Driven by its productivity agenda, the government has committed to achieving three million apprenticeship starts by summer 2020.
To do so, the government has confirmed the introduction of an apprenticeship levy from April 2017 – a fundamental change to the way apprenticeships in England are funded. If you have a UK paybill of over £3m, you will be required to pay 0.5% of that into a levy. Your levy payment will then be ring-fenced in the form of an electronic voucher (managed through your Digital Apprenticeship Service account) to be used to purchase apprenticeship training.
The levy is the government’s logical solution to funding the increase in numbers and putting control of the funding in your hands.
Leading employers will all be at different stages of their levy journey. You will need to think through everything from; your levy strategy, to how you might best capitalise on it, to which apprenticeship standards will be ‘best fit’ for your organisation, to how your resulting programmes will be programme-managed by which internal resources and or through one or multiple training providers, and how your programmes will be operationalised across all stages of the apprenticeship lifecycle (attraction to off-boarding and post programme talent management).
Where you have a paybill over £3m, you will be charged a levy of 0.5% of that paybill. “Paybill” will be based on your total employee earnings subject to Class 1 secondary NICs. The 0.5% levy is on your full UK payroll bill, not just the amount over £3m. And although the levy is calculated based on your full UK paybill, you will only be able to only spend your English proportion on English apprenticeship training. To calculate how much you will have to spend through the English system, the government plans to use data that it already holds about the home address of your employees. The government will use this data to work out what proportion of your pay bill is paid to employees living in England. And if you are an employer in England who pays the levy and committed to apprenticeship training, you will be able to get more out than you pay into the levy. The government will apply a 10% top-up to your monthly funds i.e. all funds entering your Digital Apprenticeship Service account will be increased, so every £1 will be increased to £1.10 in value.
For more detailed information on calculating your apprenticeship levy, visit the Government’s Employers Guide to the Apprenticeship Levy or use their Apprenticeship Levy Calculator.
To pay for your apprenticeship training you will need to set up and manage your Digital Apprenticeship Service account. Registrations are now open for you to set up your account, this is your online account which gives you greater control of your apprenticeship programmes and distribution of funds you have contributed through the apprenticeship levy, enables you to find training providers; pay for training and assessment of apprentices in England; manage your funds and apprentices and perform account maintenance.
To find out what your Digital Apprenticeship Service account will look like and what its functionality will be, watch the Skills Funding Agency Digital apprenticeship service demonstration webinar.
Based on the proposed funding rules, the levy can be claimed back and spent on apprenticeship training for all employees, at all levels of education and ages, including graduates who may be eligible for Level 6 or 7 apprenticeship programmes. You can therefore use the levy to offer a suite of interconnected talent propositions that enable your employees to develop their careers by transitioning from one level or programme to another. For example, a trainee on a pre-apprenticeship programme (traineeship) may join your foundation apprenticeships, a degree apprentice may progress to your internal graduate programme or your intermediate or advanced apprentices may move on to your higher or degree apprenticeships. You can also look to convert your current learning and development, professional qualifications or talent spend to the levy where an appropriate apprenticeship programme can replace existing activity.
Some employers may find that they want to spend more on apprenticeships than their levy allows for. If this is your approach, the government will support and help you meet 90% of the additional costs. You will be asked to make a 10% contribution to the extra cost of training and to pay this directly to the government or your chosen apprenticeship training provider.
By the academic year 2017/2018 the majority of apprenticeship frameworks will begin to be replaced by new standards - that are created by employers, for employers. A Trailblazer is an employer-led group developing the new apprenticeship standards for occupations in their sectors. Download our Trailblazer Guide for more information on what constitutes an apprenticeship standard including knowledge, skills and behaviours.
With over 450 apprenticeship standards currently approved for delivery or in development across all industry sectors, you will need to scope which programmes for which job families or disciplines in your organisation would add most value if applied to your operating model – either; specialist programmes that close identified future skills gaps, or larger scale programmes for high turnover junior roles to boost retention, or programmes to upskill or reskill your existing staff.
The majority of leading employers in key sectors such as; financial services, professional services (including accounting and tax), law, industry and commerce and public, are looking to offer standards that allow for progression across a range of disciplines including; accounting and tax, actuarial, digital and technology, financial services, HR, legal and management and business.
Once you have decided how you will capitalise on your apprenticeship levy and which standards you will focus on, you will need to consider how you operationalise your programmes across all stages of the apprenticeship lifecycle and adapt your approach for each of the lifecycle stages depending on whether your apprentices are internal recruits (existing staff) versus external recruits (new starts).
If you are a leading employer looking for advice on how you can capitalise on and maximise your apprenticeship levy spend, visit our 'Engage' page to request an advisory session with one of our team. We can help you to scope and deliver a range of technical and non-technical apprenticeships from; Level 2 to Level 7 including degree apprenticeships, graduate apprenticeship programmes and management development schemes as appropriate. We can also provide best practice on how you might operationalise your apprenticeship programmes across all stages of the apprenticeship lifecycle from strategy to operating model to attraction to induction to talent management to measuring success.
BPP partnered with Trendence UK and Group GTI to survey Guardian UK 300 employers on how they are responding to the levy and implementing their resulting apprenticeship programmes. Visit our ‘Levy Research’ page to view the results for market and sector specific best practice on how to deploy and operationalise apprenticeships.