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Apprenticeship Reforms Explained… for employers

Since April 2017 employers are required to pay for apprenticeship training. The method of payment is determined by the paybill size of the employer.

Employers with a paybill of over £3 million will be required to pay a levy, with the monies being ringfenced to pay for training. Each employer will receive a government allowance of £15,000 to offset the cost of the levy. Levy paying employers will also receive a £10,000 top up to add to their funding pot.

Employers with an annual paybill of less than £3 million will contribute 10% to the overall cost of training and pay this directly to the training provider.

Training providers will now charge for delivery of Apprenticeships, with the employers both negotiating a price and then paying for the training out of the levy pot of funding, using a digital voucher system.

Non levy paying employers will pay only 5% towards that negotiated price, and the government will supply the remainder up to a certain amount.

Each apprenticeship is ‘capped’ which effectively sets the pricing structure for delivering the training.

Non levy paying employers will also received a £1000 financial incentive to recruit 16-18 year old apprentices, those who are care leavers and those with an education and health care plan.

Employers with less than 50 staff will not have to pay at all for training for 16-18 year old apprentices, those who are care leavers or have an education health care plan.

Standards replace Frameworks

Current Apprenticeship frameworks are currently being replaced by new Apprenticeship standards, with a view to a final completion by 2020. This means current Apprenticeship training will both change and expand to cover new roles and levels of training from those which have been previously available. This will result in additional higher level apprenticeships as an alternative to degree study, as well as creating apprenticeships in specialist niche occupations.

Opportunities

Many employers will benefit through extracting more from the training budget than they have originally paid in.

There will be extra money for taking on 16-18 year old apprentices, apprentices with additional learning needs, and those who are care leavers.

The new standards have been largely designed through input from employers and industry experts, which should make them far more focused.

Some new apprenticeship standards may be assessed against job competency only, rather than qualifications. This means industry experts will have more input than training providers in the quality of the training.

Training providers may add extra value for training by providing additional short qualifications to meet business needs.

Apprentices do not necessarily have to be new members of staff. Existing team members can be ‘converted’ to apprenticeship positions in order to benefit from further training.

From April 2016 employers no longer pay Class 1 NI contributions for apprentices below age 25.

Risks

If employers are required to pay into a levy, it may fundamentally alter their training plans in the future, especially if their current training model is in house only. Levy funding can only be used to fund apprenticeships, not any other type of training.

If levy funding isn’t used within 18 months, then it will expire, adding further costs to the business.

Non levy paying employers will need to budget for training if they wish to take on apprentices.

Added training costs for the business may affect recruitment drives

Consider how apprenticeships could replace some existing training, in order to maximise the levy funding.

Contact training providers to find out more about how the changes may affect your business.

Contact the Apprentice employer helpline to find out how the changes affect your business by email nationalhelpdesk@apprenticeships.gov.uk or telephone 0800 150 600

Try out the online calculator to see what your levy funding will be.


Factsheets for Employers

How do I pay for training?

From May 2017 employers with a paybill under £3,000,000 will not be required to pay a levy for apprenticeship training. These employers will use a different ‘co investment’ model instead.

Employers and training providers will firstly agree on a price for training. Non levy paying employers will then contribute 10% towards the costs of apprenticeship training and this payment will go directly to training providers on a monthly basis. Eventually this payment will go through a digital account- DAS.

The remainder of the training costs will be funded by the government up to a specific amount predetermined by funding caps linked to specific frameworks (and later standards).

Is there any other funding available to support training costs?

There will be further financial incentives for employing 16-18 year old apprentices worth £1000. This will be paid via the training provider who will pass on £500 when the apprentice has been with them 3 months and a further £500 at 12 months. If you employ 19-24 year olds who are either care leavers or have Education Health Care Plans you receive the same £1000 incentive payments.

For employers with less than 50 employees they will pay nothing towards the costs of 16-18 year old apprentices, or those aged 19-24 who are care leavers or have Education Health Care Plans.

I’ve heard about this digital apprenticeship account – how do I access it?

The digital apprenticeship service account ( DAS) will initially be used by levy paying employers only as a payment system to receive their levy funds and to pay training providers for the cost of delivering training. However, non levy paying employers will be able to access its search facility to source suitable training providers. Eventually the payment facility will become available to non levy paying employers also.

Where can I find out more information?

The government will issue further guidance which will confirm the funding caps and arrangements for non levy paying employers on the gov.uk website

Apprentice employer helpline

nationalhelpdesk@apprenticeships.gov.uk

Telephone 0800 150 600

From May 2017 employers with a total paybill of over £3 million will pay a levy of 0.5% per financial year. This will be offset by a levy allowance of £15,000. This levy will be used to pay for apprenticeship training that you select for your company. Although the levy applies to the UK the monies can only be spent on training taking place in England.

What is included in a paybill?

A paybill is based on the total amount of employee earnings you use to calculate NI contributions before any deductions. Things like bonuses, commission, additional payments are all included in this calculation.

How will the levy be collected?

The levy will be collected monthly through your PAYE system alongside income tax and NI contributions. The levy monies will be placed in a digital apprenticeship service account (DAS) and will be received on a monthly basis. Any company who thinks they have an annual paybill of more than £3 million will submit this information to HMRC in April 2017. The first levy payments started in May 2017.

Is there any other funding available to contribute to training costs?

You will also receive a £15,000 annual levy allowance which will also appear in your DAS in monthly instalments. If your organisation is a set of connected companies then you will share the £15,000 levy allowance between them. Furthermore, you will also receive a 10% top up on the funds in your DAS.

What can I spend the funds on?

The funds can only be spent on apprenticeship training. It can’t be used on wages or expenses or the costs of setting up an apprenticeship. Funds will be available for 18 months before they expire.

How do I access the DAS?

The DAS system is currently in its pilot stage and there are some trials under way with employers and training providers working in partnership. The system should be ready by January 2017 for employers to register on it. Employers will also be able to search for suitable training providers via the account also

Where can I get further information?

Current funding tool can be used online.

Apprentice employer helpline – nationalhelpdesk@apprenticeships.gov.uk or phone 0800 150 600