Government publishes further details on the Apprenticeship Levy and requests views on how it will operate - DAC Beachcroft

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Government publishes further details on the Apprenticeship Levy and requests views on how it will operate

Published On: 23 August 2016

Despite calls from employer representatives to delay the introduction of the apprenticeship levy, the government has now confirmed that it will be introduced on 6 April 2017. The government has issued further details on how the levy will work together with proposals for a new funding model. The government is inviting employers and training providers to have their say on the initial funding proposals, to try to ensure that it fully meets the needs of those involved in the apprenticeship programme.

The core principles of the levy are unchanged - you will need to pay the apprenticeship levy if you are an employer, in any sector, with a pay bill of more than £3 million each year. The levy will be charged at a rate of 0.5% of your annual pay bill. Once you have paid the levy through PAYE, a proportion of the levy, reflecting the number of your employees living in England, will enter your digital account. You will be able to use this fund (plus an uplift of 10%, provided by the government) for training and assessment of apprentices in England. As apprenticeships are a devolved policy, authorities in each of the UK nations will manage their own apprenticeship programmes.

The recent proposals outlined by the government:

  • Employers will be able to access the funds generated by the levy from 1 May 2017. All apprenticeships started before this date will be funded through to completion under the current system.
  • Employers with pay bills too small to contribute to the apprenticeship levy will have 90% of the cost of the apprenticeship training paid by the government (described as "co-investment"). This would also be the case for employers who pay the levy but want to spend more on training than is in their account.
  • Employers will be able to use the levy to retrain existing workers in new skills, even if they have higher qualifications, as long as the apprenticeship training is significantly different from their previous qualifications.
  • Apprenticeship funding will be made up of 15 bands each with an upper limit ranging from £1,500 to £27,000. All existing and new apprenticeship frameworks and standards will be placed in one of the funding bands, regardless of the age of the learner, or geographical location. The upper limit of each funding band will cap the maximum amount of funds an employer who pays the levy can use towards an individual apprenticeship or that the government will co-invest. It will be up to the employer to negotiate prices with providers within those limits.
  • The government will pay an additional £2,000 to employers and providers who take on 16 to 18 year olds, young care leavers and people with an education health and care plan – with £1,000 going to employers and an additional £1,000 to training providers.
  • A new register of training providers will be introduced from April 2017 to improve the link between training providers and employers.

Next steps

All employers and training providers now have the chance to feedback on the proposals for apprenticeship funding by completing the survey by 5 September. Please click here for survey.

Final funding proposals will be confirmed in October 2016 and employer guidance will be published in December.

What this means for employers - costs and opportunities

If you are a business to which the levy will apply, and you have not yet done so, we recommend you project the cost of the apprenticeship levy to your business and consider your options now. The levy can, of course, be paid as an additional "tax" but given that the levy is likely to be substantial many employers will want to balance the cost of the levy and exploit this opportunity to use the funds available in the most effective manner. The levy will be paid on a monthly basis and you will be given 18 months to spend the funds arising from the levy before you "lose" them.

It is worth considering the lead times involved in building a substantial apprenticeship program in terms of:

  • the time it might take to design a program that will really work for your business;
  • getting buy in from across the business;
  • planning and finalising delivery of training with whichever training provider(s) you choose;
  • recruiting the right individuals.

In considering your strategy to deal with the levy, our employment lawyers can support your business to understand the practical impact of the levy as well as advising on the legal implications of employing apprentices.

Our services include:

  • Calculating the impact of the levy.
  • Assessing with you how your current apprenticeship and training arrangements meet the requirements under the levy to ensure that you maximise your funding.
  • Advice on apprenticeship contracts or agreements.
  • Making sure you do not fall into any of the legal pitfalls associated with apprenticeships