call us 0844 800 2280

Key Points

  • The government is reforming the way Apprenticeship Training is handled moving all emphasis from Training Providers, Colleges and Awarding Bodies and placing control of the process into the hands of the employers
  • The government will introduce an employment Levy of 0.5% based on an employer’s wage bill, if over £3m, to fund Apprenticeship Training from April 2017
  • The Government will top up levy by 10% each month
  • Unspent money will lapse after 18 months
  • Employers design Apprenticeship Standards replacing current frameworks
  • Creation of an Institute of Apprenticeships to oversee the regulation, design and delivery of apprenticeships overseen by a board made up primarily of employers
  • A Creation of a Digital Apprenticeship Service (DAS) for employers to simplify the process of finding apprentices and training providers

An Overview of what is currently happening to the World of Training:

In the November 2015 Spending Review delivered by George Osbourne the Government released their plan for the delivery of 3 million apprenticeships during the Governments term.

The main driver for the reform is a considerable skills gap in this country compared to other economies around the EU and developed economies around the world has spurred the government into action starting with the ‘Richard Review’ released in 2012 calling for action to improve the training of young people to ensure that they have the skills needed for many UK jobs.

The overarching objective of the reforms is to increase employer responsibility for the design of standards and the funding of apprenticeships. These reforms are made on the basis that it is the employer who is best placed to design the standards for apprenticeships and that by being responsible for their funding; they will hire a larger number of apprentices and ensure their training is of the highest quality.

On Friday 12th August 2016 the government, via the Department for Education (DfE) released their formal proposal for the changes in the way Apprenticeships are funded within England, this can be found here. This proposal is open to feedback up until 5th September 2016 and ICON would urge you voice your opinions positive or negative before the closing deadline so your organisation can be heard. To complete the survey click here. The DfE have also released a “how it will work” overview which gives additional information.

How does that affect you and why should you take notice?

Starting April 2017 a levy will be introduced of 0.5% of your annual wage bill and will be collected via the PAYE system by the HMRC and placed into a Digital Account – there will be an allowance of £15,000 to offset against the planned Levy Payment, this in effect offsets the payment of employer with a PAYE bill of less than £3m. an example of how to calculate your levy is below:

Examples:

A. Employer of 250 employees, each with a gross salary of £20000
Wage bill: 250 x £20000 - £5,000,000
Levy Sum: 0.5% x £5000000 = £25000
Allowance: £25000 - £15000 = £10000 annual Levy Payment

B. Employer of 100 employees, each with a gross salary of £20000
Wage bill: 100 x £20000 - £2000000
Levy Sum: 0.5% x £2000000 = £10000
Allowance: £10000 - £15000 = £0 annual Levy Payment

The new proposals affect both levied (levy payers) and non-levied employers (non-levy payers) equally. Efforts have been made to simplify the currently complex funding system to make it easier to understand for employers and give better transparency to the apprenticeship funding process. This proposal is being reviewed across the summer and will be finalised following feedback and consultation in October 2016.

Apprenticeships have been split in to 15 “bands” which determine their value-

Number Band Upper Limit Number Band Upper Limit
1 £1,500 9 £9,000
2 £2,000 10 £12,000
3 £2,500 11 £15,000
4 £3,000 12 £18,000
5 £3,500 13 £21,000
6 £4,000 14 £24,000
7 £5,000 15 £27,000
8 £6,000

Provisional bands have been aligned to the existing Standards & Frameworks which can be viewed here. Where new style apprenticeship standards are not available existing frameworks have transitioned to this model and will continue to be available until suitable standards have been built through industry trailblazers and agreed by the department for Business Innovation and Skills (BIS). Standards are being built to be more robust than the current Frameworks and consequently are worth more than the equivalent Framework.

These amounts are the upper limit and can be negotiated with ICON as a provider. When we enter these negotiations you should consider what CPD you require for these staff members to have them fully fit for purpose.

Other key changes to the current system include-

  • You will now be able to enrol staff on to an Apprenticeship scheme at a lower level than their prior attainment so long as they are acquiring significant new skills. In essence this means you could enrol a graduate to your apprenticeship scheme so long as they are entering a new role.
  • All employers regardless of size will need to enter in to a financial arrangement with their chosen provider (ICON)
  • 20% of the training value will be held back until the learner achieves or completes. (Subject to an end point assessment for Apprenticeship Standards)
  • Further Government updates will follow in October 2016 & December 2016 following which we expect the full process to be finalised in preparation for April 2017

What should you be considering?

You will not have to pay a compulsory apprentice levy but will still benefit from the changes-

  • You will receive a £1000 incentive for employing an apprentice aged 16-18 years old. This will be paid in 2 parts after months 3 and 12 of the apprenticeship.
  • If you employ an apprentice aged 16-18 the government will fund all of their training costs
  • You will receive government “co-invest”. For every £1 you contribute the government will contribute £9 for any learner 19+
  • Employer contributions will be made directly to the Training Provider (ICON) for the first year
  • Small Employers (under 50 employee’s) who employ a 16-18 year-old apprentice will not have to make any contribution to these learner’s apprenticeship training costs.
  • Where eligible you can apply for an AGE grant (£1500 per learner) to spend on supporting a new apprentice up until 31st July 2017 at which point the scheme will be reviewed.
  • You will not need to pay Employer National Insurance contributions for any Apprentice staff aged under 25 (Approx. £2,066 for an employee on NLW for 40 hours per week).
  • You will not need to contribute towards maths, English or Additional Learning Support, this will be funded separately by the government.

You will not have to pay a compulsory apprentice levy but will still benefit from the changes-

  • You will receive a £1000 incentive for employing an apprentice aged 16-18 years old. This will be paid in 2 parts after months 3 and 12 of the apprenticeship.
  • You will receive government “co-invest”. For every £1 you contribute the government will contribute £9
  • Employer contributions will be made directly to the Training Provider (ICON) for the first year
  • You will not need to pay Employer National Insurance contributions for any Apprentice staff aged under 25 (Approx. £2,066 for an employee on NLW for 40 hours per week).
  • You will not need to contribute towards maths, English or Additional Learning Support, this will be funded separately by the government.

You will pay the levy to HMRC via your PAYE system but should still recover more than you put in-

  • You will pay a levy of 0.5% of your total salary (less £15,000) this is only redeemable against Apprenticeship Training
  • Your first payment will be for April 2017 payroll and you will have visibility of this on DAS from May 2017.
  • You will be able to manage your Levy account via DAS
  • You will receive a 10% top up on your levy. That means for every £1 that enters your digital account to spend in England on apprenticeship training, you get £1.10.
  • You will receive a £1000 incentive for employing an apprentice aged 16-18 years old. This will be paid in 2 parts after months 3 and 12 of the apprenticeship.
  • You will need to register and create your Digital Apprenticeship Service account from January 2017. Once created you will need to verify your PAYE schemes and link them to your account.
  • Once all your levy is spent you will be able to enter the “co-invest” system. For every £1 you contribute the government will contribute £9.
  • You will not need to pay Employer National Insurance contributions for any Apprentice staff aged under 25 (Approx. £2,066 for an employee on NLW for 40 hours per week).
  • You will not need to contribute towards maths, English or Additional Learning Support, this will be funded separately by the government.

To calculate your levy and how your organisation might benefit fill out the form at the top of the page, call 0844 800 2280 or email levy@icon-training.com .