Apprenticeship Funding Systems
Funding for apprenticeships
Funding for apprenticeship starts from 1 May 2017 is available to employers either through their payment of the new Apprenticeship Levy or from a co-financing system from the Education and Skills Funding Agency.
How much is available depends on several factors, including the particular Apprenticeship programme you are running and the age of your apprentices.
Find out more about the funding rules (https://www.gov.uk/government/publications/apprenticeship-funding-and-performance-management-rules-2017-to-2018)
Changes to apprenticeship funding
Apprenticeship funding is going through changes. This is a result of government policy and the introduction of the new apprenticeship standards.
An overview of the three funding systems systems:
Apprenticeship levy: the principles
- The levy was announced in the government’s Comprehensive Spending Review in November 2015. It will be introduced from 1 May 2017
- The levy is a 0.5% tax on an annual payroll bill for every company but only for the amount of that payroll which is over £3m.
- This applies to all employers with PAYE arrangements including the public sector. It is expected that this will only apply to 2% of employers.
- This will only apply to apprenticeships starting from 1 May 2017, whether starting one of the existing frameworks or the new standards.
- The money raised will go into that employer’s Apprenticeship Service (AS) Account to pay for their apprentices. The AS is currently under development by the government.
- The 98% who don’t pay the levy will get funding as part of a “co-financing” arrangement. This will be at a ratio of 1+9. This means the employer pays 10% of the cost of training and this will trigger the payment of the remaining 90% by the Education and Skills Funding Agency. 20% of the overall price will be held back until the end to ensure enough is retained for the paying of the end-point assessor
- The 98% who don’t pay the levy will not have AS accounts until at least April 2018.
- The levy payers will have 24 months to use what’s in their digital account (this has changed from the original proposal of 18 months). Because the levy is collected on a monthly basis via the PAYE system, money is taken out from the earliest contribution to prevent it being clawed back.
- The levy can only be used to fund apprenticeships, not any other form of training.
- It can only be used for an employer’s English-based employees (they will check the employee’s work and home addresses).
- Companies can pool their levy payments into a group account BUT the £15k allowance will only count once.
- Levy payment to HMRC will be “allowable for Corporation Tax”.
- Employers can be learning providers so long as they are registered as such.
- All public bodies with more than 250 employees will be required to take on 2.3% of their staff as apprentices.
For more of the latest detail, go to our Apprenticeship Levy page
SASE framework apprenticeships started before 1 May 2017
- If you were already signed up to a framework, the funding system remains as is and will stay in this model for the duration of the apprenticeship.
- Frameworks will be withdrawn gradually once equivalent standards have been signed off by ministers.
- The Age Grant for Employers (AGE) will be extended to July 2017.
- From April 2016, employers were no longer required to pay National Insurance contributions for apprentices under 25.
New standards 2015-16
- Starts in 2015-16 on new Standards were funded using the 1:2 model. This is where the employer must contribute one-third of the agreed price of the apprenticeship (training and end assessment) which triggers a two-thirds payment by the Skills Funding Agency (SFA). “In kind” payments are not permissible in this arrangement.
- The actual price is negotiable between the employer and lead learning provider. SFA will have assigned each standard to one of six funding caps. SFA will pay two-thirds of that cap price. These are the maximums which can be charged and a lower price can be negotiated as can the payment schedule to the learning provider.
- Additionally there are fixed price incentive payments for each of the six bands which give extra cash back for those with fewer than 50 employees, those taking on 16-18 year olds and upon completion.