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APPRENTICESHIP REFORM & THE LEVY

What does it mean?The Conservative Government has set a target of creating three million new apprenticeships by 2020. To help fund these apprenticeships they will be bringing in a levy – a tax to support the funding of apprenticeships and they have also reviewed how apprenticeships are written and delivered.

The levy will be charged at a rate of 0.5% of your annual pay bill that exceeds £3 million in a given year. You will have a levy allowance of £15,000 per year to offset against the levy. You will only pay the levy if your pay bill exceeds £3 million (£250,000 on a monthly basis).

The government will provide a 10% top up on all levy contributions relevant to your English pay bill to be spent on employees working in England

The devolved assemblies of Scotland, Wales and Northern Ireland will decide on how the remaining funds will be spent in their countries.

Where levy funds have been maximised, the SFA will pay 90% of the negotiated training cost for additional apprentices, on condition the employer has paid 10% to the training provider

A 90% subsidy will be applied by the SFA for an employer that has no levy account, on condition the employer has paid 10% to the training provider for all apprentices they take on.

The new funding system will come into effect on 1 May 2017. All apprenticeships starting after this date will be funded according to the new rules. Up until this date the current system remains in place.

The levy will be set at 0.5% of an employer’s pay bill.

It will be paid on any bill in excess of

£3m per annum

employers will have an allowance of £15,000 to offset against their levy payment

What you’ll payThe levy will come into effect on 6th April 2017 and be applicable to all employers across all sectors both public and private.

Payable by employers in the UK at 0.5% of the pay bill in excess of £3m per year, through Pay As You Earn (PAYE), alongside income tax and NI

All employers given allowance of £15,000 to offset against payment of the levy

Levy is paid in to the Digital Apprenticeship Service Account

Levied Employer Employer of 250 employees, each with a gross

salary of £20,000

Pay bill: 250 x £20,000 = £5,000,000

Levy sum: 0,5% x £5,000,000 = £25,000

Allowance: £25,000 - £15,000 = £10,000 annual levy payment

What Counts as your pay billYour pay bill will be based on the total amount of earnings subject to Class 1 secondary National Insurance Contributions. Whilst earnings below the secondary threshold are not counted in an employer’s National Insurance Contributions, they will be used to calculate the rate they need to pay for the Levy.

Government top-upThe government will apply a 10% top up to funds available for spending on apprenticeships in England. This means for every £1 that enters your digital account, you get £1.10. The funds in your digital account will expire 24 months after they enter.

How you will payYou’ll be able to create an account with the Digital Apprenticeship Service from January 2017.

non-Levied Employer Employer of 100 employees, each with a

gross salary of £20,000

Pay bill: 100 x £20,000 = £2,000,000

Levy sum: 0,5% x £2,000,000 = £10,000

Allowance: £10,000 - £15,000 = £0 annual levy payment

10% top up from

government

Training ProviderProvide

training to apprenticesReceive

funding through

DASAgree price for training with

employer

Offer apprenticeship

training

Registered with SFA (Ofsted)

Employer

HMRC collect levy

(PAYE) Employer has online

accountEmploy

apprentices

Agree price for training with

provider

Receive training for apprentice

Unused funds will expire after

24 months

How the levy will work

Invoice employer for 10% of training costs where digital funds

have been used

When funds will appear in the digital accountThe apprenticeship levy will be introduced on 6 April 2017. Employers will be have to declare their liability to HMRC in May 2017 for levy due on April payroll. The corresponding funds will appear after an employer’s final declaration to HMRC - so after 22 May.

Employers can commit to apprenticeship starts from the beginning of May after selecting a provider and an apprenticeship programme

Funds will automatically leave the employer’s digital account monthly, spread over the lifetime of the apprenticeship

20% of the total cost will be held back and paid to the training provider upon completion of End Point Assessment

Co InvestmentEmployers that don’t pay the levy and those exceeding their monthly allowance.

Non-levied employers will be asked to make an initial contribution to the cost of an apprenticeship at 10% of the price negotiated with their training provider. The government will co-invest 90% of this negotiated price.

This co-investment will also apply to levied employers who have exceeded the account balance.

Operating in other areas of the UKThe levy applies to all employers in the UK – and the contribution is measured against the payroll of all employees living within the UK.

However, apprenticeships are devolved area of policy, meaning it is the responsibility of the Scottish, Welsh and Northern Irish Assemblies to decide how the funds will be spent.

The Digital Apprenticeship Service will support the English apprenticeship system. The government will calculate how much of your levy contribution will be available to spend in England through data they hold on the home addresses of employees. This assessment will be made in early 2017.

Example of 10% top up for 75% of workforce living in England.

