In spring 2017 the way the government funds apprenticeships in England is changing. Some employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers.
(information below adapted and truncated from https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work)
The Government is introducing the apprenticeship levy on 6 April 2017. The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships.
Paying the apprenticeship levy
You will report and pay your levy to HMRC through the PAYE process.
Levy rate and allowance
Employers with an annual pay bill of more than £3 million will need to spend 0.5% of their total pay bill on the apprenticeship levy.
However, they’re introducing a ‘levy allowance’ of £15,000 per year. This means that the total amount employers need to spend is 0.5% of your pay bill, minus £15,000.
What will I have to pay?
To calculate how much levy you will pay, follow these steps:
1) Work out what your total pay bill is.
Your pay bill is made up of the total amount of your employees’ earnings that are subject to Class 1 National Insurance contributions. Employees’ earnings include any money they make from employment, such as:
- pension contributions
2) Work out what 0.5% of your total pay bill is.
3) Subtract the £15,000 allowance.
If you’re an employer with an annual pay bill of more than £3 million, you’ll start paying the levy in May 2017.
Each month, you will have to:
let HMRC know whether you need to pay the apprenticeship levy
include the levy you need to pay in your usual PAYE payment to HMRC – you should do this by 19 (or 22 if you report electronically) of the following month
Any apprenticeship levy payment to HMRC will be allowable for Corporation Tax.
Existing industry levy schemes
Some organisations already operate similar levy systems or other collective training arrangements. You will have to pay the apprenticeship levy even if you already contribute to another training arrangement such as the CITB.
Accessing money paid under the apprenticeship levy
Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through a new digital apprenticeship service account.
Through the digital apprenticeship service all employers will be able to:
- select an apprenticeship framework or standard
- choose the training provider or providers you want to deliver the training
- choose the organisation that will assess your apprentices
- post apprenticeship vacancies
If you are an employer who pays the levy, you can also use the digital apprenticeship service to:
- set the price you’ve agreed with your training provider
- pay for apprenticeship training and assessment
- tell us to stop or pause payments (for example, if your apprentice stops their training, your apprentice takes a break from training or you haven’t received the service you agreed with the provider)
- By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships.
The amount entering your digital apprenticeship service account will be how much you have available to spend on apprenticeship training in England.
Apprenticeships are a devolved policy, which means that authorities in each of the UK nations manage their own apprenticeship programmes, including how funding is spent on apprenticeship training.
The digital apprenticeship service will support the English apprenticeship system. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.
To calculate how much you will have to spend through the English system, the Government plan to use data that they already hold about the home address of your employees. They’ll use this data to work out what proportion of your pay bill is paid to employees living in England. They’ll make this assessment in early 2017 and will announce the exact date in advance.
Employers can update their employees’ address as part of their Real Time Information returns.
Top-ups to the funds in your digital account
The Government will apply a 10% top-up to the funds you have for spending on apprenticeship training in England. They will apply the top-up monthly at the same time the funds enter your digital account.
That means for every £1 that enters your digital account to spend in England on apprenticeship training, you get £1.10.
Expiry of funds in your digital account
Funds will expire 24 months after they enter your digital account unless you spend them on apprenticeship training with a training provider. Whenever a payment is taken from your digital account, the service automatically uses the funds that entered your account first.
This will minimise the amount of expired funds. This will happen automatically. Your digital account will let you know in good time when any funds are due to expire so that you can arrange to spend them if you wish.
Directing funds in a digital account to another employer
In the first year of the levy, you will be able to use the funds in your digital account to pay for apprenticeship training and assessment for your own employees. The main aim of the apprenticeship levy is to support employers in growing the number and quality of apprenticeships in their own workforce.
Some employers will want to use funds in their digital account to pay for apprenticeship training of other employer’s apprentices, for example, someone in their supply chain. The Government are committed to allow levy-paying employers to transfer up to 10% of the annual value of funds entering their digital accounts to other employers or apprenticeship training agencies.
Buying apprenticeship training
Once you decide to buy apprenticeship training through the digital apprenticeship service, the funds will be taken from your digital account each month to pay the training provider.
Choosing apprenticeship training
You can only spend funds in your digital account on training from a government-approved training provider – see the register of apprenticeship training organisations.
