Government publishes final funding policy for Apprenticeship Levy
Education Secretary Justine Greening has issued a written Ministerial Statement on Supporting Apprenticeships, covering the final funding policy for apprenticeships from May 2017, and makes available details of the new register of training providers.
After the Funding Guidance consultation - what next for the levy?
Sian Wilson, Head of Apprenticeships on behalf of the Tech Partnership, looks at employers’ views on the latest round of funding guidance on the apprenticeship levy.
Quantity should not trump quality for apprenticeships, says Tech Partnership consultation
Following the Department of Education’s release of new guidance last month, tech employers welcome the clarification of the terms of the forthcoming apprenticeship levy, but remain concerned with insufficient focus on quality.
Guide to the levy
The apprenticeship levy, coming in May 2017, is hot on the government skills agenda, but many employers remain unclear as to the impact it will have on their business. Here, the Tech Partnership explains who the levy affects, how apprenticeships work, and the options open to employers to benefit from these changes. The Tech Partnership is working with employers to help them plan for the levy implementation to ensure that, not only are they are prepared, but also that they positively benefit from this change.
In a nutshell
- The apprenticeship levy is to fund an increase in the number and quality of apprenticeships
- It will affect businesses with a payroll bill of over £3 million (roughly 2% of businesses)
- Each qualifying business will pay 0.5% of their employee payroll to the levy pot
- They can then receive up to £15,000 against the cost of training apprentices
The levy - an introduction
Smaller employers - what will I pay?
Business impact - how will the levy affect me?
Can I register my business as a training provider?
Can I direct funds in my account to another employer?
Apprenticeship standards - how they're set
The purpose of the apprenticeship levy is to fund an increase in the number and quality of apprenticeships. The levy will be introduced in May 2017, for businesses with a payroll of £3m+, and set at 0.5% of employers’ pay role bill.
The government believes this equates to "less than 2% of businesses". It is estimated that the levy will apply to employers of roughly 110 employees and over – but employers who do not pay the levy will still be able to access government support for apprenticeships. The Government expects the levy to raise £3bn UK wide – of which £2.5bn would come from England. The levy will apply to all large organisations, regardless of whether they already employ apprentices or not.
In England, HMRC will collect levy payments from employers through Pay as You Earn (PAYE), alongside tax and National Insurance. Levy-paying employers will be able to register with the Digital Apprenticeship Service (DAS) to set up their digital account, from Jan 2017. Through their account, employers will be able to redeem their entitlement to pay for apprentice training and will have access to information about appropriate apprenticeship training courses and training providers.
Levy-paying employers in England will be able to "get more out than they put in" through a 10% top-up to their digital account. That means for every £1 that enters an employer’s digital account, it will get £1.10 to spend in England on apprenticeship training. Businesses are given 2 years expiry on their monthly levy payments.
The digital account and voucher will only apply in England. If you operate in Scotland, Wales and / or Northern Ireland, you’ll also need to be aware that those nations have slightly different policies regarding apprenticeships. Your levy payment will be split between the nations based on the number of your employees who live in each of the four nations.
Smaller employers, who don’t have to pay the levy, will remain outside this system for the next couple of years until 2018/19. You’ll be able to access apprenticeships under the current system of government funding via training providers in which 90% of the cost of the apprenticeship training will be covered by the government leaving just 10% of the cost to be met by the employer. Availability of support for apprenticeships in Scotland, Wales and Northern Ireland still needs to be clarified. Employers with less than 50 staff can benefit from 100% government funding for all apprentices aged 16-18.
An apprenticeship is a programme of real work experience, education, training and ongoing assessment which delivers the competencies for a specific occupation. An apprenticeship:
- creates the competencies set out in an approved apprenticeship standard that is developed by employers
- is of at least one year’s duration in a real job
- includes off-the-job training for at least 20% of the time
- is delivered by a registered provider which is subject to OFSTED inspection
- ensures minimum standards of English and Maths have been met
- culminates in an approved ‘end point assessment’.
Apprenticeships offer opportunities to people at all stages in their lives, and indeed at all stages in their careers. It is not just for new recruits to an employer; it can be for somebody who has been working for an employer for several years but has the potential to develop.
Authorities in each of the UK nations will manage their own apprenticeship programmes, including how funding is spent on training. The digital apprenticeship service will support the English apprenticeship system. Scotland, Wales and Northern Ireland will have their own arrangements for supporting employers to access apprenticeships.
Each levy paying employer will receive an allowance of £15,000 per year to offset against the cost of training apprentices.
Levy funds will be provided in the form of vouchers, which can be turned into money only by organisations on the government’s Register of Apprenticeship Training Providers (ROATP). Registered training organisations can include private training providers, universities, colleges and employers themselves. As the levy is public funding, the registered training organisation receiving the voucher is subject to OFSTED inspection.
For larger companies, the levy of 0.5% of payroll could constitute several millions of pounds. To ensure that companies really benefit from this change, they will need to devise a strategic plan that:
- Reflects an understanding of the skills needed in the business over the next 3-5 years
- Confirms that appropriate Apprenticeship standards are in place to support skills needs
- Makes provision for appropriate, high quality training
- Ensures the programme is managed cost-effectively.
An employer must spend the levy vouchers with registered training providers. This means either giving the vouchers to a private training provider, university or college, or becoming registered itself as a private training provider. If an employer becomes a registered training provider, it can use the vouchers to cover apprenticeship training and assessment. It cannot be used for wages or non- apprenticeship training. It will also be subject to:
- Significant related administration, compliance and reporting: the employer will be responsible for the design, implementation and compliance of the necessary processes, systems, governance, audit, data collection and government reporting;
- Regular reviews by OFSTED, in its role as the body that inspects, regulates and rates services providing education and skills for learners of all ages.
If your business is interested in becoming a training provider there is government guidance available.
In the first year of the levy, employers will only be able to use the funds in their digital account to pay for apprenticeship training and assessment for their own employees.
The Tech Partnership and others have made the government aware that many employers may wish to use funds in their account to pay for apprenticeship training of other employers’ apprentices, especially for those in their supply chain. From May 2018, it's proposed that businesses can transfer 10% of their annual levy pot to a supply chain.
Working to ensure coherence in digital apprenticeship standards, a Tech Partnership Employer Steering Group has developed and is maintaining an ‘occupation map’ for new digital apprenticeship standards.
Apprenticeship standards, and their assessment plans, are each designed by a group of at least 10 employers, including at least two companies smaller than 50 staff. Approval to develop a particular standard, and to publish a standard and assessment plan once developed, is currently given by government.
From April 2017, the Institute for Apprenticeships will become responsible for setting apprenticeship standards and ensuring quality for England. The Institute will create mechanisms for the approval of apprenticeship standards and assessment plans, maintain quality criteria, and review the effectiveness and quality of standards over time.
New funding bands will become effective from May 2017 for the new digital apprenticeship standards.
- April 2017: Levy comes into force
- May 2017: Employers affected will begin making levy payments on a monthly basis. New funding bands will become effective.
- June 2017: Levy-paying employers will be able to create an account on the apprenticeship service to manage their levy funds.
Non-levy paying employers won’t be able to use the apprenticeship service to pay for apprenticeship training and assessment until at least 2018. Instead, they will need to agree a payment schedule with the provider and pay them directly for the training. The provider must then prove that the employers have paid their share (10%) as a condition of government paying its contribution (90%) - up to the funding band maximum.