VTS Blog – Apprenticeship reforms

The way in which Apprenticeships are funded in England is changing. The current framework apprenticeships funding model requires a 50% contribution from employers. On Friday 12 August the DfE released a suite of guidance, and provisional guidance on apprenticeship funding and the supporting system. It is difficult to judge the impact of the proposals given the range of the reform, and the numbers of organisations involved (employers paying the levy, and those not paying the levy, and current and new apprenticeship providers, however with subsequent information due soon this is likely to become clearer.

Overall the direction of travel continues to be for less reliance on central funding for Apprenticeships for large employers and more shared ownership and greater control by employers.

Central to this move is the introduction of an Apprenticeships Levy from April 2017 of 0.5% of pay-bill applicable to large employers. Each employer will receive an allowance of £15,000 to offset against their levy payment and so this will only be paid by employers who have annual paybills of more than £3 million (representing less than 2% of UK employers). This levy will be paid through PAYE and has not been well received particularly by some employer associations. Further details on the Levy are still emerging, however:

  • Government will use the Levy to increase the investment of UK employers in training through Apprenticeships, benchmarking such nations as Denmark and France
  • The Levy is seen as a long term solution to supporting growth and commitment from employers
  • Employers will have control of how their levy is spent through a new Digital Apprenticeship Service, with non-used funds being made more widely available
  • Employers in England will be able to ‘get out more than they pay in’ through top-ups
  • We do not yet know what funding model will be in place for smaller employers in England who are not in scope of the levy. We do know that they will have to contribute 10% of the cost of training.
  • Funding for all employers, irrespective of whether they will pay the Levy, will be managed through a new Digital Apprenticeship Services (DAS). It is anticipated DAS will also be the mechanism for Apprenticeship certification alongside a one stop shop for other related services such as Apprenticeship vacancy matching. It is due to be in place by April 2017.

We have known that a number of changes will be made to apprenticeship funding in light of the wholesale reform of apprenticeships and the introduction of the levy. They include changes to how much employers have to contribute if they aren’t paying the levy, the rates employers and providers will be paid to deliver apprenticeships, and the new way all providers will be approved to deliver apprenticeships.

In short the funding proposals mean:

  • Employers who are too small to pay the apprenticeship levy will have 90% of the cost of apprenticeship training paid by government.
  • Government will pay an additional £2,000 for 16-18-year-olds, young care leavers and young people with an education, health and care (EHC) plan. £1,000 will go to employers and £1,000 will go to training providers.
  • Employers with fewer than 50 employees will not have to pay anything towards the cost of training a 16-18-year-old, young care leaver or young person with an EHC plan.
  • Government will pay training providers £471 to deliver English and maths qualifications as they do now when an individual is working towards an apprenticeship standard. This will come direct from the government and will not be deducted from an employer’s digital account.
  • There will be 15 funding bands, with the upper limit of these bands ranging from £1,500 to £27,000. All existing and new apprenticeship frameworks and standards will be placed within one of these funding bands.
  • Each individual framework pathway will be allocated to a single funding band, regardless of the age of the learner, or geographic location. This will bring frameworks into line with the funding system for apprenticeship standards.
  • Employers will be able to use the funds in their digital account, and be co-funded at 90% by government, to pay for training apprentices whose main place of work is in England whether they live in England or other parts of the UK.
  • Employers will be able to use levy funds to retrain workers in new skills, even if they have prior qualifications, as long as the apprenticeship is significantly different from their previous qualifications.
  • From 2018 levy-paying employers will be able to transfer up to 10% of the annual value of funds entering their digital accounts to other employers on the digital system.
  • Levy paying employers who use up their levy will have 90% of the cost of apprenticeship training paid by government for any additional apprenticeships.

The obvious conclusion is that it makes sense to enrol your learners now, to avoid paying the contribution.

Call us if you need more information: 01702 353557. We’ll keep you up to date in the meanwhile.