Apprenticeship levy and government funding update

Alan Price – CEO at BrightHR

November 07 2016

The apprenticeship levy, coming in to force on 6th April 2017, will require employers with a pay bill of over £3 million to pay 0.5% of their total pay amount to a digital apprenticeship account. Employers will receive a £15,000 allowance from the government to offset against this amount. Updated guidance on the apprenticeship levy, due out in June, has now been released. The updated guidance clarifies points on how the scheme will work in practice. The original proposal stated that employers would have 18 months to use funds from their digital account for apprenticeship training and assessment. If funds had not been used after 18 months they would disappear from the account, effectively use it or lose it. This update confirmed that employers will have a longer period to use the funds and they will expire 24 months after they first entered the account. Funds will be used on a first in first out basis, and the account will remind employers when their funds are due to expire, to limit the possibility of this happening. During the first year of the levy being in place, funds have to be used for the businesses’ own workforce. The government has confirmed that, from 2018, employers will be able to transfer up to 10% of their digital funds to other employers in their supply chain, sector or to Apprenticeship Training Agencies. This will be particularly important for group structures who may take on greater numbers of apprentices in one company than they would in another. Although the company with smaller numbers of apprentices will have to pay the levy, if they qualify, the chance to share the levy will ensure it is used purposefully within the group. The sharing system is being developed by an employer group set up for this purpose. Alongside the levy, the government announced greater support for apprenticeships. This includes:
  • A 10% top up to the funds in the digital account. This will be applied when the funds enters the account so for every £1 put in, the employer will have £1.10 to spend on apprenticeships.
  • Employers who do not pay the levy will use the new funding system when it is brought in in 2017. They will only have to make a 10% contribution to the cost of training and the government will pay the rest, up to the maximum amount of government funding available for that particular apprenticeship.
  • 100% of training costs will be paid by the government where employers with fewer than 50 employees take on apprentices aged 16-18 years old.
  • If an employer takes on a 16-18 year old or 19-24 year olds who was in care or who have an education and health care plan they will receive £1,000 from the government.

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