The Apprenticeship Levy; ‘known knowns’ and ‘known unknowns’

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Posted by  Steve Morris, Head of Key Accounts, Apprenticeships,,

To adopt a phrase commonly attributed to former US Secretary of Defense Donald Rumsfeld, it is fair to say that the Apprenticeship Levy still has a number of ‘known knowns’ and many ‘known unknowns’.

To adopt a phrase commonly attributed to former US Secretary of Defense Donald Rumsfeld, it is fair to say that the Apprenticeship Levy still has a number of ‘known knowns’ and many ‘known unknowns’.

With just one year to go before the government’s proposed Apprenticeship Levy is introduced there is a lack of definitive details on the scheme and how it will operate.

For organisations this uncertainty could make it difficult to begin planning for the Levy’s introduction. They can calculate the amount of Levy that they will need to pay (0.5% of their total pay-bill over £3m), but may feel it is currently impossible to develop the strategies that will allow them to best benefit from the levy’s introduction. However, this absence of detail shouldn’t prevent organisations from beginning their planning and preparations now.

So here is our take on the ‘known knowns’ and ‘known unknowns’ around the levy one year from its implementation.

The Apprenticeship Levy: ‘known knowns’

What we are sure about;

1) The Apprenticeship levy will affect organisations across the UK in all sectors, but will only be paid by employers with annual total employee pay bills in excess of £3m. It will be charged at a rate of 0.5% of an employer’s pay bill and each employer will receive an allowance of £15,000 to offset against their levy payment. The levy will be payable each month through Pay As You Earn (PAYE) alongside income tax and National Insurance.

2) For organisations in England that have paid the levy, funding for Apprenticeship training will be made available via a new Digital Apprenticeship Service (DAS) account, in the form of e-vouchers which can be spent on training with registered training organisations.

3) Funding caps will be set on the amount of levy funds an employer can spend on training for an apprentice. These will vary according to the level and type of Apprenticeship but any training must be provided to an approved Apprenticeship standard.

4) Organisations can only spend their levy funds on Apprenticeship training delivered by an approved provider. This could be through buying-in training from an approved provider or delivering the training in-house. If following the latter option organisations would need to register as an approved provider and be subject to Skills Funding Agency (SFA) quality arrangements and Ofsted inspections.

5) Organisations with a pay bill less than £3m will not have to pay the Levy, and it is understood that in England, Apprenticeships for small employers will continue to be funded as present until 2019. Training providers, colleges and others will be awarded contracts to provide Apprenticeships, and then work with small employers to deliver their Apprenticeship programmes.

The Apprenticeship Levy: ‘known unknowns’

What we still want to know:

1) As yet there is no confirmation as to when employers can begin to register for the Digital Apprenticeship Scheme or when they will be able to draw down their first e-vouchers. Similarly it’s likely to be the summer before details are announced about how funding caps will apply.

2) It is not known how long these vouchers will last as the government wants employers to have the flexibility to pay for their Apprenticeship training when it best suits their needs. They also want to ensure levy funds which are unused can be reallocated to other employers.

3) Whilst eligible organisations across the UK must pay the levy, details are yet to be finalised with the devolved administrations of Scotland, Wales and Northern Ireland about how this money is spent for organisations with operations outside of England. Confirmation on this is expected later this year.

4) The government is looking into ways to help organisations who may want to direct some of their levy funding to other employers, for instance within their supply chains, but to date no decisions have been made.

5) Employers in England have been promised they will be able to get out more than is paid into the levy through a 10% government top-up to their levy funds, but as yet there are no details as to how these will be funded if all levy money is allocated.

6) The plan is that smaller employers, i.e. those who won’t need to pay the levy, will be able to access the online system and draw down vouchers in 2019, but as yet there are no details how the funding or vouchers will be accessed after that time.

7) There are questions around eligibility and whether employers will be able to spend their levy on a broader range of individuals. For example; graduates with degrees in arts subjects who want to undertake managerial training.

So whilst many ‘known unknowns’ remain, we believe it is important to start planning now – one year from the Levy’s introduction.  We’re working with a range of organisations to model ways for them to maximise their levy and build sustainable talent strategies. If you’d like to know more, see our Guide to the Apprenticeship Levy