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Apprenticeships now and the proposed plans going forward

EmployerUpdate

October 2016


• The levy is essentially a new tax on employers to be introduced from 6 April 2017, the purpose of which is to fund an increase in the number and quality of apprenticeships.

• The levy will apply to all UK employers in both the private and public sectors, regardless of whether or not they have (or intend to have) apprentices.

• The levy will be charged at a rate of 0.5% of an employer's payroll bill. Employers will have a fixed annual levy allowance of £15,000 to offset against their levy payment.

• The draft regulations amend exiting PAYE Regulations and cover the calculation, payment and reporting of the levy including the operation of the £15,000 annual levy allowance.


In summary, the draft regulations

• set out that an employer is required to assess their annual pay bill amount for the previous and current tax year to decide if they are liable for the levy

• make provision for the levy to be paid by the 19th (or 22nd if the employer reports electronically) of the following month

• place a requirement on employers to notify HMRC of the levy which is to be paid and make provision for the information which should be included in this return

• set out how to calculate the monthly levy allowance on a cumulative basis, in order to calculate levy liability (see below)

• allow both single and employers who are part of a group to apportion the annual levy allowance between multiple PAYE schemes (provided this is notified to HMRC in the first month of the tax year)

• make provision for recovery of overpaid levy by the employer


In summary, the draft regulations Cont…

• The regulations confirm that the annual levy allowance will operate on a monthly cumulative basis, so the levy allowance will increase evenly throughout the year. • For example, where an employer has an annual levy allowance

of £15,000 and applies this to a single PAYE scheme, this would mean an allowance of £1,250 a month.

• Any unused allowance will be carried over from one month to the next.

• If the levy liability in month 1 is £1,000 the employer won't pay the levy and the allowance in month 2 will be £1,500. At the end of the tax year, if the levy has been overpaid, the employer can use the overpayment to offset against their other PAYE liabilities.


The Skills Funding Agency (SFA) Commitment to Reform

• Boosting our nation’s productivity to maintain and consolidate our economic recovery.

• Raising skill levels through apprenticeships – reaching 3 million starts in 2020. • That is equivalent to more than one apprentice

every minute over the next five years • Putting employers in the driving seat of creating

apprenticeships that fully meet their business needs.• Making sure that apprenticeships are open to all, with

a 20% increase in BAME apprentice starts in 2020.


Disclaimer

• This presentation is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.


WHY? Rationale for ReformsWHY? Rationale for Reforms

Employer Driven Employers designing

apprenticeships to make them more responsive to

their needs and the future economy, and controlling funding

Simplicity Simplifying

apprenticeship standards so that they are shorter

and more accessible

Quality Improving the quality of apprenticeships so that

they are viewed with the same esteem as

University


WHAT : Main Elements of Reform

Employer-led Trailblazers designing apprenticeships

Giving employers the opportunity to set the skills, knowledge and behaviours you need. Aligned to professional recognition where appropriate.

Short, concise standards replace long, complex frameworks

Providing a clear and attractive ‘shop window’ for parents, apprentices and businesses

All apprenticeships have an end point assessment and include grading

Ensuring that apprentices are signed off as fully competent at the end of their apprenticeship

All apprenticeships must last at least 12 months

Continuing to drive up the quality of apprenticeships

Give employers greater control over funding Enabling employers to be intelligent customers, getting the training they want and driving up quality


Why Employers Engage with Apprenticeships

• 80% Companies take on apprentices have reported a significant increase in employee retention

• 77% of employers consider Apprenticeships make them more competitive;

• 76% of those employers who employ apprentices agree this makes the workplace more productive.

• Around 81% of consumers prefer dealing with a company which employs apprentices.

• Employers who employ apprentices agree that Apprenticeships lead to a more motivated and satisfied workforce.

• Apprenticeships programme to provide Employers with the skilled workers that they need for the future.

