The Department for Education has published the Government’s initial Proposals for apprenticeship funding in England from May 2017, along with an Apprenticeship funding bands tool and a spreadsheet of Apprenticeships approved for delivery.

The DfE is seeking views from employers and providers on its initial proposals outlined here and, particularly, how they plan to adapt their hiring, training and development activities in response to these reforms. You can respond by completing this survey by 5 September. The DfE has also published updated guidance on the Apprenticeship levy: how it will work.

In brief, the proposals would:

• provide that employers that are too small to contribute to the apprenticeship levy would have 90% of the cost of their apprenticeship training paid by the Government as a “co-investment”;
• provide extra funding for young apprentices and care leavers: the Government will pay an additional £2,000 in respect of 16- to 18-year-olds, young care leavers and young people with an education, health and care (EHC) plan, with £1,000 going to the employer and an additional £1,000 to the training provides:
• waive the “co-investment requirement” for small employers (ie those with fewer than 50 employees) where they are training a 16- to 18-year-old apprentice, young care leaver or young person with an EHC  plan – which means that they would not have to pay anything towards the training;
• offer greater flexibility for employers to retrain individuals: they will be able to use levy funds to retrain workers in a new skill where they have prior qualifications – so long as the new skill is significantly different from their previous qualifications;
• pay training providers £471 for training to gain the minimum standard of Level 2 in English and maths, payable directly from the Government instead of being deducted from the employer’s digital account; and
• from 2018 allow levy-paying employers to be able to transfer up to 10% of the annual value of funds entering their digital accounts to other employers on the digital system.

The DfE proposes that levy-paying employers – those with a pay bill of over £3 million – that wish to spend more on training than is in their digital account should receive government funding for 90% of their additional apprenticeship training costs. A new register of training providers will be introduced from April 2017 to improve the link between training providers and employers and enable employers to identify high-quality providers. The DfE has also published guidance for employers wishing to become training providers in their own right.

The DfE also proposes that the new funding system will be made up of 15 funding bands, with the upper limit ranging from £1,500 to £27,000. The number of funding bands is to be increased, in order “to manage the tendency for prices to drift towards the top of a funding band, until we see employers becoming more accustomed to negotiating on price”. All existing and new apprenticeship frameworks and standards will be placed within one of these funding bands. The upper limit of each funding band will cap the maximum amount of digital funds an employer who pays the levy can use towards an individual apprenticeship. The upper limit of the funding bands will also cap the maximum price that the Government will ‘co-invest’ towards, where an employer does not pay the levy or has insufficient digital funds and is eligible for extra government support.

Questions still remain for charities. It remains the case that charities that have a high proportion of volunteers in relation to paid staff often have very few roles that could be filled by apprentices, even though they might well breach the £3m payroll threshold – in which case, they might find themselves obliged to pay the levy and receive little in return. We have called upon government to consider whether volunteers could be deemed to be “employees” for the purpose of deciding who can qualify for an apprenticeship.

Charities are obliged to maximise the use of their funds so we have called on the Government to allow charities to surrender unused levy to other charities whose charitable objectives are similar.  The proposal to allow a 10% transfer by levy-paying employers of the annual value of funds entering their digital accounts to other employers on the digital system is welcome but, in our view, does not go far enough.

Concerns also remain over the issue of connected charities. The critical issue is the statement in the updated guidance on Calculating the levy for connected companies or charities that “where a group of employers are connected they will only be able to use one £15,000 levy allowance.” We assume that whether or not several individual charities are “connected” will still cause disputes that will have to be resolved individually.

For more information on the Apprenticeship Levy, click here.

To find out if your organisation is a levy payer, and get an idea of how much you will have available to spend on apprenticeships and how much the government will contribute towards the cost of training, try the Skills Funding Agency’s estimation tool.