Under the government's apprenticeship reforms, employers have been given more control over how apprenticeship training is funded and delivered.
This page outlines changes under the headings below.
Access to funding
Using the digital account
From 6 April 2017 all employers with a pay bill over £3 million each year will pay the apprenticeship levy to HMRC through the Pay as You Earn (PAYE) process. Guidance is available on how to pay the apprenticeship levy.
Employers who pay the levy create an online account with the apprenticeship service and use this to access funds to spend on apprenticeship training. The apprenticeship funding rules form part of the terms and conditions for using funds in the account.
While employers who don't pay the levy are not currently able to use the apprenticeship service to pay for apprenticeship training and assessments, the government is looking to make this available during 2018. For more details on this please visit guidance for non-levy paying employers.
Levy paying employers use their account to view their balance and forecast spending, manage payments to training providers, and track their apprentices.
Paying for training
Payments to apprenticeship training providers are taken automatically from the employer's account with the cost spread over the lifetime of the apprenticeship. Providers are paid monthly in arrears for the training they have delivered so an employer's levy funds won't need to cover the entire cost at the start of the training, just the monthly cost of all the apprenticeships chosen.
Expiry of funds
Any funds not spent on apprenticeship training and assessments will expire 24 months after they enter an employer's account. The account works on a first-in, first-out basis, for both payment and expiry, which means that payments are automatically taken from those funds that entered the account first.
Transferring digital funds
From April 2018, levy-paying employers can transfer funds to another employer or apprenticeship training agency, through the apprenticeship service. Those funds can only be used to pay for training and assessments delivered under apprenticeship standards, for new starters from 1 May 2018. In the initial phase employers can transfer up to 10 per cent of their annual levy fund to one other employer. The number of employers they can transfer funds to will increase over time following feedback on the process.
Any employer wishing to receive and use any transferred funds will have to register with the apprenticeship service, and have a signed agreement with the Education and Skills Funding Agency (ESFA).
Read more about transferring apprenticeship service funds.
Extra financial support
Extra financial support will be made to both employers and training providers to help with the additional costs associated with supporting younger apprentices, care leavers and young adults with additional learning needs.
A further payment (plus additional costs based on evidence of need) can be claimed by training providers where an apprentice requires additional learning support as a result of conditions such as dyslexia, learning difficulties or disabilities.
A separate additional payment will also be made to train young people that come from a disadvantaged background.
These payments will come directly from government and not from the employer’s account.
Support for English and maths training
Where apprentices need training to gain the minimum standard of level two in English and maths, training providers can claim funding to deliver each qualification. This will be paid by the government direct to training providers and will not be deducted from an employer’s account.
The funding rules for employers and providers can be found on the web page.
The ‘English percentage’ – where employees live outside England
Apprenticeships are a devolved policy and each of the UK nations will manage their own apprenticeship programmes, including how funding is spent on apprenticeship training.
The apprenticeship service account will only support and fund the English apprenticeship system. The amount of funds paid into an employer’s online account therefore will depend on how many of their employees live in England. This is called the ‘English percentage’. HMRC will use the home address of employees, taken from information provided about the pay bill, to calculate an organisation’s ‘English percentage’ and use this to pay the appropriate proportion of levy funds into the account.
Employers can use the funds in their account, and any co-investment support, to pay for apprentices that work at least 50 per cent of the time in England, whether that individual lives in England or another part of the UK.
Employers can invest more in training than they have in their account by entering into a co-investment arrangement with the government who will pay 90 per cent of the cost, with the employer paying the remaining 10 per cent. Employers will pay this amount directly to the provider, rather than through the online account.
No longer age-related
Under the old system the amount of funding available for apprenticeship training varied depending on the age of the apprentice. Under the levy system funding is applied to each framework and standard regardless of age.
Employees with existing qualifications
In a change to previous rules, funds in an employer's account can be used to pay for individuals to take an apprenticeship at any level (higher, equal or lower) to a qualification they already hold, if it allows them to acquire substantive new skills.
A set of 15 funding bands have been set up that range from £1,500 to £27,000. All apprenticeship frameworks and standards are placed within a funding band which sets an upper limit and caps the maximum amount that can be spent on an individual apprenticeship. Details can be found in the Apprenticeship Funding document.
Agreeing a price
Employers negotiate with training providers and agree a total price for each apprenticeship, which includes the cost of the training and end point assessment. This can be lower than the cap set by the funding band, but if a price is agreed above this the employer has to pay the difference and this cannot come from the funds in their account.
Training providers receive 80 per cent of the negotiated price across the period of the apprenticeship with the remaining 20 per cent held back and paid once the end point assessment has been completed.
Further guidance on the levy is available at gov.uk.
For more information about this apprenticeship policy visit our web page.