HOW DOES APPRENTICESHIP FUNDING WORK?
All apprenticeships are allocated a ‘funding band value’ by the government. The actual cost can vary for several reasons, so before an apprenticeship starts, the employer and training provider will agree a total cost for the training. Funding is available up to the funding band value via the apprenticeship funding system. If the total agreed cost exceeds the funding band value, the employer is responsible for the extra cost.
There are basically two types of apprenticeship funding:
- LEVY FUNDING – this applies to apprentices employed by large employers who pay the apprenticeship levy tax
- NON LEVY FUNDING – this applies to apprentices employed by smaller employers who do not pay the apprenticeship levy tax
We will look at how each of these works:
Each month, the employer pays the apprenticeship levy tax to the HMRC, which is set aside and accumulates in the employer’s own ‘levy pot’. These funds can only be used to pay for apprenticeship training for their staff.
The employer creates a digital account with the government apprenticeship service and they can see how much funds they have accumulating in their ‘levy pot’.
The employer decides to employ an apprentice (or opts for an existing employee to commence apprenticeship training) and engages the services of a training provider.
The employer uses their digital apprenticeship account to record the details of the apprentice and training provider.
The training provider confirms these details using their own version of the digital account.
Apprenticeship training commences and funds are drawn automatically from the employer's ‘levy pot’ to the training provider via the Education & Skills Funding Agency (ESFA).
Funds are drawn in equal monthly payments to cover the planned length of the apprenticeship.
If an employer has used all the funding in their ‘levy pot’, they can still take on apprentices, in which case the non-levy rules regarding Government-Employer Co-investment will apply.
NON LEVY FUNDING
This is referred to as ‘Government-Employer Co-investment’. The government via the ESFA will pay 95% of the agreed cost (up to the funding band value), leaving the employer with just a 5% contribution to pay.
Once the total cost for the apprenticeship is agreed between the employer and the training provider, the training provider will invoice the employer for the 5% contribution.
The 5% contribution is mandatory and the training provider will have to confirm to the ESFA that this has been paid within the permitted timeframes, otherwise the apprenticeship training may not be able to continue. The 5% contribution is an employer cost and must not be passed onto the apprentice.
The 5% employer contribution can be paid either in full within 30 days of the invoice date, or by direct debit in equal payments over the first 10 months of the apprenticeship. We utilise the ‘go cardless’ platform to manage our direct debit payments.
The ESFA will pay the remaining 95% funding directly to the training provider over the planned length of the apprenticeship.
SPECIAL ARRANGEMENTS FOR YOUNG APPRENTICES
The government is currently offering two types of incentives to employers who employ young apprentices – that is young persons who are aged 18 or under on the day they enrol onto the apprenticeship:
1. ALL EMPLOYERS (LEVY & NON LEVY PAYING) will receive an incentive payment of £1000. This will be paid in two payments:
- First payment of £500 is triggered when the apprentice has been in learning and passed the 90 day threshold. The training provider will receive the payment in the month following and will pass this onto the employer within 30 days
- Second payment is triggered when the apprentice has been in learning and passed the 365 day threshold. The training provider will receive the payment in the month following and will pass this onto the employer within 30 days
Of course if the apprentice withdraws from training and does not meet the thresholds, the payments will not be triggered.
2. VERY SMALL EMPLOYERS – that is those employers who employ less than 50 members of staff will NOT be required to pay the 5% co investment contribution. In this instance the ESFA will provide 100% of the funding to the training provider
The funding methods described above relate only to the cost of the mandatory, vocational elements of the apprenticeship. In addition to this and for both levy and non-levy paying employers, the ESFA provides additional funding directly to the training providers for:
- All maths and English provision
- Any additional approved learning support
- Any disadvantage uplift applicable to either the delivery or home address area
EMPLOYERS - you can read the ESFA full funding guidance at https://www.gov.uk/guidance/apprenticeship-funding-rules-for-employers