• One in five employers are hiring apprentices to help them through the tough economic climate. Giving them employer growth at low cost


Funding and delivery comparisonThe way it is Now

Proposed Plans

Skills Funding Agency

Training Organisation

Learning / Assessment

Awarding Body

Employer Contribution (Levy)

SME payment

DAS/ Skills Funding Agency

EmployerTraining

OrganisationAwarding

Body

AssessmentLearning


Apprenticeship Funding and the Changes planned

Provider control

• Provider funded for delivery of Specification of Apprenticeship Standards for England (SASE) framework

• Employer contribution expected but not always collected

Transition

• Employers have more control over content of Standards• Funding partially to employer (incentives) and provider• Employer contribution in cash (£2 for every £1 from employer)

Employer control

• Content and delivery controlled by employer• Large employers pay 0.5% paybill tax as levy with a 10% top-up • Employer uses digital voucher to pay for training and assessment

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Apprenticeship Levy: how it will work

• The purpose of the apprenticeship levy is to fund an increase in the number and quality of apprenticeships

• The levy will apply to all UK employers in both the private and public sectors.

• It is payable on annual pay bills of more than £3 million. Employers with an annual pay bill of less than £3 million will not pay the levy. These employers will continue to have access to government funding to support apprenticeships. In June 2016 we will provide further details of what that support is expected to be.

• Less than 2-3% of UK employers will pay the apprenticeship levy.


How much you will pay

• The levy will be charged at a rate of 0.5% of an employer’s pay bill. Levy payments will be collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), payable alongside tax and National Insurance. Pay bill will be based on total employee earnings subject to Class 1 secondary National Insurance Contributions (NICs).

• There will be a £15,000 fixed annual allowance for employers to offset against their levy payment


Examples

Example 1:• Employer of 250 employees, each with a gross salary of £20,000 would pay:• Pay bill: 250 x £20,000 = £5,000,000 • Levy sum: 0.5% x £5,000,000 = £25,000• Allowance: £25,000 - £15,000 = £10,000 annual levy payment

Example 2:• Employer of 100 employees, each with a gross salary of £20,000 would pay: • Pay bill: 100 x £20,000 = £2,000,000• Levy sum: 0.5% x £2,000,000 = £10,000• Allowance: £10,000 - £15,000 = £0 annual levy payment

• Levy payments will be payable monthly to HMRC


What happens to the Levy

• The money will be collected by HMRC will be made available to them via a new Digital Apprenticeship Service (DAS) account. • Employers will be able to use this to pay for training for apprentices.

The service will also support employers to identify a training provider, choose an apprenticeship training course and find a candidate.

• The DAS will also enable employers to:• select an apprenticeship training course• choose the training provider or providers they want to deliver the

training• post apprenticeship vacancies

• The main functions of this service will be in place in 2017.


Apprenticeship Reforms: Withdrawal of Frameworks

• As part of the apprenticeship reform programme, apprenticeship frameworks will be replaced by New Standards

• This will not affect those apprentices currently completing their apprenticeship on existing frameworks


Spending the Levy

• Employers will be able to use their funding (up to a cap which will depend upon the standard or framework that is being trained against) to cover the costs of an apprentice’s training, assessment and certification.

• Employers will not be able to use levy funds to cover all the costs associated with taking on an apprentice. For example, overheads, supervision costs and apprentices’ wages will not be funded by the levy.


Changing Content

What is being removed?

• Employment Rights and Responsibilities disappears• However, apprentices will still need good careers

advice, information and guidance• Personal Learning and Thinking Skills will be

replaced by Behaviours; these will require specific training

• On Programme Assessments will be replaced by independent End Point Assessments


SMEs (organisations not qualifying for Levy)

• SMEs to stay on the current funding system until 2019 but will have to make a 10% mandatory contribution to Training

VAT may have to be paid on this 10%


Comparison of Framework and Standards Funding

Frameworks (current system) Standards (newly planned)

2012/13 listed rates per qualification on LARS not linked to fee charged to employer

Different rates per age group (16-18, 19-24, 25+)

Cost weightings, disadvantage and area cost uplifts

Achievement 20% of funding paid to provider

25% discount for large employers with 1000+ staff

16-24 Apprenticeship Grant for Employers with less than 50 employees

One of 6 capped rates per standard linked to fee

Rate is the same regardless of age with 16-18 employer incentive only

No disadvantage and area cost uplifts

Successful completion payment to employer

No incentive payment to employers with 50+ staff

Small employer (less than 50 employees) incentive paid to employer


Apprenticeships Standards Proposed 15 funding bands.

