We recently reported on the proposed introduction of an apprenticeship levy with effect from Spring 2017 to fund and facilitate a greater number of apprenticeships. Employers with an annual wage bill in excess of £3m will be required to pay in 0.5% of their annual wage bill into a digital account which the employer can access for the purpose of funding apprenticeships. These funds must be used within an 18 month period, or they will expire.

Proposals On 12 August, the UK Government published their ‘Proposals for apprenticeship funding in England’. These proposals are only relevant for the operation of the apprenticeship levy in England (the Scottish position is discussed below).

  • Start date

The system will come into force in April 2017. Apprenticeships commencing from 1 May 2017 onwards will be funded under the new rules.

  • Funding bands

There will be 15 funding bands with the upper limits ranging from £1,500 to £27,000. All new and existing apprenticeships will be placed within one of these bands.

  • Funding bands for frameworks

The Government wants to simplify the current funding arrangements. There will be a move away from pricing based on the age of the apprentice, towards individual framework pathways based on the current rate of funding the government pays providers for training adult apprentices.

  • Co-investment

Employers who do not pay the levy but would like to invest in apprentices will fund 10% of the cost of the apprenticeship themselves and the government will cover the remaining 90%. Similarly, where a levy-paying employer wants to invest more in apprenticeship training than they have available in their digital account, the government will fund 90% of the cost.

  • Additional payments

Employers who train a 16 to 18-year-old will receive a further £1,000 to meet additional costs associated with training younger apprentices. An additional £1,000 will also be given to employers of apprentices aged 19 to 24 who have a Local Authority Education, Health and Care plan. 100% of the training costs for such apprentices will be covered for employers with a headcount of less than 50. The government will make an additional payment to employers who train apprentices who need greater skills in English or maths, or require learning support.

  • Cross Border funding rules

To qualify for funding through the English system, the apprentice’s main place of employment must be in England. The Government is working in conjunction with the devolved administrations on reciprocal funding arrangements for employees living in England but who may work elsewhere in the UK.

  • Equivalent and lower level apprenticeships

Employers should be able to use the funds in their digital account or access Government co-investment to allow an individual to undertake an apprenticeship at a higher level, the same level or a lower level than a qualification they already hold, provided the content of the training is materially different from any previous training undertaken and that they would acquire substantive new skills as a result.

What’s next? The Government will engage with employers, providers and other stakeholders and consider the views expressed through their online survey. The above proposals will then be refined and developed. In October 2016 the Government will publish the final funding bands which will apply to the new system, and the final set of technical rules which will underpin the funding system. In December 2016, we expect further guidance from HMRC will be published for employers on how to calculate and pay the apprenticeship levy.

The full UK Government proposal can be viewed here.

The position in Scotland The Scottish Government is currently running a consultation, which will close on 26 August 2016, on how best to use this levy in Scotland. The Scottish Government want to explore ’a wider set of options to use Levy funding in order to benefit employers and support our economic ambitions while supporting the delivery and quality of the Modern Apprenticeship programme for the benefit of levy paying employers and of smaller employers’. In short, they are seeking opinions on:

  1. Maintaining the current Modern Apprenticeship growth ambition This is to deliver at least 30,000 Modern Apprenticeship starts per year from 2020. It is recognised that this number may need to increase if there is sufficient industry demand following the introduction of the levy, without impacting on the quality of apprenticeships provided.
  2. Developing graduate level apprenticeships These would provide work-based learning opportunities up to masters degree level for employees combining academic knowledge with workplace focussed skills development.
  3. Developing a flexible skills fund for wider workforce development Use levy funding for workforce training opportunities beyond just apprenticeships.
  4. Pre-employment support Colleges and schools are working together to offer opportunities to young people to participate in Foundation Apprenticeship opportunities enabling young people to gain real-world work experiences.

The full Scottish Government consultation is available here.