With the introduction of the Apprenticeship Levy mere months away, many organisations are still getting to grips with how this complex bit of legislation will work in practice. 

And one of the most frequently asked questions on the Levy is how changes to apprenticeship funding will be enacted. 

In this guide, we’ll look at how apprenticeship funding under the Levy will differ from current practices, how different age groups will be funded and examine the government’s new banding system for training costs.

How apprenticeship funding works currentlyChanges to apprenticeship funding

Under the current system of SASE (Specification for Apprenticeship Standards for England) Frameworks, organisations can apply to the government for funding equivalent to the cost of the qualification (or up to £15,000 - whichever comes first) as long as they’re providing an apprentice’s formal study, as well as being their employer.

For organisations without in-house training provision, a training provider is usually commissioned, which carries out the apprenticeship training and is paid using this government funding. 

The amount of funding that can be unlocked is dependent on the age of the apprenticeship candidate: 

16-18: All of the costs associated with the course, up to and including advanced level apprenticeship qualifications can be funded.

19-23: Only half the costs can be funded.

24 and above: Organisations can apply for a contribution to the costs of training, the amount of which depends on several factors. 

Apprenticeship Levy funding changes Apprenticeship Levy payments

In line with findings from the government’s consultations on the issue of funding for apprenticeship training, the way the Levy operates is designed to tackle some of the complexity that plagues the current system. 

By simplifying the way funding works, employers of all shapes and sizes should be able to pick the sort of apprenticeship training that matches their business goals more easily. 

As opposed to the current provider-led system, funding will be much more closely tied to role-specific needs - making the content more targeted and the system work better and more efficiently for employers. 

Funding for 16 to 18-year-olds under the Apprenticeship Levy 

As covered in our guide to the sweeping changes to apprenticeship frameworks, the current system of SASE Frameworks will be gradually replaced by a new series of ‘Trailblazer’ standards. 

To give employers a helping hand when it comes to getting to grips with these changes, the government has pledged an additional 20% increase in funding for 16 to 18-year-olds engaging in framework-based training. This added funding will be directed to the training providers themselves, as opposed to the Digital Apprenticeship Service account of the employer, where Levy-related funding will be deposited. 

Funding levels for the new standards will be decided upon during their development as part of the creation process for these new Trailblazer standards.

To further incentivise taking on young people, employers will receive an additional £1,000 (paid at three and 12 month milestones during the apprenticeship) when taking on 16 to 18-year-olds to cover any additional costs and support the government’s aim of getting more young people into apprenticeships by 2020. 

Training providers will also get a one-off payment of £1,000 to help out with extra costs associated with supporting apprentices in this age bracket. 

Smaller organisations with less than 50 employees will be able to forgo paying in the 10% co-investment when taking on a 16 to 18-year-olds, which means the government will take care of all training costs (provided they fall within the funding cap for that particular standard). 

Other government top-upsFunding for apprenticeships 

An additional £1,000 will be provided to both employers and training providers to cover any additional support required when taking on an apprentice between the ages of 19 to 24, who has previously been in care or has a Local Authority Education or Health Care Plan. 

The government also recently re-evaluated funding for apprentices in deprived areas, pledging £60 million to help support young apprentices in some of the UK’s poorest regions. 

This will consist of a £600 ‘disadvantage uplift’ payment for the 10% of the most deprived areas in the country, followed by £300 for the next 10% bracket and £200 for the following 7%. However, this will apply only to frameworks and will take the form of a grant, rather than being applied to an employer’s Digital Apprenticeship Service account. 

Similarly, just under £500 can be claimed by training providers looking to support apprenticeship candidates who don’t meet the minimum standards in maths and English. 

Providers will also be able to apply for an extra £150 (and potentially more) each month from the government in cases where an apprentice who has a learning disability requires additional support. 

Apprenticeship Levy funding bands 

When the Apprenticeship Levy comes into force, the new system will categorise both existing SASE frameworks and new Trailblazer standards into one of 15 funding bands, the upper limits of which range from £1,500 to £27,000. These also mark the maximum amount that the government will co-invest in training costs. 

Standards that are currently being developed, or that will be developed in the future, will be placed into one of these funding bands during the course of their development. 

Current frameworks are placed into the individual funding band that most closely matches the current rate the government pays providers for training. 

When will the Apprenticeship Levy funding system come into force? 

These new funding rules will come into force as of May 1st 2017, with any apprenticeships starting from this date falling under their remit. Apprenticeships started before this date will continue to be funded under the current rules until their completion. 

Providers can expect their first payments for apprentices who start in May with Levy-paying employers to arrive in early June 2017. 

Employers outside the scope of the Levy 

Even employers who won’t be paying into the Levy can take advantage of increased government funding for apprenticeships. Organisations with an annual payroll of less than £3 million (as well as Levy-paying employers who’ve used up all the funds in their Digital Apprenticeship Service account) can make use of government co-investment of up to 90 per cent on accredited training. 

Smaller employers will also be able to take advantage of the additional payments, top-ups and grants described above on exactly the same basis as their larger counterparts. 

And you? 

Funding changes have been the subject of much debate and several alterations have been made in the run-up to their release, adding to the uncertainty afflicting many employers. If you’ve got any additional questions about the subjects we’ve covered above, be sure to get in touch via LinkedIn or Twitter

And if you’re looking for bespoke advice on how to engage with the Levy, be sure to book an obligation-free chat with our expert team today:

Talk to our Apprenticeship Levy team