New funding system

The interim funding model is coming to an end and will be replaced by a new funding model linked to the apprenticeship levy. UK productivity lags behind other developed economies and employers are investing less in training. During the year 2000, 180,000 people were away from their workplace because they were involved in training, whereas, after a steady decline, the figure for 2014 was 18,288. The purpose of the Trailblazer project and the introduction of the levy is to reverse this trend.

The levy starts on 6 April 2017 and it will be paid through PAYE. The trigger for paying the levy will be set at 0.5% of an employer’s pay bill and it will only be paid if the employer’s pay bill exceeds
£3 million. The government is also giving an allowance of £15k. Only 1.3% of the UK employers will pay the levy.

Levy payers – The levy will be paid into an employer’s digital account, which can then be used to fund training up to the designated cap. If, at any stage, an employer has insufficient funds in their digital account, then the government will provide 90% of the funding and the employer will provide 10% of the funding.

Non-levy payers – will pay 10% towards training, which will be supported by a further 90% provided by the government. Employers with fewer than 50 employees will have 100% of the training and assessment costs covered when training an apprentice aged 16-18.

For levy and non-levy payers – The government will pay £1000 to employers and a further £1000 to training providers if they train an apprentice aged 16-18. Expiration of digital funds has now been extended to 24 months, helping employers to prepare for the new system and to adapt training programmes. This means that levies paid in year one will be available throughout year one and up to the end of year two. Every apprenticeship will be placed in a funding band; the upper limit of each funding band will cap the maximum amount of digital funds an employer who pays the levy can use towards an individual apprenticeship. There are now 15 new funding bands, ranging between cap maxima of £1.5k to £27k; existing apprenticeships will be reallocated to one of the new bands.

The new funding system comes into effect on 1 May 2017. Levied employers buying training from May 2017 can commit to starting apprenticeships from the beginning of May. Funds will automatically leave the digital account on a monthly basis, the cost will be spread over the lifetime of the apprenticeship and the government will hold back 20% of the total cost, which will be paid on completion of the apprenticeship. Non-levied employers buying training from May 2017 will continue to make payments direct to providers and will move onto the digital system at a later date.

Digital funds and government funding can be used for apprenticeship training and assessment, against an approved framework or standard, with an approved training provider and assessment organisation, up to the funding band maximum for that apprenticeship.

Digital funds and government funding cannot be used for wages, travel and subsistence costs, managerial costs, traineeships, work placement programmes or the cost of setting up an apprenticeship programme.

Apprenticeships started before 1 May will be funded through to completion according to the existing rules.

Employer Contribution Calculator

£3,000,000 × 0.5% = £15,000

Government allowance = £15,000

Employer’s net contribution = £0

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