On 7 April, the government will take the historical step of charging all UK employers (with a pay bill of £3 million or more) a 0.5% tax on that pay bill. Branded as the Apprenticeship Levy, this is a central component of the apprenticeship reform programme that began back in 2012 with the Richard Review of Apprenticeships.
A fundamental driver of the coalition – and Conservative – governments’ ideology to increase the profile and uptake of apprenticeships has been employer ownership, or, as a former skills minister put it: ‘for employers to have skin in the game’. In order to achieve this, the Levy was proposed and will be enacted this year to ensure that employers have a stake (their own payroll) being invested in apprenticeships, with the ultimate intention that employers will be looking to recoup this tax through negotiating a price with providers to offer apprenticeships in their industry. According to the Department for Education, ‘the levy will allow us to double investment in apprenticeships by 2020 from 2010 levels, to £2.5bn.’
Set out below is a very basic guide to the system level changes that will be brought in as a result of the Levy. If you haven’t already, I’d strongly recommend becoming familiar with the current version of the Funding of Apprenticeships from May 2017 as this sets out in much greater depth and detail the points summarised below.
Employers that pay the Levy will use a Digital Account System (DAS) to manage their Levy allocation, which will include a 10% ‘top-up’ from the government. If they use all of their Levy allocation up, they’ll be expected to pay a 10% contribution towards the funding rate they’ve negotiated with a provider (with the government paying the remaining 90%).
Employers that don’t pay the Levy (those whose pay bill is below £3 million) will not be using the DAS system, and will rely on finding a provider with a funding allocation. The employer would then be required to pay a 10% contribution towards the funding rate they’ve negotiated with a provider (again, the government would pay the remaining 90%). If the non-levied employer is taking on 16-18 year old apprentices in a business with fewer than 50 staff, this contribution would be waived.
There are additional rules and payments available for younger learners, care leavers and those who have an Education, Health and Care plan.
Regardless of whether or not the employer contracting the apprenticeship training pays the levy or not, on 1 May, the funding of both apprenticeship frameworks and standards will change. Each framework or standard will be allocated a maximum funding value from bands ranging from £1.5k to £27k. All existing apprenticeship frameworks and standards have been placed within one of these funding bands and new standards will be placed in a funding band as they become ready for use. Funding bands don’t have a lower limit because the Department for Education doesn’t want to prejudge what the correct price for a provider and employer to settle on is.
As I set out above, it’s essential to read the current version of the Funding of Apprenticeships from May 2017 as this sets out in much greater depth and detail the points summarised above, in addition to the current documentation supporting funding for apprenticeships published by the Skills Funding Agency. This page also sets out the funding bands that will apply for existing apprenticeship frameworks and apprenticeship standards from May 2017 – essential for modelling your apprenticeship offer from the spring.
If you’d like to find out more about how NCFE can help you navigate your Apprenticeship Levy opportunity, visit our dedicated website at http://levy.ncfe.org.uk/, which includes a useful Levy calculator.