10%

90%

Government ContributionEmployer Contribution

HMRC Levy Payment English Workers 10% of English Pay Bill

Annual £ to spend on English Apprenticeship

Funds available to Devolved Nations

£300,000 £225,000 £22,500 £247,500 £75,000

The apprentice must be employed in a real job; they can be an existing employee or a new hire

The apprentice must work towards

achieving an approved apprenticeship standard

The apprenticeship must last at least 12

months

The apprentice must spend at least 20% of their time on off-the-

job training

What is an apprenticeship?

Funding until 30th April 2017 The new system will come into effect from May 2017. For apprenticeships started prior to this date, the funding system in place for frameworks and pilot standards will continue to operate.

What you can spend apprenticeship funding on Apprenticeship funding can only be used towards the costs of apprenticeship training and assessment. It cannot be used on other training costs, such as wages, traineeships, or the costs of setting up an apprenticeship programme.

Candidates for apprenticeship programmes who have completed higher level qualifications in significantly different vocations are eligible for funding from 1st May 2017. This does include those holding degrees.

Buying Apprenticeship Training for a Levied EmployerOnce you’ve chosen your apprenticeship programme, the cost will be taken out of the digital account on a monthly basis.

You do not need to have the full cost of an apprenticeship available to enrol an apprentice

Your monthly balance must be enough to cover the monthly instalment of those in learning and newly started apprentices

If the funds do not stretch to cover the cost of your desired apprenticeship training, the government co-investment rates apply

Funding training and assessment costsEvery apprenticeship standard and framework is placed in a funding band. The funding band sets the maximum amount of funding that can be used towards training and assessment costs over the length of each apprenticeship.

Current funded frameworks will be available as an option for apprenticeships until they have a suitable Standard replacement and are withdrawn from the Approved Frameworks list

Apprenticeship standards are employer designed and offer a more robust and relevant training experience

Recognised in current and future funding system by allocating higher funding bands to apprenticeship standards, relative to equivalent frameworks

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Buying Apprenticeship Training for a non-Levied Employer As a non-levied employer, you will be invoiced by your training provider via a mutually agreed timetable for the 10%

contribution. This can be split over 12 months to spread the cost.

Employers of less than 50 people will not pay a contribution for apprentices aged 16-18 or those 19-24 who meet the special requirements. 100% of the cost will be supported by the government.

Extra support for employing 16 to 18 year old apprentices and apprentices with additional needs When you employ an apprentice who is aged between 16

and 18, or a 19 to 24 year old who has been in the care of a local authority or has an Education, Health and Care Plan; the government will contribute £1000 to employers to help meet the extra costs of employing them.

If you employ an apprentice with additional learning needs, the government will continue to pay the training provider to cover extra costs.

Funding for English and maths training Apprentices must work towards Level 2 qualifications in English and Maths. If your apprentice does not have this qualification the government will continue to pay the training provider to cover extra costs of meeting this requirement, these funds will not be drawn from your digital account.

Apprenticeship Reform - Frameworks to Standards The reform is not focused purely on how apprenticeships

are funded. The new system also incorporates reformed

programmes, moving away from regulated frameworks to

new employer designed standards. Putting the employer

in control of apprenticeships is the government’s aim and

the new standards have been collectively designed by a

multitude of progressive and experienced employer groups

with the view of simplifying the current system and providing

quality based employer led apprenticeship programmes.

IF YOU HAVE ANY QUESTIONS WE ARE EAGER TO ANSWER, SO PLEASE SEND ANY QUERIES TO

LEVY@LIFETIMETRAINING.CO.UKOR ALTERNATIVELY YOU CAN CALL US ON

0333 0143 669TO SPEAK TO OUR EXPERTS

Short & easy to understand based on Knowledge, Skills & Behaviours

End Point Assessement to increase quality

One standard for each ‘occupation’ sector

Standards designed by employers

END POINT ASSESSMENT – RAISING QUALITY STANDARDSOne of the most significant changes will be the move from

formative assessment to end point assessment. This will

mean apprentices will have the ability to showcase their

skills to an independent assessor and be offered a graded

apprenticeship completion of pass, merit or distinction.

How does Lifetime Training view the process of reform?We believe the evolution of the apprenticeship programmes through this process is positive, as we will be able to respond more acutely to employer requirements and design training that is more responsive to the needs of the individual and their employer.

The new standards will have fewer constraints upon how a programme should be structured i.e. it will be defined by the needs, knowledge, skills and behaviours demanded by specified job roles.

Over the past year we have significantly invested in curriculum development teams and eLearning and social learning platforms to ensure we’re ready to optimise the demands and opportunities that the new standards will offer our clients. Clearly this is work in progress; we are aligned to the continuing discussions and development of the new standards and have created the operational platform to act swiftly as standards are confirmed. We know the direction of travel but at this stage we are yet to see the final destination!

The end product has to be something that supports employers to work together to generate more apprentices into the system so we anticipate a more fluid and productive way of working.

We are committed to supporting our partners throughout the transition of the proposed reforms.