• There is a move away from the current system of pricing apprenticeship frameworks at three different levels depending on the age of the learner, and move towards a single funding band for individual framework pathways.

• They are proposing that all employers will benefit from an additional payment to help with the costs of supporting apprentices aged between 16 and 18 years old or where the apprentice is 19 to 24 years old and is a care leaver or has a Local Authority Education, Health and Care plan.

• The suggested rate is !000 for the employer and 1000 for the provider.

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Number Band Upper Limit 1 £1,5002 £2,0003 £2,5004 £3,0005 £3,5006 £4,0007 £5,0008 £6,0009 £9,00010 £12,00011 £15,00012 £18,00013 £21,00014 £24,00015 £27,000


Who provides the training

• Employers 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 themselves.

• To deliver training the employer would need to register as an approved provider and be subject to Skills Funding Agency (SFA) quality arrangements and Ofsted inspection. • This may be onerous for employers tying them down

with red tape


Revolution in Assessments

• Training Providers will:• have a diminished responsibility for assessing• Increase added value to the Apprenticeship system;

by including the delivery of high quality learning tailored to employers’ needs.

• Training standards will be specific to job families/roles and not sectors


Institute for Apprenticeships(IfA)

• Over the next year or so the IfA will be working to ensure the organisation is ready to launch in April 2017, ensuring quality apprenticeships that meet the needs of businesses

• The IfA will help police employers as apprenticeship reforms take effect


When further information will be available

October 2016• In October 2016 there will be information about apprentices starting from

May 2017, including:• final levels of:

• funding• government support• additional support for 16- to 18-year-olds• English and maths payments

• final detailed funding and eligibility rules

December 2016• In December 2016 there will be information about further employer guidance

from HMRC on how to calculate and pay the apprenticeship levy.


Keep in Touch:

• https://uk.linkedin.com/in/safaraz

• https://www.facebook.com/pathwaygroup/

• @pathwaygroup @SafarazAliSafaraz Ali (Saf)[email protected]

Eddie Cottis (Eddie)[email protected]

Alternatively phone: 0121 707 0550

https://uk.linkedin.com/in/safaraz

https://uk.linkedin.com/in/safaraz

https://www.facebook.com/pathwaygroup/

https://www.facebook.com/pathwaygroup/

mailto:[email protected]

mailto:[email protected]


HOW: Delivery so far

• Over 1400 businesses in over 100 sectors involved

• 241 standards published so far • 114 ‘ready to deliver’ –

standard and assessment plan approved, funding Cap allocated

• Over 172 standards in development

• Around 40% of standards so far are for

• Higher and Degree apprenticeships


HOW: Delivery so far

• Standards developed/in development so far• 400 starts in 2014/15 across nine standards• Increasing number of starts on standards going

forward - 700 starts in the first quarter of 2015/16

P A T H W A Y S


Costing template (if

needed)

Trailblazer forms & submits expression of interest

Trailblazer writes new standard

Assessment Plan

Approved by Gov’t

Approved by Gov’t

Approved & funding band

allocated

Register of Assessment

Organisations

Online Consultation

Online ConsultationOnline

Consultation

Delivery

Monthly submission dates and regular publication on direct.gov

HOW: Trailblazers design standards and assessments


WHEN: Transitional arrangements

• The government envisage a migration from apprenticeship frameworks to standards over the course of the Parliament, with as much of this to take place by 2017/18 as possible

• There will be dual running in the interim, with potential switch off of some frameworks/pathways earlier than others

• Notice was given to withdraw the first seven frameworks in March 16 - these frameworks have closed to new apprenticeship from 1 June 2016. Since then batch two has been completed and currently consulting on batch three is taking place which closes on 3rd August 2016.


Standards are

• Designed and written by employers • Clear and concise, typically no more than two pages long• Include occupation title, occupational profile, ‘knowledge,

skills and behaviours,’ typical duration, any mandatory qualifications, entry requirements, professional recognition, level, review date

• The minimum requirements for English and mathematics • A minimum length of 12 months – some standards may

take longer • May include Core and options


What is an Assessment Plan?

