The Department for Education (DfE) has released plans entitled Apprenticeship Funding: Proposals for apprenticeship funding in England from May 2017 outlining how apprenticeships will be funded from next year. As part of its proposals, the government will introduce an ‘apprenticeship levy’ from 6 April 2017, payable by employers in all sectors that have a pay bill of more than £3 million each year [, and which will therefore include large chains of academies, charities and other not-for profit organisations where their pay bill surpasses this total].
The levy will be charged at a rate of 0.5% of an employer’s entire annual pay bill through the Pay as You Earn (PAYE) process and will be based on the total amount of earnings subject to Class 1 secondary NICs. ‘Earnings’ will include any remuneration or profit coming from employment, including wages, bonuses, commissions and pension contributions on which NICs are paid. Other payments such as benefits in kind, subject to Class 1A NICs will not be subject to the levy
All employers will be entitled to set off an annual allowance of £15,000 against payment of the levy. In effect this means that only employers with a payroll exceeding £3 million per year will have to pay the levy. Funds paid under the scheme will be accessed through an online portal through which the employer can use digital vouchers to purchase training, find training providers to develop and deliver their apprenticeship programmes and secure the services of accredited assessment organisations. It is also proposed that the government will top up any funds that the employer pay through the levy by 10%.
For employers too small to pay the levy, the government will fund 90% of the costs of any apprentices that they want to train in a process known as ‘co-investment’. The employer will fund the remaining 10%. Extra funding for employers who take on 16-18 year olds or those aged 19-24 who have previously been in care or had a local authority Education, Health or Care plan has been proposed.
The levy can only be used towards the cost of training and assessing apprentices and is not available for payment of wages, travel, managerial and other associated costs. The government aims to create 3 million new apprenticeships through the scheme.