Apprenticeship Funding Reform – The Basics!

Gareth Jones Apprenticeship Strategy Manager

GMLPF gareth@gmlpf.net @gmlpfapps

Webinar will cover:

1. Apprenticeship Levy

2. Apprenticeship Funding for Non-Levy Payers

3. Co-Investment & Additional Payments

4. Apprenticeship Funding Bands

5. Digital Apprenticeship Service

6. Register of Apprenticeship Training Providers

https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work

Apprenticeship Reform update: A set of Proposals!

Apprenticeship Levy The basics

• The levy will be 0.5% of pay bill, to be paid monthly alongside usual PAYE payment and applies to all UK based businesses

• Will raise approx. £2.7bn per annum across UK

• Every employer gets an allowance of £15,000 per year

• £1250 per month, unused allowance carried forward one month to next

• Effectively means, Levy only paid on pay bill in excess of £3m

• (0.5% x £3m = £15,000)

• Levy paid into a digital account on the new Digital Apprenticeship Service

Apprenticeship Levy The basics

• Employers will be able to get out more than they pay into the levy – via an automatic 10% top-up to their account

• Levy will be collected from April 2017

– Via PAYE system and paid to HMRC monthly in arrears as per PAYE payments

• Levy funds will expire 18 months after they have been credited to employers DAS account – payments taken on 1st in, 1st out basis

• New Funding systems implemented 1st May 2017

• Apprenticeship Levy can only be used to pay for training and assessment for apprentices in England

• Apprentices starting their Apprenticeship prior to the end of April 2017 will continue to have their programmes funded under current system.

Apprenticeship Levy What does it mean in real terms?

• Levy affects approx. 2% of UK employers

• Approx. 19,000 employers

• Examples:

– Civil Service

• Annual Salary Cost £11.13bn (source: National Audit Office – Central Government staff costs)

• Approximate Levy sum: 0.5% x £11,13bn = £55,650,000

– Liverpool City Region

• Approx. 400+ employers will pay Levy

• Approx. Levy contribution by LCR employers = £30m+

• Employers with pay bill over £2.8m will have to report to HMRC in case they go over threshold during the year, even if they don’t pay the Levy

Apprenticeship Levy Examples of what employers may pay?

Example 1: an employer who would pay the levy

An employer with an annual pay bill of £5,000,000:

Levy sum: 0.5% x £5,000,000 = £25,000

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

Example 2: an employer who would not have to pay the levy

An employer with an annual pay bill of £2,000,000:

Levy sum: 0.5% x £2,000,000 = £10,000

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

• New indicative online tool for employers to estimate levy contributions and begin to plan their training requirements and financial spending

Non-Levy paying Employers

• Those with pay bill of less than £3,000,000

• 98% of employers

• Will be expected to make contribution towards cost of training (co-investment) and Government will pay the rest

• Must be cash, cannot be in-kind payments

• Each Apprenticeship Framework and standard has been allocated to a new funding band

• They will not use DAS until at least 2018

• Expectation that all employers will use DAS by 2020

Co-Investment

• Employers will pay their providers the agreed co-investment direct and over the life of the apprenticeship

• Proposed co-investment rate

– 10% Employer

– 90% Government

• No longer having rates based on age of apprentice at the start of the programme(16-18, 19-24, 25+, etc.)

• Co-investment also applies to those Levy-paying employers who have used all their Levy contributions and wish to purchase more apprenticeship training

• There will be additional payments available to both employers and providers

Additional Payments

Training younger apprentices

• Extra support for those employing 16-18 year old – £1000 for both employers and providers

– Payments made at 3 and 6 months direct to training provider

• Proposal for employers with fewer than 50 people, 16-18 year olds will be trained at no cost – i.e. 100% Government funding

Support for care leavers and those with Education, Health and Care plan

• For those aged 19-24 who have been in care or have EHC plan, both employers and providers will receive £1000.

• Government pays 100% of training costs for these individuals

NOTE: Currently no additional support for those aged 16-18 care leavers or those with EHC other than the standard £1000

Additional Payments

English & Maths

• Where English & Maths required:

– Provider will claim flat rate of £471 for each qualification from Government

– This does not come from employers levy contributions

Learner Support

• Apprentices with a learning or physical difficulty may require extra learning support that can involve additional costs

• Government will fund up to an additional £150 per month direct to provider

Both a continuation of the current system

Equivalent or Lower Level Apprenticeships

• Current rules complex

• Simplify rules so employers can apply them to their own existing workforce

• New proposal is that Levy or co-investing employer can support to train eligible individual to undertake an apprentice at a higher level than a qualification they already hold

• Also propose that an individual can be funded to undertake an apprenticeship at the same or lower level than a qualification they already hold if the apprenticeship allows them to acquire substantive new skills and the content of the training is materially different from any prior training

