Employment Law Update - March 2017
THE NEW APPRENTICESHIP TRAINING LEVY
The new apprenticeship levy begins on 6 April 2017 and will require those employers in the UK who have a payroll bill over £3 million to contribute and invest in apprenticeships. In addition, there will be changes to how apprenticeship training is funded. Key points about the new scheme are provided below:
The new funding system will come into effect on 1 May 2017 with larger employers required to register for a digital account. Funds will be paid into the account through Pay as You Earn and the employer will be able to use these funds to pay for apprentice training.
There will be 15 funding bands in the system, ranging from £1500 to £27000. Existing and new apprenticeship frameworks and apprenticeship standards will be placed into a funding band. The funding band indicates the maximum that can be used to pay for an individual apprenticeship. The employer will negotiate with training providers listed on the Register of Apprenticeship Training Providers, within the limits of the funding band. If the agreed price is over the capped funding band, the employer will have to pay the excess themselves.
The funding bands will be the same regardless of the age of the apprentice. This s a change to the previous arrangement where different funding levels were available, depending on the apprentice’s age.
Employers will now be able to use their digital account to pay for individuals to undertake an apprenticeship at any level, whether this is higher, equal to or lower than a qualification they have already achieved, as long as they will gain new skills and the training they will receive is different from previous training or an apprenticeship they have undertaken. Apprentices must, however, be in a genuine job.
The government will provide an additional £1000 to employers and training providers to support younger apprentices, care leavers and young adults who have additional learning needs. This additional funding will not come out of the employer’s digital account.
Training providers will be able to claim up to £150 per month, plus other costs relating to need that is evidenced, to provide additional learning support for apprentices with conditions such as dyslexia, those with learning difficulties or with disabilities.
All apprentices will need to achieve a minimum of level 2 in English and maths.
Once the employer has an agreement in place with an approved apprenticeship training provider, the cost of the apprenticeship will be met through monthly payments from the digital account, over the period of the apprenticeship. Employers therefore only need to have enough money in their digital account to cover each monthly payment, not the full cost of the apprenticeship at the beginning of the programme.
Funds placed in the employer’s digital account and not spent on apprenticeships will expire 24 months after reaching the account. This will be operated on a first-in, first-out basis with funds that entered the account first being used up first.
An employer who wishes to spend more on apprenticeships than they have available in their digital account will enter into a co-investment arrangement. This means that the government will pay 90% of the cost, whilst the employer pays the remaining 10% directly to the training provider.
The Institute for Apprenticeships to be launched in April 2017 will oversee the apprenticeship standards, levy and quality.
Use the online tool available on the Skills Funding Agency website to estimate whether your organisation will need to pay the apprenticeship levy, how much will be available to spend on apprenticeships and the amount of government contribution you can receive towards this training. To do this you will need to know your organisation’s annual payroll bill.
HMRC have provided guidance for employers about the levy including how to calculate and pay and further information can be found on the gov.uk website.
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