Apprenticeship Levy Consultation

The government has now confirmed that despite calls from employer representatives for a delay the apprenticeship levy will be introduced on 6 April 2017 and has issued further details on how the levy will work together with proposals for a new funding model. Employers and training providers are being asked by the government is to comment on the initial funding proposals, with the aim of ensuring that it fully meets the needs of those involved in the apprenticeship programme. The core principles of the levy are unchanged

  • Companies, regardless of sector, with an annual pay bill of more than £3million will have to pay the apprenticeship levy.
  • The levy will be charged at a rate of 0.5% of the annual pay bill.
  • The levy will be paid through PAYE
  • A proportion of the levy, reflecting the number of your employees living in England, will enter the companys’ digital account.
  • The company will then be able to use this fund (plus an uplift of 10%, provided by the government) for training and assessment of apprentices in England.

Apprenticeships are a devolved policy, so authorities in each of the UK nations will be managing their own apprenticeship programmes. The recent proposals outlined by the government:

  • Employers will be able to access the funds generated by the levy from 1 May 2017. All apprenticeships started before this date will be funded through to completion under the current system.
  • Employers with pay bills too small to contribute to the apprenticeship levy will have 90% of the cost of the apprenticeship training paid by the government (described as “co-investment”). This would also be the case for employers who pay the levy but want to spend more on training than is in their account.
  • Employers will be able to use the levy to retrain existing workers in new skills, even if they have higher qualifications, as long as the apprenticeship training is significantly different from their previous qualifications.
  • Apprenticeship funding will be made up of 15 bands each with an upper limit ranging from £1,500 to £27,000. All existing and new apprenticeship frameworks and standards will be placed in one of the funding bands, regardless of the age of the learner, or geographical location. The upper limit of each funding band will cap the maximum amount of funds an employer who pays the levy can use towards an individual apprenticeship or that the government will co-invest. It will be up to the employer to negotiate prices with providers within those limits.
  • The government will pay an additional £2,000 to employers and providers who take on 16 to 18 year olds, young care leavers and people with an education health and care plan – with £1,000 going to employers and an additional £1,000 to training providers.
  • A new register of training providers will be introduced from April 2017 to improve the link between training providers and employers.

All employers and training providers should take the opportunity to provide feedback on the proposals for apprenticeship funding by completing the survey which closes on 5 September. It is expected that the final funding proposals will be confirmed in October 2016 and employer guidance will be published in December.

Law firm DAC Beachcroft have recommended that if you are an employer to whom the levy will apply that you “project the cost of the apprenticeship levy to your business and consider your options now.” The levy say DAC Beachcroft can, of course, be paid as an additional “tax” but given that the levy is likely to be substantial many employers will want to balance the cost of the levy and exploit this opportunity to use the funds available in the most effective manner. The levy will be paid on a monthly basis but it is worth noting that any funds that a company is granted from the levy have to be spent within 18 months or they will be lost. If a company is to take full advantage of the levy they must consider the length of time that it takes to get a substantial apprenticeship program establish:

  • make sure that you understand the levy so that you do not fall into any of the legal pitfalls associated with the levy or apprenticeships in general;
  • assess how your current apprenticeship and training arrangements meet the requirements under the levy to ensure that you maximise your funding;
  • the time it might take to design a program that will really work for your business;
  • getting buy in from across the business;
  • make sure that you understand the difference between apprenticeship contracts and agreements and ensure that you are using the correct one;
  • planning and finalising delivery of training with whichever training provider(s) you choose;
  • recruiting the right individuals.