Funding

In 2017 the government introduced the Apprenticeships Levy – a central fund which receives contributions from all employers with an annual pay bill of more than £3 million, at a rate of 0.5% of their total pay bill. These funds are used to pay for apprenticeships training for all employers via the Apprenticeship Service – an online system which, amongst other things, allows employers to access and manage funding.

Getting an Apprenticeship Service account is instrumental in being able to access Levy funding. The main things required to do this are:

• A valid email address
• Permission to add the PAYE scheme(s) of the organisation
• Permission to accept the employer agreement on behalf of the organisation
• A Government Gateway login for the organisation or the Accounts Office Reference Number (AORN) and PAYE scheme(s) reference number(s)

The DfE provides a YouTube playlist which explains the Apprenticeship Service.

Employers who pay the Levy will, in most cases, not need to make any direct payments to the training provider to cover the cost of the training and assessment of their apprentice(s). These costs are covered and paid for by funds within their Apprenticeship Service account which are sent directly to the training provider on a monthly basis for the duration of the apprenticeship. The amount of funding that an employer paying the Levy can access is linked to:

• the value of their PAYE contributions,
• the proportion of their employees living in England, and
• a government top-up of 10%.

In the event that an employer’s Levy funds have been exhausted in a given month, they will be required to make what are known as ‘co-investment’ contributions to cover any outstanding balance – namely 5% of however much is left to pay, with the government funding the remaining 95%.

For example, if in the month of July, the employer was supposed to pay £500 to the training provider via the Apprenticeship Service, but they only had £400 left in their account, this would leave an outstanding balance of £100. The employer would therefore be responsible for paying £5 (5%) directly to the training provider, and the government would pay the remaining £95 (95%).

The good news for employers who don’t pay the Levy is that, despite not having contributed directly to it, they can still access and make use of Levy funding via 'reservations'. This is a mechanism which allows smaller employers to reserve funds from the Levy pot to cover most of the cost of their apprentices’ training via the Apprenticeship Service. Much like with Levy-payer co-investment, the employer will be responsible for paying just 5% towards the cost of the apprenticeship training and the ‘reservation’ will pay the remaining 95%, up to the funding band maximum.

The even better news is, in some cases employers won’t have to pay a penny. From 1 April 2024, the government will fund all of the apprenticeships training and assessment costs, up to the funding band maximum of the apprenticeship for the following:

• Employers who do not pay the levy, if at the start of their apprenticeship training the apprentice is aged between 16-21 years old (of 15 years of age if the apprentice’s 16th birthday is between the last Friday of June and the 31 August.
• Employers who do not pay the levy and have fewer than ✱50 employees, if at the start of their apprenticeship training the apprentice is aged between 22 and 24 years old and has either an Education, Health, and Care (EHC) plan provided by their local authority and/or has been in the care of their local authority.

 ✱This is calculated using the average number of employees with a contract of service in the 365 days before the apprentice is recruited. If the average number of employees is 49 and the recruitment of the apprentice takes this number to 50, the employer will still be eligible to receive this extra support.

The bottom line is, the cost to employers is minimal when compared to how much it would otherwise cost them to train their employees via a non-apprenticeship route.

Apprenticeships are costed and split into 'funding bands' which range from £1,500 to £27,000, and reflect what the government considers to be the maximum reasonable cost for delivering the standard.

The Institute for Apprenticeships and Technical Education (IFATE) provides recommendations on the appropriate funding band for each standard, and reviews existing funding bands on a regular basis.

These top of each band is by no means the default price however, and employers are both entitled and encouraged to enter into negotiations with their chosen training provider to arrive at a price which satisfies both parties. A prospective apprentice’s prior academic and experiential learning will also play a part in determining the final negotiated price, as an employer is not expected to pay for training that an apprentice is ‘exempt’ from. 

If an employer wants their apprentice(s) to undertake training that they consider to be necessary, but which is not included within the apprenticeship standard, they are entitled to do this. The cost(s) associated with this kind of additional training cannot be paid for via Levy funds or ‘reservations’ though, meaning the employer will need to be prepared to pay for it themselves, in full, directly to the training provider. Details of what training is considered mandatory for each standard can be found on the IFATE website.