Trailblazers - New Funding Approach

BACK 14-04-2016

New Funding Approach - Apprenticeship Standards and the new Levy 2016/17

This can be described as both an exciting and challenging time for those involved in Apprenticeship recruitment and delivery and suffice to say any reform of apprenticeships to the scale we are seeing will inevitably lead to a reform in the national funding methodology.  

Whilst this blog tries to explain some of the funding reforms happening, it should be noted that there are still lots of questions arising through this process and discussions are still taking place across Government as to some of the detail. However, this is what we know so far.

In December 2015, the Government published ‘English Apprenticeships – Our 2020 Vison’ which set out the case for supporting 3 million new apprenticeship starts during the lifetime of this Parliament, a 25% increase on the last Parliament providing an opportunity to further grow quality apprenticeship delivery.

It was in this document that the Levy was introduced as a mechanism for sustaining apprenticeships longer term.  From April 2017, those employers with a wage bill in excess of £3million will be required to pay a 0.5% levy on their pay bill, deducted directly via their PAYE system and paid into a ‘digital account’ which will be used to fund apprenticeships. However they will have a £15,000 tax allowance. In addition, following the recent budget announcements employers will also receive a 10% top up into their ‘digital account’ so those employers committed to apprenticeships can get more out than they put in.  At this time, we understand that the Levy can only be used for apprenticeships.

 

 

It is expected that this will only affect 2% of employers nationally and will apply to all UK private and public sector employers including those operating under other levies (e.g. construction). For employers spread across the UK, HMRC will devolve the levy to the Scottish and Irish Parliaments and the National Assembly for Wales and it will be up to them how they might spend the Levy. However, there is currently very little detail as to how this will work in practice for employers working across the UK although the Government have stated that they are committed to working closely with devolved administrations to make this work.

For employers falling outside of the scope of the Levy, a new co-funded model will be at the heart of the system meaning that employers will be required to pay a financial contribution. So for apprentices commencing against the new standards in 2016/17 the current requirement will be a 1/3rd employer contribution against a 2/3rd Government contribution. i.e. for every £1 received, Government will pay £2. (Note that moving forward from April 2017, the co-funding split has not been set and could be subject to change).

 

 

 

 

Employer Contribution

•    Employer pays one third of the price agreed for delivering training and end point assessment required to complete the standard

Core Government Contribution

•    Government pays two thirds of the price agreed for delivering training and end point assessment required to complete the

standard; up to the cap for the standard.

 

Underpinning this co-funded model each new Apprenticeship standard that is approved will fall under a ‘funding cap’ currently determined by Government at the point of approval. So an administrative apprentice standard will sit under a different funding cap to a manufacturing apprentice standard for example.

 

 

 


It is important to note that the funding cap sets the maximum limit the Government will contribute toward an apprenticeship standard and therefore it is not a reflection of the actual ‘price’ of an apprenticeship. It will be for employers and providers to determine/negotiate the rate of the apprenticeship taking account of what needs to be delivered.  

The funding cap will remain the same irrespective of age and is different to the current arrangement where no contributions are required from employers recruiting a 16-18 year old. However, in order to address this, an employer can potentially draw down up to 3 incentive payments.  These incentive payments are paid on top of the core Government contribution and reflect:
•    the recruitment of a 16-18-year-old;
•    whether an employer is classed as an SME i.e. 49 employers or below; and
•    a completion payment.

Each incentive payment will be claimed via an invoice from the employer to the provider at certain times across the duration of the apprenticeship with the majority of incentive to be paid in month 4 of the apprenticeship (subject to timely invoices).
For employers, this will mean financial contributions will need to be made prior to an incentive payment being made. Under this new system, it is the employer contribution that will ‘trigger’ the Government contribution and an incentive payment cannot be claimed unless the employer has contributed.

 

 

Example using Funding Cap 4

 

 

 

 

 

 

 

 

 

Levy payers will draw down 100% of the funding cap e.g. the Government 2/3 plus the employer 1/3 contributions (this does not include incentive payments). Should the cost of an apprenticeship total more than the funding cap for a particular sector, the employer is expected to pay the difference irrespective of whether they are a levy payer or not. In addition, it is anticipated that where a Levy payer has spent all of their digital account (levy and top-up) and wishes to spend more on additional apprenticeship training, they are likely to have to contribute additional funds. However, further detail on this is still to be determined. Discussions are also taking place as to how might Levy employers support transfers of levy funding to assist their supplier chains. At this time it is expected that unused Levy accounts will expire but again discussions are taking place as to what time period this will cover.  Further guidance on the broad operating model of the Levy is due late Spring 2016 but this is still unlikely to go into minute detail until later in the year.   click here for more detail

The Digital Apprenticeship Service (DAS)
The new Digital Apprenticeship Service will be accessed by all employers irrespective of whether they are a Levy payer or not. It works on the basis of accessing a ‘digital voucher’ which is ‘cashed in’ or ‘redeemed’ by delivery Providers direct from Government.

Employers not paying the levy will be expected to ‘register with the Digital Apprenticeship Service’ to create an account. Levy payers will have a digital account generated automatically through the Levy process. The Digital Apprenticeship Service will provide a general service for all employers in terms of sourcing and securing apprenticeship providers, end-point assessment organisations, placing apprenticeship vacancies etc.

Written agreements/Commitment Statement and Payment Schedule
Once an employer has identified a lead delivery provider and agreed a price for delivery of the new standard (including the end point assessment), they will be required to sign a written agreement which forms the basis of a legal contract with the provider. This will include a payment schedule setting out when employer contributions are to be made. It will be between the employer and provider to determine when payments might be made over the duration of the apprenticeship and this may be different for every employer.  In addition, the employer, provider and apprentice will each sign a commitment statement clarifying the roles and responsibilities of all parties. It is also important to note that for apprentices aged 16-18 there will be a requirement that their parents also sign the commitment statement.

Once delivery starts against the agreed standard, the payment schedule commences. Lead providers will be responsible for transferring funds to other providers the employer may be working with including the end-point assessment provider.  
It should be noted that only providers/end-point assessment organisations who are Government registered (identified on the Register of Training Organisations) are able to deliver and draw down apprenticeship funding.

For more information go to Apprenticeship_standards_employers__guide.pdf
Alternatively speak to one of our members of staff on 01159 677771 or email info@webstraining.com

 

 

 

 

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