Apprenticeship Reform Vicky Mann – Head of Apprenticeships & Work Based Learning Paul Smith – Head of Employer Liaison, Partnerships & Commercial Training 14 September 2016 VICKY & PAUL Introduce ourselves Questions as we go Slides sent by email Current app numbers in year 1200

Why reform? VICKY To maintain and consolidate economic recovery To address skills gaps & raise productivity To increase apprenticeship opportunities To raise quality and open up career paths To put employers in the driving seat To meet the government target of 3 million starts by 2020 VICKY Individual apprenticeships provide good returns, but there is an insufficient number of apprenticeship opportunities to meet demand from individuals, and skills gaps remain in the economy. Whilst the vast majority of apprenticeships provide high quality training, feedback from employers shows that this is not always the case. We need to continue to drive up the quality of apprenticeship training and ensure that anyone completing an apprenticeship is fully competent in their occupation.

Addressing challenges… The government is committed to significantly increasing the quantity and quality of apprenticeships in England and achieving 3 million starts by 2020. Benefits Apprentices complete their apprenticeship with highly marketable skills… …that make it more likely for them to remain employed, including with the same employer. Employers experience tangible improvements to their product or service as a result of apprenticeships. Apprenticeships create real benefits for the taxpayer and the wider economy… …and contribute to the Government’s overall goal of improving labour market outcomes. VICKY

Ambitious government reforms… Employers at the heart of designing new Apprenticeships Standards to replace apprenticeship frameworks by 2020. Introduction of Apprenticeship Levy New Institute for Apprenticeships led by employers to oversee standards and ensure quality and rigour. Apprenticeship target for public sector bodies – duty for 2.3% of workforce to be apprentices will grow opportunities. VICKY

Apprenticeship standards… Traditional apprenticeships are typically available at levels 2 & 3. Progression routes now available: > Higher level apprenticeships at levels 4 & 5 > Degree level apprenticeships through to masters at level 7 These offer clear, work-based pathways, from craft to technician to professional and managerial skills. PAUL

Apprenticeship standards… The common elements of the new Apprenticeship Standard Enrol Apprentice Behaviours Technical knowledge and understanding End Point Assessment Certification Skills PAUL English + Maths Communicate effectively Team working Time management Work independently Take responsibility Ability to handle change Ability to complete work to schedule Understand impact of work on others Apprenticeship Duration

The Apprenticeship Levy… A levy on UK employers will fund growth in the apprenticeship programme. In parallel, employers will be given more influence over how apprenticeships are designed and paid for. The levy will come into effect on 6 April 2017, at a rate of 0.5% of pay bill, paid through PAYE. It applies to all employers in all sectors. All employers have an allowance of £15,000 to offset against their levy liability. The levy allowance is not a cash payment and cannot be used to purchase apprenticeship training The allowance means that only UK employers with an annual pay bill of more than £3 million are liable to pay the levy. That’s 2% of employers. Employers in England who pay the levy will be able to get out more than they pay into the levy, through a 10% top-up to their digital accounts PAUL

Paying the levy… PAUL LEVIED EMPLOYER NON-LEVIED EMPLOYER Employer of 250 employees, each with a gross salary of £20,000. 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 Employer of 100 employees, each with a gross salary of £20,000. 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 PAUL Employers will calculate, report and pay their levy to HMRC, through the Pay As You Earn (PAYE) process alongside income tax and National Insurance. Single employers with multiple PAYE schemes will only have one allowance. Employers will not be exempt from the apprenticeship levy if they already pay into an existing levy.

Levy example – Part 1 PAUL A food processing company has an annual pay bill of £10.2m. Their monthly levy payment will be £3,000. The government will top their digital account up by 10% to £3,300. The company recruits two Apprentices on a Food & Drink Maintenance Engineering Standard at an agreed cost of £18,000 per apprentice. The duration of the apprenticeship is 3 years. 20% of the £18,000 is held back from the training provider until the End Point Assessment is completed. PAUL

Levy example-Part 2 PAUL The companies digital apprenticeship account will be debited each month by: 2 x £18,000 – 20% 36 month = £800 This will leave £2,500 per month to be spent on further apprentices in different parts of the business. These could be existing employees who require new skills due for example to internal promotion. PAUL

