The Apprenticeship Funding changes are coming very soon – here’s a definitive explanation of how it could affect you…

Back in October 2016 we reported on the upcoming changes to the way apprenticeships are funded. At the time, consultations were still ongoing but we now have a much fuller picture of how the new framework will be managed.

In a nutshell:

The new Apprenticeship Levy begins from April 2017 and will apply to all businesses with an annual payroll over £3 million (regardless of whether they employ apprentices or not). Each employer in this category has their own digital account. Each month, deducted through the PAYE system, an additional 0.5% of the pay bill will be allocated to that digital account. These funds can then be exchanged for vouchers that are used to fund Apprenticeship training, essentially getting your levy payments back.

If your company’s annual payroll is under £3 million, you will not be required to pay into the levy, however, you will be required to make a contribution to the cost of training each of your Apprentices.

Now the detail:

The system kicks in for employers with a wage bill over £3 million per year. This is because there is a Fixed Annual Allowance (FAA) of £15,000 which can be offset against the levy payments. Here are a couple of examples:

  • Company A has a wage bill of £4 million a year. The additional 0.5% levy payment would then be £20,000 per year. The £15,000 FAA is offset against the levy payments resulting in an annual levy bill of £5,000.
  • Company B has a wage bill of £1 million. The 0.5% levy payment is £5,000. As the FAA is £15,000, no payment is made at all. An alternative apprenticeship funding path has been developed for these companies.

You can get an estimate of your apprenticeship funding costs, the levy contribution and how much the government will contribute by using the Skills Funding Agency  Estimate My Apprenticeship Funding tool.

For those who are paying the levy, the government will add a further 10% ‘top up’ to your digital account for training purposes. Any funds still in the account after 24 months will be forfeit and reallocated by the government for other apprenticeship training.

If you are going to be paying the levy, first you’ll need to register with the Digital Apprenticeship Service to set up your digital account to receive the levy vouchers. Once this is done you can use the vouchers to fund your apprenticeship training. Those smaller companies that are not required to use the levy system will be obliged to pay 10% of the apprenticeship training costs and the government will top up the additional 90% (up to the relevant funding cap – see below for the range of caps).

In addition to this, smaller companies with 50 employees or less will receive 100% of funding, PLUS a further £1,000 for recruiting apprentices aged 16-18. More funding is available for 16-18 year olds or young care leavers with an education, health and care (EHC) plan.

Each new apprenticeship standard will be allocated a funding band. These bands represent the upper limit the government will fund. The standards are being developed by Trailblazers – groups of sector-specific businesses, training providers, awarding bodies and representatives from the Dept of Education. These groups will create the standards, which will be turned into a guidance document including requirements for successful delivery and a detailed assessment plan (check out how the standards are being developed by visiting this government web page).

Each standard will then fall into one of these 15 funding bands:

Band Number

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Funding Limit

£1,500

£2,000

£2,500

£3,000

£3,500

£4,000

£5,000

£6,000

£9,000

£12,000

£15,000

£18,000

£21,000

£24,000

£27,000

To use the funding service, you must first choose your training service from a government register of providers. The Register of Apprenticeship Training Providers (RoATP) will list providers that have met the quality standards laid out by OFSTED and the Institute for Apprenticeships (IfA). Once you have selected your training provider, you then negotiate a training fee. If the fee is higher than the cap set by the relevant funding band, you will have to fund the extra amount yourself.

The funds can be used for training purposes only and not for wages, travel/subsidiary/managerial costs, work placements, traineeships or costs of setting up a new apprenticeship program.

The new funding regime all kicks in from your April 2017 payroll, with levy funds accessible from the 1st May.

If you are still unsure of what steps you need to take in order to make the transition to this new funding system, more information is available from the Government website here.

Alternatively, why not give us a ring. Flexible Training can help you understand your new responsibilities and how to prepare for them, alongside utilising current funding streams prior to the end of April.
We look forward to helping you develop your apprenticeship program.

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