A cautious welcome for apprenticeship funding changes - but more detail needed!

25 October 2016

Dave CampbellDave Campbell, Membership and Training Director

Today the government published its response to its consultation on apprenticeship funding and the new government levy on apprenticeships. The government has not heeded our advice for a delay in the levy and new funding regimes introduction, but it has listened to other concerns about the impact of the changes.

Our initial assessment of the government response is that they have put in measures that will ease the initial burden on colleges/providers that comes with the new system’s introduction with funding uplifts for the delivery of current apprenticeship frameworks as funding for these is lowered – however, industry must act quickly to get new apprenticeship standards in place that attract the higher levels of funding in the medium to long term. If you have not yet pledged your support for our Wood Product Manufacturing Apprenticeship Standard development, please take two minutes to do so now.

There are incentives for SMEs employing 16-18 year olds to make it cost neutral, along with some additional support towards wages. Furthermore, employers paying levy will have 6 months longer to use their levy funds towards apprenticeship training (24 months instead of 18 months), and employers can use apprenticeships and funds to train existing staff so long as they will be learning significantly new skills.

However, issues remain with the tight timeframe for introduction, and any new IT system must be in place on time and be robustly tested, or government must delay introduction of the levy and new funding system. Failure to do so risks employers accessing their levy funds and delays in colleges/providers getting paid for the training they provide. There is also an urgent need for detail from the Scottish, Welsh and Norther Irish administrations on how they will distribute the levy to employers in those nations.

Here are the main points on the Government’s planned way forward:

*please note the following guidance applies for England Only. Please scroll to the bottom if your business is located in Scotland, Wales or Norther Ireland.

Levy Introduction: Employers who have a payroll of £3m+ will start paying as of the start of the new tax year (first payroll from 6th April 2017) at a rate of 0.5%. Those that do pay can register for a ‘digital account’ where levy funds will be kept for use against apprenticeship training. Funds collected from the levy will appear in these accounts by the end of May 2017. The government will top-up an employer’s digital account funds by 10%. Employers can register for their digital accounts from January 2017.

Employers that do not pay the levy (i.e. they are under the £3 payroll) will not get a digital account and government funding for their apprentice training will continue to be routed to the college/provider (for now – this is likely to change in 2018-2019).

This levy does not affect any employer’s liability to the CITB levy, which is separate to the government levy. However, CITB is consulting how to change its levy system to reduce the burden on those employers that will be liable for both.

New Funding System Introduction: This will be introduced from 1st May 2017, so any apprenticeship ‘starts’ from this date will be subject to the new funding regime.

Those that do not pay a government levy, will pay 10% of the cost of the apprenticeship, with government topping up the rest (90%). For example, if your Bench Joinery apprenticeship costs £6,000 in total, you will pay £600 and the government will pay £5,400. You pay your contribution to the college/provider directly (for now – although when digital accounts are introduced for all employers, it will be done through this mechanism).

There are some exceptions to this 10% employer contribution:

·         You employ less than 50 employees and the apprentice you are taking on is aged 16-18.

·         The apprentice you are taking is leaving care or has an ‘education, health and care plan’ (any age)

This is still subject to the cost of the apprenticeship agreed with the training provider being within the funding band set by government – if the cost is higher, employers must make up the difference.

Those that do pay a levy can pay 100% of their apprenticeship training costs with the funds in their digital accounts, as long as they do not exhaust the funds in their account and the price of apprenticeship the employer agrees with the college/training provider is not above the ‘funding band’ set by government.

If all funds are used up, then employers can access government support by the same rules as those that do not pay the levy outlined above.

Levy payers have 24 months in which to use the funds in their digital accounts towards apprenticeship training (this is 6 months longer than originally outlined) before they expire. Funds are added to the digital account monthly, and the oldest funds will expire first.

Additional Government Grants for Apprentices: If an apprentice is 16-18 both the employer and college/provider will be able to claim £1,000 each in recognition for the extra resource required for taking on a young person. Employers will claim this through their college/provider.  

Amount of app funds calculated based on employees location for England. Calculations done each quarter but can be updated in real-time on HMRC account

Colleges/Providers will be given a temporary 20% uplift on any apprenticeship ‘frameworks’ still being used where apprenticeship ‘standards’ still in development (see below for explanation). This uplift is not likely to last longer than 12-24 months.

Government will continue to fund any apprentice that requires English and maths qualifications where they have not achieved an acceptable stand at school. This will be paid directly to the college/provider.

New Funding Bands for the cost of apprenticeships: The government has put a maximum value against each type of apprenticeship. While they range from £1,000-£27,000, Bench Joinery (and the other wood occupations) will be £6,000 for a two-year apprentice and £9,000 for a three-year apprentice. Employers are now able negotiate directly the cost of their apprenticeship, but these values are the maximum to which government funding can be allocated. So, you are a levy paying employer the government will only pay up to £6K or £9K respectively, or if you are not paying the levy and you are required to make a 10% contribution, the government will only pay up to £5,400 or £8,100 respectively.

The above applies to the current apprenticeship ‘frameworks’. The government is phasing these out for apprenticeship ‘standards’ (also known as trailblazers) by 2020, for which the content is directly written by employers. This process is near completion for bench (architectural) joinery and carpentry, when this happens, the maximum funding band is expected to be higher. BWF will inform members when these changes come into play.

Employers in Scotland, Wales and Northern Ireland: While the apprenticeship levy is UK-wide, skills policy is a devolved issue. The introduction of the levy and employers’ liability will be as outlined for England, but the distribution of funds by the devolved administrations has not yet been outlined (i.e. is may or may not follow the ‘digital account’ model). More detail is expected before the end of 2016.

Employers operating across national borders, or close to borders: Where an employer has places of work in England and in one or more of the other UK nations, HMRC will allocate the appropriate proportion to the English digital account or to each devolved administration once those terms are agreed.

If an apprentice workplace is in England, but lives in Scotland, Wales or Northern Ireland, the employer can claim funds from their digital account to pay for an English apprenticeship Framework or Standard.

All funding arrangements and additional grant support does not apply to Scotland, Wales or Northern Ireland.

If you have questions on the above or would like more information or clarification, please contact me at dave.campbell@bwf.org.uk or call 0844 815 9981.



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