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Apprenticeships benefit employers and individuals, and by boosting the skills of the workforce they help to improve economic productivity. The Government’s aim is that the current apprenticeship reforms will support an increase in the quality and quantity of apprenticeships so that more individuals have the chance to pursue a successful career – whether this is their first step on the employment ladder or progression within a current employer or sector.
From May 2017, the way apprenticeships are funded in England should simplify some of the complex arrangements that currently exist and allow the Government to double their investment in apprenticeships by 2020.
What will I have to pay?
The new levy, which comes into effect in April 2017, applies in principle to all employers. You will be charged a sum equivalent to 0.5% of your paybill, but you will not be required to pay the first £15,000. This means that employers with a paybill of less than £3 million will not have to pay anything. For clarity, your paybill is the total you use for making National Insurance contributions.
When will I have to pay?
Employers will pay from April 2017, making their first declaration in May 2017. From then on, you will declare and pay monthly.
If your paybill is variable and by the end of a year of making monthly payments, your paybill has not reached £3 million, rebates will be made available.
What will I have to spend?
If you pay the levy:
You will receive funds into a digital account based on the following calculation: the levy paid, multiplied by the proportion of your pay bill paid to workers living in England, plus a 10% top-up supplied by the Government. So if your workers are all in England, you will get 100% of what you have paid in, plus the 10% top-up, i.e 110% of the levy you have paid.
If you don’t pay the levy
You will pay 10% of the cost of training and assessing apprentices and the government will pay the remaining 90%, up to the limit of the cap for the apprenticeship. This is called co-investment.
If you have fewer than 50 employees
The government will pay 100% of the costs of an apprenticeship for young people aged 16-18 or for those aged 19-24 who have been in care, so you won’t need to spend anything on apprentices in these categories.
What can I spend my money on?
• Apprentice training and assessment after May 2017.
• Reskilling an existing learner who already has qualifications, where the training will equip them with substantive new skills.
You will only be able to spend your funds on apprenticeships for employees who live and work in England. Arrangements are being made separately for apprenticeships in Scotland, Wales and Northern Ireland.
The new funding system will be made up of 15 funding bands and all apprenticeships will be allocated to one of these bands. Each band will have an upper limit, so that spending on apprenticeships within it will be capped at a certain level, (including any top-up spending from the Government). These limits will range widely in order to meet the objectives of the new scheme, which include redressing the historic underfunding of STEM apprenticeships.
Employers will be able to negotiate a price for their chosen apprenticeship with a provider but where the costs exceed the cap within the banding constraints, you will need to pay the difference yourselves.
What if I have digital funds left over?
The initial arrangement is that funds unused 24 months after receipt will expire. However, this is subject to review, and from 2018 onwards it will be possible to transfer up to 10% of your annual funds to another organisation or an apprenticeship training provider of your choice. They will need to be on the digital system themselves to receive the funds.
What if I’m a levy-payer but have run out of funds to pay for the apprenticeships I want?
If you have spent everything in your digital account, but wish to invest further in apprenticeships co-investment will be available for the excess. What this means is, you pay 10% of what is still left to pay, with the government making up the 90%, up to the limit of the cap.
What support is available with the scheme?
The government has been consulting with employers to establish what support they need and have used their findings to develop a tool called the Digital Apprenticeship Service. This will:
• calculate what you’ve paid in levy
• allow you to enter the apprenticeships you are interested in
• tell you what you need to pay the provider each month
• forecast what you will be paying in the future
• tell you what is left in your account and what you could purchase with it
• tell you what will happen to your unspent funds
Guidance has been published on how the scheme works and there is information available for employers who wish to become apprenticeship providers themselves.
Are there any other sources of funding available?
Other incentive payments are being made available, such as an additional £1,000 in recognition of the extra pastoral and supervision costs involved in employing and training young people and those who have been in care. These payments will be made in 2 equal instalments at 3 months and 12 months and will be made via the apprenticeship provider.
Providers will receive additional payments where apprentices are drawn from deprived areas or have a disability.
What happens next?
If you need support with recruiting apprentices, drawing up their contracts or understanding the apprenticeship levy scheme as it applies specifically to your organisation, we would be happy to help.