There are 2 different types of apprenticeship training you can choose from:
- apprenticeship standards – each standard covers a specific job role and sets out the core skills, knowledge and behaviours an apprentice will need to be fully competent in their job role and meet the needs of employers, standards are developed by employer groups known as ‘trailblazers’ (see C&G 5357)
- apprenticeship frameworks – a series of work-related vocational and professional qualifications, with workplace and classroom based training
Frameworks will be phased out between now and 2020, as The Government move over to the employer-led apprenticeship standards.
Using funds in your digital account to buy training
Once the apprenticeship training you’ve bought has started, monthly payments will be automatically taken from your digital account and sent to the provider.
You just need to have enough funds in your account to cover the monthly cost of each apprenticeship you have chosen. You will see funds entering your digital account each month as you pay the levy, and funds leaving the account each month as you pay for training.
You will be able to spread this contribution over the lifetime of the apprenticeship and agree a payment schedule with your provider.
Employers that don’t pay the levy
If you do not pay the levy, you won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least 2018. When The Government ask you to start using the digital apprenticeship service to pay for apprenticeship training, The Government will help you to prepare.
When the new funding system begins in May 2017, you can choose the training you’d like your apprentices to receive, an approved training provider and an assessment organisation using the registers available on the digital apprenticeship service. Help with this is available from the National Apprenticeship Service.
The Government will ask you to make a 10% contribution to the cost of this training and government will pay the rest (90%), up to the maximum amount of government funding available for that apprenticeship. They will ask you to pay this directly to the provider and you will be able to spread it over the life time of the apprenticeship. As both you and the government make a payment, they call this ‘co-investment’.
Every individual apprenticeship framework and standard will be allocated to a funding band. The upper limit of the funding band will cap the maximum price that government will ‘co-invest’ towards. The Government will ask you to pay your contribution directly to the provider and you will be able to spread it over the lifetime of the apprenticeship and agree a payment schedule with the provider.
Buying training if you don’t have enough in your digital account – levy-paying employers
If you pay the levy, you may find that over the course of an apprenticeship the funds in your digital account aren’t enough to cover the full cost of the apprenticeship training and assessment you’d like to buy. This may be the case for employers who only pay a small amount of levy or have a variable pay bill and pay the levy in some months but not others.
If you don’t have enough in your account in a particular month, you will be asked to make a contribution to the extra cost of training and to pay this directly to the provider, rather than through your digital account. You will be able to spread this contribution over the lifetime of the apprenticeship and agree a payment schedule with your provider. The Government will provide some support to help you meet these additional costs, up to the maximum amount of funding available for that apprenticeship. As both you and government make a payment, they call this ‘co-investment’. This will be set at the same co-investment rate as for employers who do not pay the levy, with government paying 90% towards the extra cost of training and assessment and employers paying the remaining 10%
What you can spend apprenticeship funding on – all employers
Funds in your digital account, and funding provided by the government through co-investment, can only be used towards the costs of apprenticeship training and end point assessment. This must be with an approved training provider and assessment organisation.
It can’t be used on other costs associated with your apprentices or wider training effort. For example wages, statutory licences to practise, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or the costs of setting up an apprenticeship programme.
What is an apprenticeship?
There are rules governing what an apprenticeship is. The main ones are:
- the apprentice must be employed in a real job; they may be an existing employee or a new hire
- the apprentice must work towards achieving an approved apprenticeship standard or apprenticeship framework
- the apprenticeship training must last at least 12 months
- the apprentice must spend at least 20% of their time on off-the-job training
Employing an apprentice is very simple. The National Apprenticeship Service can provide all the information you need to know in order to employ an apprentice.
You can also read more about how to set up your organisation to deliver apprenticeship training for your own employees.
Eligibility for training
Who provides the training – all employers
You can only spend the funds in your digital account or access government support for apprenticeship training delivered by an approved training provider.
The Skills Funding Agency is working with employers and providers to identify what precise standards and measures are important to them in selecting an apprenticeship training provider. All training providers will need to show that they meet or exceed these criteria to join the register of approved training providers and receive digital payments or government funding to deliver apprenticeship training.
Employers wishing to become training providers
The Government recognise that employers can be extremely successful training providers and they want to encourage those who want to take this route to deliver high-quality apprenticeships.
Who provides assessment – all employers
You can only spend the funds in your digital account or access government support to pay for approved assessment organisations that are listed on the Register of apprenticeship assessment organisations. Organisations who wish to carry out end point assessments will need to show that they meet or exceed certain criteria.
If you’d like to know more about what this will mean for you, contact the employer helpline.
Email: firstname.lastname@example.org Telephone: 08000 150 600