After May 1st, the way apprenticeships are funded is changing. The new apprenticeship levy funding rules and a range of robust new apprenticeship standards are an opportunity for organisations to achieve a step-change in how they recruit and develop their people.
Stockport based Damar’s managing director Jonathan Bourne explains more about the apprenticeship levy and offers some advice for businesses:
So what is changing and how will it affect you and your business?
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. To achieve this, the new apprenticeship levy is being introduced as significant changes are being made to apprenticeships and how they are funded:
- New, employer-designed apprenticeship standards (including some up to post-graduate level) are being created. About 350 new standards are being developed currently. At Damar, we are already actively involved in the development and delivery of several apprenticeship standards.
- 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.
- Most public sector employers will be expected to demonstrate progress towards an apprenticeship quota set at 2.3% of their workforce.
- 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 which can be found here. 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.
- 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.
We will be updating partner employers regularly over the coming months. The needs of every organisation are different though and so, if you have further questions or would like a more detailed discussion about how your organisation can maximise the opportunities that these changes will create, read more at Damar, call your usual contact at Damar, give us a call on 0161 480 8171 or email and a member of our team will be in touch.
Thanks to Jonathan Bourne for providing his Expert Opinion