Small employers that don’t pay the apprenticeship levy can now use the digital apprenticeship service. The Association of Employment and Learning Providers has a guide.
What is it?
The ‘apprenticeship service’ is a generic term used for an online system to access Government funding. This currently operates in two distinct ways, depending on if an employer pays the apprenticeship levy or not.
The service allows levy-paying employers to access specific ring-fenced allocations linked to the amount of levy they have paid. They can spend this on their own employees, or transfer it to other employers to use. If it is unspent after 24 months it gets returned to the Treasury.
Employers that do not pay the levy can use the service to ‘reserve’ commitments (funding), which count towards the Government’s co-investment slice of the cost of apprenticeship training. There are rules on the amount of reservations employers can make, although this is expected to be relaxed as the system moves forward.
How it works
Under the new system, small and medium-sized employers will select an apprenticeship standard, choose their training provider and secure access to funding for all new apprenticeships through the service. The employer will be able to choose any of the training providers on the main route of the Register of Apprenticeship Training Providers.
Reserved funding becomes a ‘commitment’ once the training provider and an apprentice are confirmed. ‘At this point funding can be released to the training provider in the usual way,’ the guidance reads. Employers will in most cases still need to contribute 5 per cent for their co-investment towards the total cost, unless the business has fewer than 50 staff and the apprentice is aged between 16 and 18 when they start – in this case the Government funds the full cost of the training.
This can be done in advance of recruiting apprentices or an offer of an apprenticeship being made to an existing employee. The employer can change the training provider at any time up to the point of turning the reservation into a commitment.
The system is:
- aimed just at employers that do not pay the apprenticeship levy
- aimed at apprentices who were due to start on or after 9 January 2020
- for funding apprenticeship standards only
- for apprenticeships with main training providers listed on the Register of Apprenticeship Training Providers.
What else do I need to know?
Initially the Government is restricting employers to three reservations/commitments each in order to manage this transition to the apprenticeship service and to ensure the programme remains affordable.
The current system of direct contracts for training providers will still operate alongside, and these non-levy apprenticeship contracts will run until autumn 2020, at which point all starts will be channelled solely through the new service.
This dual system means employers that do not pay the apprenticeship levy will be able to access training either through a provider with an existing Government contract or through the service.
The key points to understand here are that direct training provider contracts with the Government are finite in value, and therefore are subject to demand, but allow employers to access both apprenticeship standards and frameworks and are not capped at three starts per employer. The apprenticeship service is initially limited to three starts per employer, and can only fund apprenticeship standards, but gives employers access to more training providers and will be the sole system operating in the future.
Is this a good move?
The Association of Employment and Learning Providers says the move away from direct contracting to an open employer-led market is a welcome change. Government-run procurements for direct contracts in recent years have been largely ineffective and limited the opportunity for employers to access established and good-quality provision.
The long term
Current non-levy apprenticeship contracts will run until the autumn and then the apprenticeship market for all sized employers will become truly employer-led. The main challenge the system faces is the sustainability of funding. Despite the apprenticeship levy doubling the amount of funding available for apprenticeships, a number of the assumptions that the Government made in designing the apprenticeship reforms were flawed. Non-levy-paying employers are funded with underspent apprenticeship levy, something which the Government assumed would be 50 per cent unspent by levy-payers. Yet a National Audit Office (NAO) review in 2019 exposed that levy-paying employers were now spending towards 60 per cent of their levy and the consequence was a restriction in funding left over to meet the needs of non-levy-payers. The NAO said there is likely to be a significant overspend of the apprenticeship budget in 2020-2021 of around £500 million (about 25 per cent of the annual budget).
In order for the apprenticeship system to operate in its current guise, the two options are further investment by the Treasury to meet the growing demand of all employers, or the Government will need to implement more drastic intervention measures to bring demand back down in line with the supply of funding available. This could include changing the eligibility criteria for potential future apprentices by prior attainment or age, or even moving some current apprenticeship programmes out of the scope of levy funding altogether.
Further information
For more on how to make a reservation, set up a digital account, and all aspects of the new apprenticeship system, see: https://bit.ly/2uGikar
