The apprenticeship programme – launched in 2010 – has already given millions of people the chance to learn new skills so they can go on to access fulfilling careers and help boost UK businesses.
The way the government funds apprenticeships in England changed as of Spring 2017, and some employers were required to contribute to a new apprenticeship levy, with changes to the funding for apprenticeship training for all employers.
The levy requires all UK employers, with a pay bill over £3 million each year, to make an investment in apprenticeships. The DfE proposed that employers that are too small to pay the levy – around 98 percent of employers in England – had 90 percent of the costs of training paid for by the government, but also had delayed access to the apprenticeship service and its funding until at least 2018.
Apprentices who were accepted on to an apprenticeship programme before 1 May 2017 were funded for the full duration of the apprenticeship under the terms and conditions that were in place at the time the apprenticeship started.
Paying the apprenticeship levy
If you are an employer, in any sector, with a pay bill of more than £3 million each year, you will need to pay the apprenticeship levy. For the purposes of the levy, an ‘employer’ is someone who is a secondary contributor, with liability to pay Class 1 secondary national insurance contributions for their employees.
The levy is charged at a rate of 0.5 percent of your annual pay bill. In order to offset against the levy you must pay, you will be allowed an allowance of £15,000 per year. You are only required to pay the levy if your bill exceeds £3 million in a given year.
Your total amount of earnings, subject to Class 1 secondary national insurance contributions, is what your bill will be based on. Although earnings below the secondary threshold are not counted when calculating an employer’s NI contributions, they are included for the purpose of calculating the amount of levy the employer needs to pay.
The levy allowance operates on a monthly basis and will accumulate throughout the year ─ this means you will have an allowance of £1,250 a month. Any unused allowance is carried from one month to the next. For example, if your levy liability in month one is £1,000, you will not pay the levy, and your allowance in month two will be £1,500
Once you have declared the levy to HMRC you are able to access funding for apprenticeships through a new digital apprenticeship service account. The levy is paid to HMRC through the Pay as You Earn (PAYE) process, a system for collecting tax from your employees’ earnings or pensions during the tax year.
You are able to use this to pay for training and assessment for apprentices in England. The service will also help you find training providers to help you develop and deliver your apprenticeship programme.
Spending your funding
The costs of apprenticeship training and end point assessment are provided by the government funding; however, this must be with an approved training provider and assessment organisation. It can’t be used for other costs that are associated with your apprentices, such as travel and subsidiary costs.
All existing and new apprenticeship frameworks and standards are placed within a funding band. The upper limit of each funding band caps the maximum amount of digital funds an employer who pays the levy can use towards an individual apprenticeship. The upper limit of the funding bands also caps the maximum price that the government will ‘co-invest’ towards, where an employer does not pay the levy or has insufficient digital funds and is eligible for extra support.
The amount of apprenticeship funding employers have access to is dependent on the proportion of its employees based in England, rather than elsewhere in Britain or overseas – the apprenticeship service only supports the English apprenticeship system. The amount of levy funds employers have in their account is calculated on the basis of this ‘English percentage’, by HMRC.
Top-up and expiry of funds
The government automatically adds 10 percent to the funds in a school’s apprenticeship service account – which will be applied monthly, at the same time the funds enter the school’s account.
Funds not used will expire 24 months after they enter the account, and schools will be informed when funds are due to expire. Whenever a payment for training is taken from the account, the service always uses the funds that entered the account first.
You will receive a payment to help meet the extra costs of employing an apprentice, if they are between 16- and 18-years-old at the start of their apprenticeship. In order to assist employers to meet extra costs, you will receive the same payment as you do when you recruit a 16- to 18-year-old apprentice, if you recruit:
- An apprentice who is aged between 19- and 24-years-old and who has an education, health and care plan provided by the LA.
- A 19- to 24-year-old who has been in the care of the LA.
If you recruit an apprentice with additional learning needs, such as dyslexia, or other learning difficulties or disabilities, the government will make a payment directly to the training provider to help them with the extra costs of supporting their learning.
Apprentices must have a Level 2 in both English and maths in order to meet the minimum standard required. If your apprentices do not have these, they may need to do an additional course.
You will need to work with your provider to identify which of your apprentices require this extra training. The government will pay providers directly for the Level 1 and 2 English and maths training
If you’re not a levy-paying employer, you are be able to register for an apprenticeship service account until at least 2018 and, therefore, will not have access to the services’ funds prior to this. The government is providing support for smaller employers who will begin paying from May 2017 by co-investing ─ paying 90 percent of the cost of apprenticeship training (up to the funding band limit) and leaving the remaining 10 percent to the employer.
Until the apprenticeship service and funding is accessible to small employers in 2018, they must agree a direct payment schedule with training providers and educators. There must be official records of all payments made so the government can verify payment has taken place and contribute its 90 percent share.
Transferring funds between organisations
The employers and training providers who will have to wait until 2018 to receive funds, may also access them via levy-paying employers from April of that year. In this funds sharing system, levy-paying employers will be able to transfer up to 10 percent of the annual value of funds within their apprenticeship service account.
Employers and training providers who allocate or receive funds to or from another organisation are subject to certain regulations. Currently, organisations must not be in receipt of more than the sum of €2 million over a period of three years.
Before accepting a transfer, employers should check how much state aid they have already received in any three-year period, to ensure they do not exceed the €200,000 limit permitted under ‘de minimis’ funding rules.
DfE (2018) ‘Apprenticeship funding: how it will work’, <https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work#non-levy-paying-employers> [Accessed: 8 March 2018]
DfE, SFA and Rt Hon Robert Halfon (2016) ‘Views south on plans to boost apprenticeships’, <https://www.gov.uk/government/news/views-sought-on-plans-to-boost-apprenticeships> [Accessed: 8 March 2018]