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30 August 2016

Apprenticeship funding – how will the new levy work?

From April 2017 larger employers (with a payroll of £3 million or more each year) will have to pay an apprenticeship levy of 0.5% of their pay bill. It is estimated that this will actually only affect about 2% of employers. 

The Government has recently published proposals on how the funding scheme will work in practice and responses are invited by 5 September, with the final rules anticipated in October.  It is proposed that employers who pay the levy will be able to access funds for apprenticeships through a digital account. The funds available will depend on the proportion of the workforce based in England: for example, if 100% of the employers payroll relates to employees living in England, then 100% of the levy will be available in the digital account. If however only 80% of the payroll relates to England based employees, then 80% of the levy payment will be available. The government then intends to make an additional monthly payment of 10% of the amount going into the levy account.

There will be an incentive however on employers to utilise these monies as the funds will expire after 18 months if they are not spent on apprenticeship training. Employers will be able to use the funding in their digital accounts to pay for training and assessment of apprentices in England. The digital service will also help employers find training providers and assessment organisations. 

Employers that pay no levy, a small amount of levy or invest in a lot of apprenticeship training may find their digital funds are not sufficient to cover the full cost of all the training they would like to buy. In these circumstances it is proposed that the government pays for 90% of the additional costs incurred and that the employer should make a co-investment of 10%. Small employers (fewer than 50 employees) will not have to make any contribution to the training of apprentices aged 16-18. The Government is also proposing that the government pays 100% of the apprenticeship training costs for small employers where the apprentice is a 19-24 year old care leaver or is 19-24 and has a Local Authority Education, health and Care plan.

The government is clearly seeking to improve the range of apprenticeships available to fill certain skills gaps and drive increased productivity. Whether the proposed new levy and funding system meets these ambitions, or whether large employers feel they are being in some way penalised, remains to be seen.