Kirk Rice Blog

Apprenticeship Funding – What’s New?Written on March 2, 2017 by Kirk Rice LLP

The Question

I’ve seen something in the news about changes to apprenticeship funding for employers coming in the next month or so, but there seem to be different rules depending on how much your payroll bill is. From what I’ve read, I think the government will fund all my apprenticeship training which seems too good to be true. Is this correct?

Kirk Rice LLP Answers

If something seems too good to be true (especially where government apprenticeship funding is involved), then it usually is! But in this instance, there is good news for some employers, who may have 90% (not 100%) of their apprenticeship training costs funded by the government.  This is especially interesting considering that the upper age limit for apprentices (previously 25) has been removed.  But not all employers will benefit so let me start at the beginning and give you the full picture…..

Apprenticeship funding – all change!

From Spring 2017, the way the government funds apprenticeships in England is changing. This affects all employers who take on new apprentices with better news for those employers with a payroll bill of less than £3m per year.  But there are big changes for all employers – so if you currently employ apprentices or are thinking of doing so, then please read on to learn more about the change in apprenticeship funding.

Apprenticeship Levy – if your payroll bill is over £3m each year

The new Apprenticeship Levy is being introduced on 6 April this year.  The Levy forces all employers operating in the UK, with a payroll bill over £3m each year, to invest in apprenticeships (and by invest they mean pay in advance for……).  In general terms, you will pay 0.5% of your payroll bill each month in to your apprentice service account and use this fund to pay for your apprenticeship training. You will see funds entering your account each month as you pay the levy, and funds leaving the account each month as you pay for training.

Here’s the detail for those affected (or skip to the next paragraph if your payroll bill is less than £3m each year):

• You will report and pay your levy to HMRC through the PAYE process, you will then be able to access funding for apprenticeships through your apprenticeship service account (registration is now open to all levy-paying employers).
• Some numbers as an example – if your payroll bill is £4m each year, you would potentially be paying 0.5% x £4m = £20,000 in apprenticeship levy over the course of the year. This would be assessed monthly, depending on your monthly payroll bill.
• The service will support the English apprenticeship system only. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.
• The Government will top up the funds in your service account by 10%. So for every £1 you pay in, you get £1.10 to spend on apprenticeship training.
• Once you decide to buy apprenticeship training, the funds will be taken from your account each month to pay the training provider and the assessment organisation. You can only spend funds in your apprenticeship service account on training from a government approved training provider. Funds will expire within 24 months unless you spend them on apprenticeship training.
• The funding for apprentices who started an apprenticeship programme before 1 May 2017 is not affected.

Employers that don’t pay the levy – if your payroll bill is less than £3m each year

Good news – If your payroll bill is less than £3m each year, you do not pay the levy each month and you can access apprenticeship funding from the government for up to 90% of the cost of training your apprentices.

Here’s the detail again:

• From 1^st May 2017, you can choose the training you’d like your apprentices to receive, choose your approved training provider and an assessment organisation (using the registers available on the apprenticeship service).
• You will pay 10% of the cost of this training and the government will pay 90%, up to the maximum amount of government apprenticeship funding available for that particular apprenticeship. The government have named this “co-investment”.
• Different types of apprenticeships have different caps and a maximum amount that the government will “co-invest” towards. Any costs over the maximum have to be paid in full by the employer.
• You pay your 10% contribution directly to the training provider and you can spread the payments over the lifetime of the apprenticeship.
• From some future point, 2018 at the earliest, how you pay your 10% contribution will change and you will need to start using the apprenticeship service. More information from the government will come as they figure it out!
• One word of warning – if your payroll bill is under £3m BUT you are in a group of UK companies, the £3m applies to your total group UK payroll bill. If your total group UK payroll bill is over £3m then you are caught within the Apprenticeship Levy.

Although lengthy, this article only covers in outline the changes that are coming. All employers that take on apprentices will be affected and if your payroll bill is over £3m each year then you will be affected even more so.  If you have any questions on the impact this might have on your business, please do get in touch.  More information is also available on the GOV.UK website.  And remember, you can now put anyone aged 16 and over onto an apprenticeship program, even existing employees!

This is one of many staff related issues that can make running and maintaining an HR function expensive and many businesses find the cost hard to justify. Did you know that this is a service we offer?

If you would like to discuss how we can help you with your staff management systems, do call Maxine Guest on 01344 875000 or email info@kirkrice.co.uk