Apprenticeship funding changes

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Changes to apprenticeship funding are coming into effect this spring…

Apprenticeships are a devolved policy with means that authorities in England, Wales, Scotland and Northern Ireland manage their own programmes and funding. This article focuses on apprenticeships in England.

Apprenticeship levy 

The first change was introduced at the start of the 2017/18 tax year. Employers now have a 0.5% apprenticeship levy charged on their pay bills.

However, employers get a £15,000 allowance which they can use to offset levy costs. This means that only employers with a pay bill of more than £3 million will have to pay the levy.

For example, a business with a pay bill of £2 million

  • 0.5% x £2,000,000 = £10,000 levy
  • the £10,000 levy is covered by the £15,000 allowance so there is nothing to pay.

A pay bill is total employee earnings that are subject to class 1 secondary national insurance contributions and includes wages, bonuses, commission and pension contributions.

Employers with multiple payrolls will only be able to claim 1 allowance.

Those that are affected will have additional reporting tasks to manage. Reporting and paying is done via PAYE.

Apprenticeship service

Employers that have to pay the levy can use the government’s new apprenticeship service to access funding for apprentices.

Businesses that register will be able to:

  • receive funds
  • manage apprentices
  • pay for training
  • stop or pause payments.

There are maximum funding bands which vary according the sector and level of qualification.

The levy does not affect funding for training for apprentices who started before 1 May 2017. Businesses will continue to fund training under the same terms and conditions agreed when the apprenticeship started.

Help for non-levy payers

From May 2017 employers who don’t pay the levy will be able to share the cost of training and assessing apprentices with the government.

The business will pay 10% and the government will pay the remaining 90%. Like the apprenticeship service there are maximum funding bands.

Industry concerns

Industry reaction to the new apprenticeship measures has not all been positive.

The Confederation of British Industry is concerned that the levy won’t help deliver high-quality training.

The organisation has asked the government to prioritise quality and long-term success as well as increasing the number of apprentices.

Neil Carberry, director for people and skills policy at the CBI, said:

“For the levy to be a success, it must deliver long-lasting careers and close skills gaps, not just create more apprenticeships. As it stands, there is a genuine risk that firms aren’t going to be able to use their funds if the system does not deliver the training apprentices need.”