Apprenticeship Levy FAQ
How will employers be affected by the funding changes?
Under the current system, training providers draw down the funding to cover the cost of apprenticeship training.
Through the new system this funding will sit with the employer, through a digital account, and the employer will be able to purchase training from providers using the money held in the account.
Non levy paying employers will not have to use a digital account until 2018, but can still utilise the digital apprenticeship service to find a training provider.
Will employers have to contribute to the cost of an apprenticeship?
If employers do not have enough funds in their digital account through paying the levy, employers will be expected to make a contribution of 10% to the cost of the apprenticeship, with the Government contributing the other 90%.
How much will an apprenticeship cost?
The Government's aim is to simplify the funding for apprenticeships.
Therefore, the new apprenticeship funding system will be made up of 15 funding bands, with the upper limit of those bands ranging from £1,500 to £27,000.The employer will be free to negotiate the best possible price with training providers. It is also expected that the employer's contribution will be paid over the course of the apprenticeship.
Employer chooses apprenticeship in band 9 with a maximum price of £9,000. Employer negotiates a price of £8,500 with their provider. Government co-invests 90% = £7650. Employer co-invests remaining 10%= £850. Employer and provider agree to spread this over 10 instalments of £85.
However, the exception to this is if a small employer, with less than 50 staff, recruits an apprentice aged between 16 and 18. In this instance no employer contribution is required and the Government will fully fund the apprenticeship.
How will digital accounts work?
Contractual arrangements with training providers will be organised through a digital account. This will also enable businesses to pay for the apprenticeship training they procure, including their co-investment.
For levy paying employers, funds will be paid into the account by government with the amount calculated by the amount of levy paid by the employer. The employer can then use these funds to procure apprenticeship training.If there is no money in an account but the employer wishes to purchase apprenticeship training, then the Government will pay in 90% of the cost. The employer will pay the other 10%.
Contractual arrangements with training providers will be organised through a digital account. This will also enable businesses to pay for the apprenticeship training they procure, including their co-investment. For levy paying employers, funds will be paid into the account by government with the amount calculated by the amount of levy paid by the employer. The employer can then use these funds to procure apprenticeship training.
How long do we have to spend the money in our digital account?
If not spent, funding will expire after 18 months.
How do we set up a digital account?
Online tools for employers will be available via the digital apprenticeship service over the next year. You will be able to register to create your account from January 2017 in order to familiarise yourself with the service prior to going live.
Is any other funding available?
The Government will apply a 10% ‘top up’ to any funds placed into an account by an employer. In addition, employers who do not pay the levy will receive an additional payment of £1,000 for training apprentices aged 16 to 18 years old, and those aged 19 to 24 years old who were formerly in care or who have a Local Authority Education, Health and Care plan.
The training provider will also receive an additional £1,000 of funding in these circumstances.
Do these changes affect Apprenticeship Training Agencies (ATAs)?
ATAs are subject to the same criteria for the levy as any other business. If the wage bill exceeds £3million per annum they will be liable to pay the levy.
Can a business transfer some of its funds from its digital account to an ATA?
In the first year of the new system, levied employers will not be able to transfer digital funds to pay for training of apprentices employed by ATAs.
Employers who want to use their own digital funds for training will only be able to do so for individuals in their direct employment.This means that employers will need to employ apprentices themselves if they want to use their digital funds to pay for training these apprentices.
From 2018, as part of the proposals on transfer of funds, employers would be able to transfer up to 10% of the annual value of funds entering their account, onto an ATA. However, the ATA will be subject to state aid rules and so limited in the total value of funds it can receive.
Click here to calculate your Apprenticeship Levy Fund