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The government want to encourage more and better quality apprenticeships with a view to boosting the skills of the workforce and economic productivity.
To this end, from April 2017 government funding of apprenticeships in England will change, with the introduction of the 'apprenticeship levy'. The government has now published detailed guidance about the new system and is seeking further input before confirming more detail about the operation of it in October 2016.
The new system - key points
An apprenticeship is formal training where an apprentice works towards achieving an approved standard or framework (with at least 20% of their time spent on 'off-the-job' training) while employed. The training is partially funded by the government.
Under the new scheme, employers will be required to pay an 'apprenticeship levy'. The levy is charged at 0.5% of the annual pay bill and is paid to HMRC through the PAYE system. However, all employers are allocated a £15,000 'levy allowance' which is offset against their liability to pay the levy. This means that only employers with a pay bill of more than £3m each year will actually be required to pay the apprenticeship levy (£3m c 0.5% = £15,000).
All earnings subject to Class 1 secondary NICs are relevant for the purposes of calculating the 'pay bill'. Earnings include any remuneration or profit coming from the employment (eg bonuses, commissions, pensions contributions).
The funds which are collected from each employer will be available to that employer via a new 'digital apprenticeship service account' for their apprenticeship training. The funds are only available for 18 months after entering the account, thereafter they are lost to the employer.
The guidance explains the principles of apprenticeship funding in the new system and is aimed at all employers. Employers should familiarise themselves with the new system, even if they don't currently have a pay bill of £3m.
The guidance confirms that the government is still seeking further views on the introduction of the system, for example:
whether employers should be able to assign a portion of their apprenticeship funds to support the training of an apprenticeship by another employer or an apprenticeship training agency;
that proposed 'co-investment' rates - the government proposes that it pays 90% towards the cost of training and assessment and the employer pays the rest;
proposals for extra support for employing 16-18 year olds and those with additional needs.
Further guidance is due to be published in October and December this year, and we will update you on any developments at that time.