• A short document (we recommend a maximum of 10 pages) which:

• Outlines how the Apprenticeship is being assessed.

• Clarifies roles and responsibilities - of the Apprentice, the Employer and the Assessment Organisation.


A Good Assessment Plan will

• Focus on describing the end point assessment (It should only briefly describe what on-programme elements – which can only be recommended)

• assess the Apprentice in a holistic way, across the standard, to ensure they are fully competent.

• deliver rigorous, high quality, assessments to maintain standards over time.

• ensure that the Apprentice is assessed fairly in an independent and impartial way.

• allow each employer the freedom to decide who undertakes the assessment


Potential methods of end-point assessment:

• Practical assessments. • A viva to assess theoretical or technical knowledge or discuss

how the apprentice approached the practical assessment and their reasoning

• Production of a project• A portfolio of work with another method of assessment• Observational assessment• Written and multiple choice test • Virtual assessment, such as online tests or

video evidence as appropriate to the content


Benefits

• Employers in the driving seat – ensuring the apprenticeship really represents the job. So employers get effective employees and apprentices get more relevant transferrable skills for a career

• Occupation specific – this is a key selling point for employers – they do not just have use a generic standard, but can have a bespoke standard for their sector and job role

• Simplified apprenticeship standards – easy ‘shop-front’ for all stakeholders to understand what the apprenticeship is about (unlike length frameworks)

• Increased flexibility for training delivery


Further Information

• Government hub page on apprenticeship reforms updated with all of the latest information:https://www.gov.uk/government/collections/apprenticeship-changes

• Published standards and those under development:https://www.gov.uk/government/collections/apprenticeship-standards

https://www.gov.uk/government/publications/apprenticeship-standards-in-development

• Guidance for developers of standards:https://www.gov.uk/government/publications/future-of-apprenticeships-in-england-guidance-for-trailblazers

• Online survey for feedback on EOIs, standards and assessments plans:https://www.gov.uk/government/publications/apprenticeship-standards-changes-to-the-process-for-approvals

• Easy reference listing of all standards:https://www.gov.uk/government/publications/apprenticeship-standards-list-of-occupations-available

https://www.gov.uk/government/collections/apprenticeship-changes

https://www.gov.uk/government/collections/apprenticeship-changes

https://www.gov.uk/government/collections/apprenticeship-standards

https://www.gov.uk/government/collections/apprenticeship-standards



https://www.gov.uk/government/publications/future-of-apprenticeships-in-england-guidance-for-trailblazers

https://www.gov.uk/government/publications/future-of-apprenticeships-in-england-guidance-for-trailblazers

https://www.gov.uk/government/publications/apprenticeship-standards-changes-to-the-process-for-approvals

https://www.gov.uk/government/publications/apprenticeship-standards-changes-to-the-process-for-approvals

https://www.gov.uk/government/publications/apprenticeship-standards-list-of-occupations-available

https://www.gov.uk/government/publications/apprenticeship-standards-list-of-occupations-available


Key Changes for Providers


Key changes for providers

• New apprenticeships funding model using price bands and a simpler funding model

• Expected to move to financial year funding for all employers

• New register of apprenticeship training providers• New contracting model for providers covering levy and

non levy paying employers


Employer (levy) commitment and contracting

OUTPUT:Levy commitment is

recorded in the digital apprenticeship service and appropriate contracts are

in place.

6April 2017 - HMRC begins collecting the

apprenticeship levy from large employers

The Digital apprenticeship

service goes live.

Digital apprenticeship service registration

verifies the identity of an employer. The

employer registers to create a digital

apprenticeship service account. The

employer verifies & links PAYE scheme(s) to their account. The employer can then

view their levy account balance.

The SFA maintains a library of

apprenticeship standards and a

catalogue of providers’ course offerings helping

employers search and select the right

Provider andstandard. The SFA provides a ‘recruit an apprenticeship’

service for employers.

The employer and provider agrees a

price and the employer records the details in the

digital apprenticeship

service initiating the ‘double-lock’ which will be confirmed by the provider via ILR

returns.