Co-investment… There are two types of employers who will be benefit from government support towards the cost of their apprenticeships training: Employers who haven’t paid the levy and want to purchase apprenticeship training from a provider A levy-paying employer who with insufficient funds in their digital account to pay for the cost of training and assessment they want to purchase The proposal is that: The government pays 90% of the costs of training and assessment. The employer will be responsible for paying 10% of the costs. VICKY

Non levy example… VICKY Employer chooses level 3 Travel Consultant Apprenticeship Standard which falls into funding band 9 with a maximum price of £9,000. Employer negotiates a price of £8,500 with their provider Government co-invests 90% = £7,650 Employer co-invests remaining 10% = £850 Employer and provider agree payment terms. VICKY

Additional payments & funding… Additional £1,000 for all employers who take on a 16-18 year old Additional £1,000 for training providers for supporting a 16-18 year old Additional £1,000 for employers/providers for apprentices who are 19-24 and have previously been in care or have a Local Authority Education, Health & Care plan. 100% funding for employers with less than 50 employees for: 16 – 18 year old 19-24 year old care leaver or those with Local Authority Education, Health & Care plan. VICKY Proposed co-investment also applies to levy payers who has insufficient funding in their account: Employer co-invests 10% of the cost of apprenticeship training, government co-invests 90%. Additional payments: £1000 for all employers who take on a 16-18 year old £1000 for training provider for supporting a 16-18 year old – not payable out of employer accounts Two instalments at 3 & 12 months

The Digital Apprenticeship Service (DAS)… Employers create an online account from January 2017 Verify PAYE schemes and link these to the account Levy to be introduced in April 2017 Eligible employers to declare liability to HMRC in May 2017 for levy due on April payroll Funds in the digital account to appear shortly after employer final declaration to HMRC – after 22nd May 2017 New system for funding apprenticeships to start 1st May 2017 VICKY

All employers… Whether you pay the levy or not, the digital apprenticeship service will help you to: Select an apprenticeship framework or standard Choose the training provider or providers you want to deliver the training Choose an assessment organisation Post apprenticeship vacancies From May 2017, if you pay the levy you will also be able to: see the funds you have available to spend in England set the price you’ve agreed with your training provider pay for apprenticeship training and assessment through the digital apprenticeship service By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships. VICKY

PAUL

Accessing levy funds… PAUL Employers will be able to see their levy contributions coming into the account monthly and accumulating over time. Funds will first appear in accounts in late May’17. Employers will benefit from a 10% government top up to monthly funds entering an account. Funds will expire 18 months after they appear in the employer’s digital account. As soon as an employer has funds in their levy account they will be able to select a provider and an apprenticeship programme. Funds will leave the employers digital account on a monthly basis over the lifetime of the apprenticeship. 20% to be held back for end assessments PAUL

Using funds… Digital funds and government funding can be used for: apprenticeship training and assessment against an approved framework or standard with an approved training provider and assessment organisation up to the funding band maximum for that apprenticeship Digital funds and government funding can not be used for: wages travel and subsistence costs managerial costs traineeships work placement programmes the costs of setting up an apprenticeship programme PAUL The new funding system comes into effect on 1 May 2017, because May is the first month that levy paying employers will declare a levy payment to HMRC. All apprenticeships started before 1 May will be funded through to completion according to the existing rules. Any employer contribution towards training commenced before 1 May will also continue at the current rate.

Additional points… VICKY English & Maths are funded directly by government not out of employer accounts. Additional funding for providers to support those with additional learning needs. Funds can be used for re-training where substantive new skills are needed and the training content is materially different to prior training or apprenticeship (includes funding for those who have degrees). Funding bands apply to apprenticeships. Current frameworks will be replaced by new standards. VICKY Government requirements are for apprentices to get to minimum level 2 English/Maths standard. Not all standards request 15 funding bands ranging from £1500 to £27,000 All existing frameworks and standards will be placed in one of the funding bands. Funding bands have an upper limit to cap the amount of digital funds which can be used and to cap the government contribution.

Some aspects of the reforms are still to be confirmed by government and may change after the recent consultation process. We are on hand to guide you through the changes. PAUL

Further links… PAUL Apprenticeship changes - GOV.UK Apprenticeship levy: how it will work - GOV.UK sector apprenticeship targets - Consultations - GOV.UK PAUL

Contacting us… www.cwatraining.co.uk VICKY & PAUL CWA – here to help Call our dedicated employer line: 01553 815600 Email: cwatraining@cwa.ac.uk www.cwatraining.co.uk VICKY & PAUL Thanks Questions – now / at the break / lunch / after