Use of Levy Funds for another Employer

• Main aim of Levy is to support employers in growing the quality and number of apprenticeship in own workforce

• Government recognises employers want to support their supply chain or other employers in their sector or community

• From 2018, proposing to be able to transfer 10% of Levy funds to another employer

• This includes those employers who use ATAs

• Means in 1st year of Levy employers can only use Levy on own workforce

Apprenticeship Funding Bands

• Currently two different funding systems, one for framework and one for standards

• Simplified into one new system - 15 new funding bandings

• Upper limit those bands ranging from £1500 to £27000

• All existing and new apprenticeship frameworks and standards will be placed within one of these bands

• STEM subjects will get an uplift and placed in higher bands (L2 – 40%, L3 – 80%)

• Upper limit is – the max amount of the levy paying employers can use towards an apprenticeship

– the max amount the Government will co-invest to none levy-payers

• Framework pathways to be allocated into nearest funding based on the current rate of funding Government pays for training adult (19+) apprentices

• 20% Completion Payment retained for all delivery, NOTE: not an achievement payment!

Apprenticeship Funding Bands

• Funding for Apprenticeship Standards is far more than for older Frameworks? E.g.’s – Motor Vehicle L3 – Light vehicle

• Framework £5000 max funding band • Standard £18,000 max funding band

• Government pushing Providers to deliver more standards where more funding

exists?

• More costly End Point Assessment means standards might not be as attractive

• More costly to employers – 10% contribution more if funding value is more

• Simply not enough standards currently available – Standards = 145 – Frameworks = 203 – with multiple pathways and levels nearer 1000 options

Apprenticeship Funding Bands - Examples

Business Administration – Level 2 • Max Funding 2017/18 = £2000 (+£1000 16-18, £942 English & Maths) • Comparison - 2015/16 rates:

• 16-18 = £5437 - 17/18 down at least £1495 • 19-24 = £2888 - 17/18 up £54 • 25+ = £2350 - 17/18 up £632

Health & Social Care – Level 3 • Max Funding 2017/18 = £2000 (+£1000 16-18, £942 English & Maths) • Comparison - 2015/16 rates:

• 16-18 = £6379 - 17/18 down at least £2437 • 19-24 = £3259 - 17/18 down at least £317 • 25+ = £2607 - 17/18 up £334

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/545340/Apprenticeship_funding_bands_tool_-_Aug_2016.xlsm

Digital Apprenticeship Service

• Help employers regardless of whether they pay levy or not:

– Select an Apprenticeship Framework or Standard

– Choose the training provider or providers they want to deliver training

– Choose an Assessment Organisation (Apprenticeship Standards only)

– Post Apprenticeship Vacancies

• From May 2017, levy payers will be able to: – See the funds they have available to spend in England

– Set the price for training agreed with the training provider

– Pay for apprenticeship training and assessment electronically to providers

• Levy payers will be able to register for DAS account Jan 2017

Register of Apprenticeship Training Providers (RoATP)

• Employers can only spend the funds in your digital account or access government support for apprenticeship training delivered by an approved training provider.

• New Register of Apprenticeship Training Providers (RoATP)

• All providers wanting a role in delivering apprenticeship training from May

2017 must apply

• No transfer from existing ROTO as it is completely separate

• Only for those who deliver training, not for managing agents, intermediaries, etc.

• Alongside application process, new procurement exercise will run for delivery of apprenticeships to non-levied employers with contracts to be awarded to successful providers

Register of Apprenticeship Training Providers (RoATP)

• Expectation that main provider will deliver more than half of each apprentice training

• Three routes for application • Main • Supporting • Employer Provider

• Will look at three tests:

• Due Diligence • Financial Health • Quality, capacity and capability

• Must pass all three to be on register

• Register will open in October 2016 for applications

Next Steps

Government has said further info to be published: • October 2016 – final levels of funding, government support,

additional payments

• December 2016 – further guidance from HMRC on how to calculate and pay the Levy

HMRC currently consulting on how employers: • Calculate Levy • Report Levy • Pay Levy

All part of draft Finance Act 2016 – see link for more detail http://www.legislation.gov.uk/ukpga/2016/24/pdfs/ukpga_20160024_en.pdf

GMLPF Support & Available Resources

• GMLPF Leaflets

– Levy paying Employer

– Non-Levy paying employer

• Infographic for use electronically by members e.g. social media

• Future Apprenticeship Programme

Questions?

Next webinar

2nd November 2016 – 10.30am

Register of Apprenticeship Training Providers

https://attendee.gotowebinar.com/register/1160475526753835777

Gareth Jones

gareth@gmlpf.net