The SFA issues an agreement to the selected provider, with a schedule to cover the value of the deal, or update

the existing agreement if this is not the first deal.

The provider can now begin

delivering the apprenticeship.

The SFA is able to manage the

apprenticeship budget by

monitoring and forecasting levy commitments.

TRIGGER: The digital Employer registration Search and Select Commit levy funds Agree contracts

OUTPUT: Levy commitment is recorded in the

digital


Employer (non-Levy) ProcessSFA procures

non-levy provision

A contract is agreed with

providers

Employer and provider agree

deal

Provider submits ILR

SFA pays funding

Employer pays contribution

The SFA invite and select those providers on the

register of apprentice

training providers to tender to

deliver co-funded apprenticeship education and skills training.

A contract for services between the SFA and the

provider to deliver non-levy funded apprenticeship

education and skills training is agreed.

A non-levied employer agrees a deal with an SFA-approved provider

to deliver apprenticeship

education and skills training.

The SFA monitors the performance of

a provider delivering non-levy funded apprenticeship

education and skills training through

monthly ILR submissions.

The SFA calculates the funding due to the provider and

payment is made.

The employer pays the agreed

contribution.


Delivery and achievement

A training provider from the list of pre-approved training providers has an

ancillary agreement in place to provide

training to a levied employer.

Providers submit on a monthly basis an

ILR containing:• Start Date• Employer

• Apprentice Details

• Learning aim code

• Agreed price

SFA checks that the details in the ILR match with the details in

digital apprenticeship

service

The SFA will calculate the funding earnt by

the provider.• SFA pays from

levy at full value• SFA pay any

outstanding balance at co-

funded rate

The provider will submit evidence of completion to

the SFA.

The SFA are able to track government

funding being used to pay providers for

apprenticeship training.

Trigger: Apprenticeship

Start Provider submits ILR Double Lock Calculate funding&

payment

Achievement Payment.End point

assessment if required

OUTPUT: Apprenticeship

certification completed


View the current balanceof your levy and expiringfunds that you might lose


Key funding policy decisions

• Single funding model• 10% monthly top-up• Approach to co-investment• Funding of 16-18 year olds• Funding for additional needs• Funding for English and maths training• Incentives


• The levy is essentially a new tax on employers to be introduced from 6 April 2017, the purpose of which is to fund an increase in the number and quality of apprenticeships.

• The levy will apply to all UK employers in both the private and public sectors, regardless of whether or not they have (or intend to have) apprentices.

• The levy will be charged at a rate of 0.5% of an employer's payroll bill. Employers will have a fixed annual levy allowance of £15,000 to offset against their levy payment.

• The draft regulations amend exiting PAYE Regulations and cover the calculation, payment and reporting of the levy including the operation of the £15,000 annual levy allowance.


Evolution of ApprenticeshipsA Long History

Stretches back to the guilds of the Middle Ages. In 1563 Elizabethan Statute of Artificers set out terms and conditions for training (including a duration of

seven years and for the master–apprentice relationship

By the late nineteenth century, Apprenticeships had spread from artisan trades such as building

and printing to the newer industries of engineering and shipbuilding

Since the mid 1990s, governments have been rebuilding the

programme in an adjusted economic and institutional context

1995. The Modern Apprenticeship was focused almost entirely on

occupational competence, and did not require specific technical learning.

Based on Traditional Trades

Intruded Non-Traditional Apprenticeships focused on sectors


Evolution of Modern Apprenticeships

1995. The Modern Apprenticeship was focused almost entirely on occupational competence, and did not require specific technical learning

Since 1997 a number of the programme elements

have been reformed.

Level 2 Apprenticeships were introduced in 2000.

The technical certificate was introduced in 2003/04 to explicitly require theoretical knowledge from

Apprentices (and, implicitly, structured off-workstation training).

The Apprenticeships family was re-branded in 2004 with the Apprenticeships blueprint being introduced in 2005 to provide updated guidance for Sector

Skills Councils on how to define their Apprenticeship frameworks.


Key funding policy decisions – in discussion

• Approach to funding equivalents and lower level qualifications

• Level of co-investment• Transfer of funds between employers• Setting of price bands

Career

Pathway apprenticeships event for saf