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Funding for Apprenticeships

Just as apprenticeships themselves are changing, government funding for apprenticeships is also in the midst of reform. An Apprentice Levy will be introduced from April 2017 which aims to:

  • Provide all businesses, regardless of size, with sustainable long term funding for apprenticeships
  • Give employers control of apprenticeship funding, enabling them to commission custom-built training that will help their businesses to grow.

From April, for apprenticeship funding purposes, employers will fall into one of two groups:

  1. £££ Levy Payers (employers with a wage bill over £3M)
  2. £ Non-Levy Payers (employers with a wage bill under £3M)

The apprenticeship funding guidance given here applies to Trailblazer Apprenticeships in England only. Wales, Scotland and Northern Ireland have their own arrangements for funding apprenticeships.

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Apprenticeship Funding for Levy Paying Employers

The new Apprentice Levy aims to secure a long-term funding solution for high-quality apprenticeships that better meet employer needs. Although ALL employers will benefit from the levy, in terms of extra funding available for training – only the largest employers will have to contribute towards it.

Example: Employer with an annual pay bill of £5,000,000

  • Levy sum = 0.5% x £5,000,000 = £25,000
  • Subtract levy allowance: £25,000 – £15,000
  • Annual levy payment = £10,000

Levy paying employers will access apprenticeship funding via the new Apprenticeship Service (AS)

What it is and how it works

The Apprenticeship Service is a computerised service whereby levy paying employers will have an online account to access their levy fund for training apprentices. The apprentice levy will be taken monthly from April 2017 payroll at a rate of 0.5% of a companies monthly wage bill. The government will then top up this amount by 10%. Money from the levy can only be used to pay for apprenticeship training with an approved apprenticeship training provider. The AS will also hold lists of apprenticeship training providers. In time employers will be able to make payments to them directly from their account.

Special Circumstances

Where a levy paying employer doesn’t have enough in their digital account to pay for their apprentices training, they will receive co-investment at the same level as non-levy payers.

Employers will need to complete an Employer Agreement with the Skills Funding Agency (SFA) to pay Training Providers to carry out apprenticeship training.

Latest Update: AS have developed a narrated video outlining the employer journey from the account home screen and registration to the funding and apprentice management sections. View video.

Apprenticeship Funding for Non Levy Paying Employers

Employers with wage bills of less than £3 million per annum will continue to receive government funding for apprenticeships in the same way as now, via co-investment. As part of the apprenticeship reforms from May 2017 non levy paying employers will only need to invest 10% of the cost of an apprentices training.  Government will co-invest the remaining 90%.

Extra Support for Small Employers

    Employers with less than 50 employees will not have to contribute their 10% co-investment if their apprentice is:

    • aged between 16-18 years
    • aged between 19-24 and has a local authority education, health & care plan or has been in the care of a local authority.

Key facts about the apprentice levy

  • Only large employers with an annual wage of over £3m will pay the levy
  • The Apprentice Levy will be charged at 0.5% of a company’s gross wage bill
  • HMRC will collect the levy monthly through the PAYE system
  • Government will ‘top-up’ employers monthly levy by 10%
  • Employers will receive an annual allowance of £15,000 to offset against their levy payment
Funding Band Band Upper Limit
1 £1,500
2 £2,000
3 £2,500
4 £3,000
5 £3,500
6 £4,000
7 £5,000
8 £6,000
9 £9,000
10 £12,000
11 £15,000
12 £18,000
13 £21,000
14 £24,000
15 £27,000
New Apprenticeship Funding Rates from April 2017

As part of the reform of apprenticeships 15 new Apprenticeship Funding bands have been developed, each attracting a different maximum level of funding.

A food industry example is the Level 2 Butchery Standard which has been assigned a £9,000 max funding cap.  Under the new funding arrangements non-levy paying employers will ‘co-invest’ up to 10% of the apprenticeship training costs (£900) with the government paying the remaining 90% (£8,100). For £9,000 the employer and training provider can tailor their own ‘fit for purpose’ training programme that aligns with knowledge, skills and behaviours detailed in the Standard found here

Estimate how much funding might be available for your apprenticeship via the government’s online calculator – Estimate My Apprenticeship Funding

 

For more detailed advice on apprenticeship funding view the documents below.