Apprenticeship Levy Update

The Apprenticeship Levy – Key Points for Employers

Apprenticeship Levy Update

As the implementation date for the Levy grows closer, many employers are asking us how it will work and what it will mean for them, so we thought it might be useful to put the proposals as they stand so far into a concise summary. (This is an updated version of our previous briefing, incorporating the latest information.)
And, while we’re here, we also thought we’d take the opportunity to look at some of the more common fallacies about apprenticeships, so we’ve added a ‘mythbusters’ section at the end.

The Basics
The Levy is due to be introduced next May and is set at 0.5% of payroll costs, but with an allowance of £15,000 so that employers whose payroll is under £3m will be exempt. Although this means that about 98% of employers will not pay the Levy, it’s important to note that more than 80% of the UK workforce is employed by organisations that will pay it. And all employers will be affected because there will be major changes to the way apprenticeships work.

In essence, the government wants to:

• Give employers more control over how apprenticeships are shaped and delivered
• Achieve a total of 3m apprenticeship starts for the 5 years to 2020 (there were 500,000 in 2015)
• Increase total annual apprenticeship funding from the current £1.5bn to the £2.6bn that the Levy is anticipated to raise.

What it Means – Financially
Employers who pay the Levy will only be able to spend their individual Levy balances on apprenticeships – if they don’t do so within 24 months they will lose them. However employers who are Levy exempt, or who want to spend more than their Levy payments on apprenticeships, will receive funding for 90% of apprenticeship training costs (the money for this is expected to come from unused Levy payments though, not from the government).

The other major change is in the pricing structure for training. At present, each curriculum (currently called a Framework) attracts a fixed level of funding, varying according to level, type of qualification, age etc. set by the Skills Funding Agency. Under the new scheme, employers will be expected to negotiate delivery pricing direct with the training provider, with the SFA setting a maximum, but not a minimum value on each curriculum (which are being renamed as Standards).

This is one of the most controversial aspects of the proposals, as:
• it raises the prospect of price competition at the expense of quality (in fact there have already been reports of employers requiring training providers to pay them for access to their Levy pools).
• the new funding bands have been substantially reduced in some areas, particularly for 16-18 year olds

What it Means – Operationally
There will be significant changes to how apprenticeship training is shaped and delivered. In essence:

• Employers will be able to design their own Standards (i.e. curricula) subject to approval by the SFA. This change will not happen immediately, as in October the SFA announced that the existing Frameworks would continue to be used and the transition to Standards will take place over time.

• Apprentices’ progress towards achieving their qualifications will no longer be gauged on a continuous assessment process, but by a single ‘End Point Assessment’ at the end of their apprenticeship programme. This will be administered by an independent assessment body, not by the training provider as is currently the case.

• Only training providers approved by the SFA will be allowed to provide apprenticeship training. Existing approvals will not carry over; there is to be a new register of approved providers and the outcome of applications to be on this register will not be announced until March.

• Many are anticipating (and we have seen signs) that large, Levy paying employers will naturally seek to explore ways of converting some of their existing employee training provision into apprenticeships, so as to make maximum use of their Levy payments.

Apprenticeship Mythbusters
Apprenticeships are just for old fashioned ‘blue collar trades’ – Not at all. There are hundreds of apprenticeship frameworks that cover the entire range of vocational training, including for example business administration, management, retail, customer services, teaching assistants; the world of work is here.

They are a second choice alternative for those not bright enough to go to university – Apprenticeships are geared directly to the world of work. But they also lead to formal qualifications, which can go up to and beyond foundation degree level. But beyond that, they provide much faster development in the soft skills that employers value.

They are just for youngsters – There is no age limit for apprenticeships, and in fact they can be an excellent way to learn new skills at the beginning of a second career.

They are just a route to cheap labour for employers –It is true that the minimum wage for apprentices is lower than the national minimum wage, and there have been occasions where unscrupulous and short sighted employers have exploited this. But they are increasingly rare, as the vast majority of employers understand that sustainable apprenticeships are those that work, in all senses, for all concerned.

Garry Sharp – Director

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