More details on the new apprenticeship funding system

The latest proposals for the operational model of funding for apprenticeships, both frameworks and standards, which will apply from May 2017, have just been published.

The main proposals, which employers and training providers have been asked to comment on before 5th September, include:

• The new system will be introduced from 1st May 2017 and apply to all new apprenticeship starts after date

• All apprenticeships started before 1 May will be funded through to completion according to existing rules

• The new apprenticeship funding system will be made up of 15 funding bands, each one with an upper limit ranging from £1,500 to £27,000

• All existing and new frameworks and standards will be placed within one of these funding bands

• Non-levy paying employers (98% of employers) will be expected to contribute 10% towards the cost of apprenticeship training and assessment, with the government paying the other 90%

• Levy-paying employers with annual paybills of over £3 million will pay their levy contribution to HMRC through the PAYE process along with tax and NICs, and their digital accounts will be topped up with a 10% contribution from the government

• Additional payments of £2,000 per apprentice will be made to all employers to cover additional costs of supporting 16-18 year olds, young care leavers and young people with an Education Health Care Plan (EHCP)

• Small employers with less than 50 employees will have 100% of the costs of the same groups of apprentices paid for by the government

• A new Register of Apprenticeship Training Providers (RoATP) will be introduced from next year and all training providers who want employers to contract with them will have to satisfy three tests

Initial responses have been mixed. Non levy-paying employers may welcome the 10% co-investment rate which is lower than the existing rate for adult apprentices on frameworks and standards, but 10% cash contribution may still be too high for some smaller employers. Large employers and the CBI want the introduction of the levy to be delayed until the system is fully tested and evaluated. Training providers appreciate the greater operational detail but are concerned that although there are upper limits to each band there are no lower limits, and this might lead to providers undercutting each other on prices, possibly at the cost of quality. Will the additional payments for the recruitment of young apprentices be enough to increase demand and are they as generous as existing arrangements, especially for 16-18 year olds? All training providers will have to assess the impacts of the new funding bands and additional payments on the viability of their apprenticeship offers, again compared to existing rates and incentive payments. Levy-paying employers are concerned about the operation of the digital accounts and also that despite the drive for more employer control over apprenticeships, they will not be able to use their digital accounts to cover the costs of the types of training they may need.

So although we now have a more detailed version of the proposed new apprenticeship funding system there is still much to be discussed and decided and …. we only have till next May to get it right!