The Department for Education has today revealed its proposals on how funding for apprenticeships will work after the apprenticeship levy comes into force in April 2017.
The announcement confirms that the controversial levy will go ahead as planned – despite some observers suggesting it might be shelved after June’s Brexit vote – and will come into force for employers with a payroll of £3 million or more from 6 April 2017.
XpertHR apprenticeship levy FAQs
What is the apprenticeship levy?
How will an employer be able to access funding?
What will employers be able to spend funding on?
How will employers that do not pay the levy be able to fund apprenticeships?
The principles for apprenticeship funding will operate from 1 May 2017, whether employers pay the levy or not.
The Government had already confirmed that larger employers would have to pay the “training tax” from next year, at a rate of 0.5% of the annual pay bill. They will then receive an allowance of £15,000 per year offset against the levy, accessible from a digital training account.
Employers are invited to feed back on the proposals during a consultation that closes on 5 September.
The key points of the proposals include the following:
- The introduction of 15 funding bands, ranging from £1,500 to £27,000, which all existing and new apprenticeship frameworks and standards will be placed within. The upper limit of each band will cap the maximum amount of digital funds an employer can use towards an apprenticeship.
- Each individual apprenticeship framework will be allocated to a single funding band, regardless of the learner’s age or where they work.
- If an employer does not pay the levy or pays the levy but does not have enough funds in their digital apprenticeship account to cover the cost of training, they can “co-invest” with the Government. The DfE proposes that employers co-invest 10% of the costs while the Government pays the remaining 90%.
- Employers with fewer than 50 employees that train younger apprentices (aged 16 to 18), will not have to pay the 10% co-investment requirement, so they do not have to contribute towards the cost of training young apprentices.
- The Government will pay 100% of the apprenticeship training costs for small employers where the apprentice is a 19- to 24-year-old care leaver or is within this age band and has a Local Authority Education, Health and Care plan.
- The Government will cover the cost of English and maths training so apprentices can gain the minimum standard of Level 2 in these subjects – the cost of these qualifications will not be deducted from an employer’s digital account.
- Employers will be able to use the funds in their account and benefit from co-investment to train any apprentices whose main place of work is England, even if they live in other parts of the UK.
- Employees will be able to access funded apprenticeships to retrain, providing the content of the training “is materially different from any prior training or a previous apprenticeship”.
- Levy-paying employers from 2018 will be able to transfer up to 10% of the annual value of their funds to other employers on the digital system.
Reacting to today’s announcement, the CBI said it welcomed increased investment in apprenticeships, but that in its current form, the levy “risks turning the clock back on recent progress through poor design and rushed timescales”.
Levy concerns
CBI director-general Carolyn Fairbairn said: “Without a radical rethink it could damage not raise training quality. This really matters because of the crucial importance of closing the skills gap to improving the UK’s lagging productivity.
“The Government must take time to get this right, and listen properly to the concerns and ideas of the businesses who will be doing their best to make it work.”
She added: “The levy is too narrowly defined. It covers only one type of training and employers can only reclaim off-the-job costs. As a result, valuable forms of training risk being cut back, with quantity put ahead of quality.”
The CBI also insisted that the 2017 start date would not give employers sufficient time to prepare.
Fairbairn said: “We urge the new secretary of state to take a step back from the political timetable and consider what is best for building the skills of our young people, to enable the UK to become a high-skilled, high-productivity economy. Business stands ready to work with Government to build a system that delivers for the future and from the outset.”
The CIPD said that pushing ahead with the levy proposals was “irresponsible”.
Ben Wilmott, head of public policy at the HR membership body, said: “It is disappointing the Government has not taken the opportunity afforded by a new ministerial team – and change to the department responsible for skills policy in the UK – to look again at the apprenticeship levy.
“The very valid concerns regarding the levy in its current form are wide scale across organisations from the private, public and voluntary sectors and it is irresponsible for the Government, particularly in a time of economic uncertainty in the aftermath of the referendum, to simply press ahead with a policy that is not fit for purpose.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
“Our research suggests the levy, in its present form, will undermine efforts to improve the quality of apprenticeships. This is a time where we need to be raising the status of apprenticeships, not pursuing a policy which will have the effect of devaluing the ‘apprenticeship brand’.”
He added that there were concerns that employers could reduce investment in other areas of learning to meet their obligations under the levy, which could affect overall investment in training in the long term.
