What is the apprenticeship levy?

Set to come into force in April 2017, the Apprenticeship Levy was initially introduced by the government in the 2015 budget, with the intention of investing £2.5 billion in apprenticeships by 2020. It proposes to apply a levy of 0.5% on employer annual pay bills over £3 million, with the money raised being used to support both large and smaller employers to provide approved apprenticeship schemes.

So what has changed in the new proposal?

Small businesses with a pay bill of less than £3 million will have 90% of the training fees for apprentices paid on their behalf. This support will be extended for apprentices between the ages of 16 to 18, as employers will receive around £2,000 more per apprentice.

Larger levy-paying businesses will be able to access similar support if they take on apprentices and the costs exceed the funds in their digital account (where their allocated funding for apprenticeships will be held).

The new proposals also set out a cap of between £1,500 and £27,000 on the amount of digital funds an employer is able to allocate to each individual apprenticeship. The precise figure is determined by the ‘funding band’ in which the apprenticeship falls. Employers will be required to negotiate prices with apprenticeship providers to keep within these funding limits.

What do these updates mean for employers?

Levy funds will be open to use on any training which the employer considers to be beneficial, meaning businesses should in theory have greater control over their apprenticeship programmes. It is hoped that alongside the new published list of training providers, the changes will improve relations between employers and providers and the calibre of apprenticeship programmes being offered.

The new updates promise to bring flexibility and control over apprenticeships, and to a certain extent, they will. The provision of the list of providers will clarify the options available to employers and potentially lead to more focussed training for specialist skills. There are however limitations to these advantages, as it is proposed that the funding will only be used for training apprentices and not for future costs such as paying their wages. The government will also only allow employers to use approved training providers and assessment organisations, narrowing the scope of the training on offer.

Have your say

A full summary of the proposed new funding model for apprenticeships can be found here.

Employers and training providers are being encouraged by the government to provide their opinions on the proposed changes before they are finalised this October. Feedback should be provided before the 5th September via the online survey which can be found here, or alternatively via your Freeths contact if you wish to take part in our joint response.=