Apprenticeship Levy: An update
Apprenticeship Levy: An update for employers
An alarming 39% of employers have still not heard about the Apprenticeship Levy which is due to begin in April 2017. If you’re one of those employers, please read on. If you are already aware of the levy then this article gives the most recent update.
Changes to apprenticeships
A key element of the government’s strategy for improving the nation’s skills and productivity is significant growth in the number of people starting apprenticeships, with a target of three million between 2015 and 2020 (up from 2.4 million).
To stimulate demand and pay for this growth, significant changes are being made to apprenticeships and how they are funded:
1. New, employer-designed apprenticeship standards (including some up to post-graduate level) are being created. About 350 new standards are being developed currently.
2. Most of the funding will come from larger employers who will pay the “apprenticeship levy” (a new payroll tax) from April 2017. These employers will be able to access money from their levy accounts to pay for apprenticeship training. Unused levy receipts will be used to support apprenticeships in smaller organisations.
3. Most public sector employers will be expected to demonstrate progress towards an apprenticeship quota set at 2.3% of their workforce.
4. Smaller employers, as well as larger employers who have spent all of their levy, will be able to access heavily subsidised apprenticeship training.
For apprentices enrolled up to 30th April 2017 the current funding arrangements will apply through to the end of their apprenticeships. Most existing apprenticeship frameworks will continue to be available until they are replaced by new apprenticeship standards. This will probably take until 2020.
Where’s the process up to?
The government is releasing regular updates. The most recent updates came via a suite of documents published between 25th and 28th October. Here’s a link to the full document. Of particular interest to employers are:
Apprenticeship funding: how it will work, which describes in detail how the funding will work for employers.
Apprenticeship funding from May 2017, a suite of documents which show how individual apprenticeships will be funded and the rules employers will need to follow.
Apprenticeships: become a training provider, which has guidance for employers who want to become training providers.
Some of the main features of the new funding environment are summarised below. Changes and clarifications arising from the most recent update are highlighted in bold.
Apprenticeship Levy – a summary
For apprenticeship starts from May 2017, most apprenticeship funding will come from an employer levy set at 0.5% of UK payroll.
All employers will receive an allowance of up to £15,000 to set against their annual contribution. This means that the first £3m of an organisation’s annual payroll will be excluded from the levy.
Deductions will be taken monthly through Pay As You Earn. The first payment will be made in May 2017 by reference to employers’ April 2017 pay bills.
Employers will be able to draw down their levy spend from a new digital apprenticeship account to fund the external costs of apprenticeship training.
If not used, the electronic funds will expire after 24 months.
Employers will receive an automatic 10% top up. So, a £1,000 levy contribution will become £1,100 of digital apprenticeship funds.
Where apprentices are aged 16-18 on enrolment it is recognised that there can be additional costs for both employers and providers, so there will be an additional £1,000 payment for employers and providers (so, £2,000 in all) for each 16-18 year old apprentice that is recruited.
In calculating UK payroll, groups of companies under common ownership will be treated as one.
All UK employers – public and private sector – are in scope but, at present, the levy can only be spent to support apprentices whose main workplace is in England
Larger public sector employers will have a statutory apprenticeship target set at 2.3% of their workforce. Apprenticeships will feature in all public sector contracts lasting over a year and worth more than £10m.
Employers’ NI contributions for apprentices aged under 25 have been abolished from April 2016.
This includes smaller employers (ie, those with annual pay bills under £3m) as well as larger employers who want to spend more than they have in their digital accounts. These employers will need to pay just 10% of the total cost of the apprenticeship, with the government paying the remaining 90%. The additional incentives for 16-18 year olds will also apply to smaller employers.
For businesses employing fewer than 50 people, the government will pay 100% of the apprenticeship training costs for 16-18 year olds.
If you are a levy-paying organisation and don’t yet have a plan in place:
o Time is of the essence. If you want to run a pilot and evaluate its success then you need to get the ball rolling straight away.
o Don’t think of the levy as a “pot” that needs spending. Rather, think of it as an investment. As with any investment, you need a business case… So, what are your organisation’s biggest areas of pain or missed opportunity and can apprenticeships be used to address these?
o Speak to a few different apprenticeship providers and some of their customers. An apprenticeship programme will get under the skin of your business – you need to work with people you trust and who understand your needs. Here at The Apprentice Finder we can manage this process for you because we partner a range of specialist training providers and colleges.
o Consider what resources you will need to allocate internally to managing your programme.
o Consider whether a single “lead provider” managing all your apprenticeships is the best approach. As an independent, The Apprentice Finder can provide this service.
o Get your senior leadership team and prospective apprentice line managers on-side early. Your provider should be happy to come and speak to them.
o Work out what your monthly contributions will be and then calculate the rough number of apprenticeships… how does this fit with your potential business need?
o Don’t forget that apprenticeships can also be used in some cases to upskill existing staff.
o With your training provider, “map” the job roles in your organisation (particularly at entry level) against the apprenticeships that currently exist or are in development.
If you are a non-Levy paying employer then our advice is:
Think first about the needs of your organisation. The changes to funding will mean that, depending of the age of the apprentice and the apprenticeship, some apprenticeships will cost slightly more and others less from May 2017. However, the overall cost of your apprenticeship programme is unlikely to change significantly.
A helping hand…
The Apprentice Finder is here to help you assess your current situation. To book a free, no obligation consultation, please contact Adrian Bird on 07538345854 or via email: firstname.lastname@example.org.