Apprenticeship funding

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Under the government's apprenticeship reforms, employers have been given more control over how apprenticeship training is funded and delivered. 

This page outlines changes in the following areas:

Funding arrangements

Paying the levy
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. For more details go to how to pay the apprenticeship levy.

Access to the funding

From 1 May 2017 employers who pay the levy can access funds to spend on apprenticeship training through an online apprenticeship service account.

Employers create an account with the Apprenticeship Service and levy funds are paid into this from the first month they declare the levy payable through the PAYE system. By creating a digital account levy paying employers will be able to manage their levy funds, their apprentices, view their balance, forecast and plan their spending and pay training providers. 

The apprenticeship funding rules for 2017 to 2018 form part of the terms and conditions for using funds in an employer’s service account. 

If you do not pay the levy, you won’t be able to use the apprenticeship service to pay for apprenticeship training and assessment until at least 2018. For more details on this go to guidance for non-levy paying employers.

For apprentices who started an apprenticeship before 1 May 2017 the funding arrangements, and terms and conditions that were in place at the start of the programme will continue until the programme is completed. 
 
The ‘English percentage’ – where employees live outside England
Apprenticeships are a devolved policy and authorities in each of the UK nations will manage their own apprenticeship programmes, including how funding is spent on apprenticeship training.

This means that online accounts set up with the Apprenticeship Service 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.

Funding bands
Under the new system 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 set an upper limit and caps the maximum amount that can be spent on an individual apprenticeship. 

Spreadsheets showing which funding bands have been applied to standards and frameworks are available at gov.uk

Details of how the funding system will work for employers can be found in the Apprenticeship Funding document.

Agreeing a price
Employers negotiate with training providers to agree a total price for each apprenticeship, which includes the cost of training and assessments. This can be lower than the cap, but if a price is agreed above this the employer pays the difference and this cannot come from the funds in their digital 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 new system the funding allocated to each framework and standard applies regardless of age.

Employees with existing qualifications
In a change to previous rules, funds in the online account can now 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.

Additional support

Extra financial support
An additional £1,000 will be paid 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. This will come directly from the government and not taken from the employer’s service account. 

Funding to assist the transition
Training providers will receive an extra 20 per cent under transitional arrangements where training is offered 16 to 18-year-olds, or young people who were formerly in care or who have an Education and Health Care plan, under an existing framework. A separate additional payment will also be made to train young people that come from a disadvantaged background. 

These payments will come from government and not from an employer’s account. These arrangements will be reviewed at the end of the first year of implementation.

Additional learning support 
Up to £150 a month (plus additional costs based on evidence of need) can be claimed from the government by training providers, where an apprentice requires additional learning support as a result of conditions such as dyslexia, learning difficulties or disabilities.

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 £471 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.

Using the digital account

Paying for training
Payments to apprenticeship training providers are taken automatically from the online account with the cost of the training spread over the lifetime of the apprenticeship. Providers are paid each month in arrears for training that has been delivered, which means employers don't need to cover the entire cost of the training at the start, just the monthly cost of each apprenticeship chosen.

Deferred payments
Providers supply evidence of the training and assessment activities delivered and they receive 80 per cent of the negotiated price across the period of the apprenticeship. The remaining 20 per cent paid is held back and not paid until the end-point assessment has been completed.

Transferring digital funds
From April 2018, the government plan to allow levy-paying employers to transfer funds to another employer or apprenticeship training agency through the apprenticeship service. Initially up to 10 per cent of the annual value of funds entering the apprenticeship service account will be able to be transferred. 

Expiry of funds
Funds will expire 24 months after they enter an employer's account, unless they are spent on apprenticeship training. The apprenticeship service account will work on a first-in, first-out basis, through either payment or expiry. This means that whenever a payment is taken from the account it will automatically use the funds that entered the account first. 

Co-investment rules 
Employers wanting to invest more in training than they have available in their account will enter 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.

Cross-border training 
Employers can use the funds in their apprenticeship service 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.

Further information

To access more government guidance on the levy go to gov.uk.

For more information about the apprenticeship policy changes visit our apprenticeship policy web page

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