The Future of Apprenticeships and the Apprenticeship Levy

The future of Apprenticeships in Englandapprentice #Apprenticeships #Basildon #ITEC

 From ‘Frameworks’ to ‘Standards’ and the changes in funding arrangements

Trailblazer Apprenticeship ‘Standards’ are replacing the current  apprenticeship ‘frameworks’ and the way in which they are funded is changing from 2017.   All employers will be expected to financially contribute towards the apprenticeships as the Government transfers the purchasing power to the ‘users’ rather than the ‘providers’.    It was originally planned that the Government will invest £2 for every £1 paid by the employer up to a ‘cap’ and these caps were dependent upon the sector of the Standard.  Thus, the new funding system would be ⅓ employer funded and ⅔ Government funded.

However, with the announcement of the Apprenticeship Levy in the Autumn 2015 budget, further changes are coming into play and will affect the way apprenticeships are funded.  The Apprenticeship Levy comes into force in April 2017 and will be a massive game-changer. #Levy #Apprenticeshiplevy

How will the new Apprenticeship Levy work?

The Levy will be mandatory and based on payroll costs.  Those employers with a total payroll bill of over £3M will have to pay 0.5% of the total cost into the levy pot.  The first £15K is an ‘allowance’ so for employers with a bill of exactly £3M, then the levy is £15K and not collected.   An employer with a salary bill of £4M, the levy will be £20K of which £5K will be collected.

This means, in effect, that employers subject to the levy may be paying up to 100% of their apprenticeship costs, whether or not they have any apprentices and this will undoubtedly affect internal staff training.

Apprenticeship_Employers_BadgeThe good news is that Apprenticeships will now be available to all age groups so employers will not be restricted to recruiting and training school or college leavers, although they will still make up the majority benefiting from this training.

Therefore, the funds can be used for workforce development, to up-skill current staff of all ages and can assist with staff promotion programmes, i.e. those being given more responsibility or moving into a more senior role.    However, there must be significant new knowledge and skills required to be eligible to draw down apprenticeship funding.

There are also constraints, of course.  The funding must be used for training for an Apprenticeship Standard and the funding must pay for off-job training with an approved training provider.   It cannot be used for general staff training, special projects or CPD updates unless this is within the apprenticeship programme delivery.   The levy system does not recognise the training employers do for their own staff so, to ensure they get a return on their levy, they will need to outsource their training.   The off-job training must be a minimum of 20% of the required apprenticeship training and must be delivered as part of ‘time off for study’ regulations.   The funding will not cover on-job training.  However, there are three employer incentive payments;   1. for businesses with less than 50 employees, 2. for training 16-18 year old apprentices and 3. for completing the apprenticeship.

What will it mean for levy payers, payers of a small levy, non-levy payers and SME’s?

josh wild mabThe plans for SME’s remain the same, i.e. ⅓ employer funded and ⅔ Government funded.   However, watch this space, as changes may be announced in the coming months.   It is expected that eventually SME funding will also come from the levy pot, making Apprenticeships sustainable for the future but meaning that large employers will also be providing the funding for apprenticeships for SME’s.

At the moment, employers are expected to top up their contributions if not covered by the levy.  So for example, where the levy that has been paid is £4K but the apprenticeship costs £6K, the employer is expected to meet the £2K additional cost.   However, there are plans to allow employers to draw down more than they put in by re-allocating ‘unused’ funds – again, watch this space, while the Government decide on these parameters.    The Government is also looking at ways very large employers can ring fence their levy funds for apprenticeships within their supply chain but there is nothing definite announced as yet and this will be difficult to manage.

Institute for Apprenticeships

A new organisation will be set up to be responsible for the governance of apprenticeships; The Institute for Apprenticeships.  This body will be overseeing the development and implementation of standards and quality.  There is no real news about how Osfted fits into this remit as of yet.

The levy pot will be managed by the Digital Apprenticeship Service and funding will be allocated by use of a ‘virtual account’.   The funding must be ‘spent’ within 2 years of being allocated.

What does it mean for our employers and apprentices?

So the new funding structure means there will no longer be a fixed rate per apprentice.  Each apprenticeship programme will be agreed between the employer and the training provider and will be based on what training and development the apprentice needs to meet the assessment criteria of the Standard.

MCSA-LogoThis price will need to include any off-job training elements, assessments, reviews and the end of programme synoptic assessment costs (rumour has it that the cost for end assessments is going to be a % of funding).

There will also be a need for a payment schedule to be agreed between the employer and the training provider to maximise cashflow opportunities across both parties.   Funding for SME’s is drawn down when a matching cash sum has been paid to the training provider by the employer so it is very important to have a mutually agreed payment schedule as part of a commitment statement.

Our apprenticeship offer to employers needs to be flexible, varied and meet the needs of the parties involved.  We can do this by varying the courses on offer and offering workforce skills development programmes.  This could be a ‘pick and mix’ variety of learning and services based upon the learners’ development needs, the needs of the employers and the requirements of the job roles, and could include:

  • Technical courses
  • Qualification coursesTime management
  • Life/soft skills courses
  • Knowledge courses
  • Preparation sessions to prepare for Gateway to assessment
  • The synoptic assessment (external costs)
  • ILPs and reviews of progress
  • Recruitment costs

Wendy Vickers

Chief Executive                                

4th March 2016