls into. If the agreed price is higher than the Band Upper Limit, the employer will have to pay this themselves.
Here are two examples:
Below Upper Band Limit
Above Upper Band Limit
Employers should be able to use funds in their digital account (levy paying) or access Government co-investment (non-levy) to train an individual if the level of Standard or Framework is higher than their current set or qualifications or at a lower/equivalent level if the content of the training is materially different from any prior training they have received.
The answers to some of these question may change over time as more detail becomes available and as the new delivery and funding rules are released.