With mere months to go until the launch of the Apprenticeship Levy, many organisations that fall within its scope are still unsure of the funding they’ll have available when taking on young apprentices.
In this guide, we’ll explore the amended funding guidance that governs 16 to 18-year old apprentices, as well as 19 to 24-year olds and those from disadvantaged areas.
Changes to Apprenticeship Levy funding
In its initial Apprenticeship Levy proposals, the government set out plans that consolidated apprenticeship frameworks and standards within 15 funding bands, each with an upper limit ranging from £1,500 to £27,000.
This would have precipitated a real-terms cut for provider organisations training apprentices between the ages of 16 to 18 of around 30 per cent (in regard to some of the most popular types of apprenticeships). Additionally, analysis conducted by FE Week found that this shortfall would rise to more than 50% for young apprentices living in some of England’s most deprived areas.
In response to widespread criticism of this move, in October 2016, the government updated its plans to provide additional support for providers to adapt to these new funding models by offering an extra cash payment equivalent to 20 per cent of the upper limit of the funding band when training 16 to 18-year-olds.
It’s worth noting that the government described this arrangement as ‘transitional’ - stating:
“We will keep it under review and envisage reducing this uplift as more apprenticeship starts are on new apprenticeship standards.”
Similarly, plans for a simplified version of the current system of support for apprentices from deprived areas were also outlined. However, these are only set to be maintained for a single year, while a “fuller review” into support mechanisms is undertaken.
How Apprenticeship Levy funding for young people works
Currently, those in the 16 to 18 bracket make up about a quarter of all apprenticeship starts and the government recognised that its proposals would entail higher training costs for this age bracket, which would act as a disincentive for prospective employers.
Similarly, while it was keen to defend its funding proposals, the government conceded that the changes could have a big impact on providers, particularly those whose mainstay is training 16 to 18-year-olds.
“We believe that moving to system of funding that does not differentiate the price an employer pays by age is the right thing to do. However, this will have a bigger impact on providers who deliver significant volumes of training to 16-18 year olds on frameworks while the market transitions to the new approach. We want to ensure stability through the transition so that employer demand for training can be met and opportunities for young people are maintained,” said the Department for Education (DoE) in its announcement on the issue.
It went on to set out the benefits of its 20 per cent uplift payment, suggesting it would “support stability” and give providers a chance to get to grips with the reforms.
The uplift payment has also been extended to 19 to 24-year-olds who have formerly been in care, or who have been involved with an education and health care (EHC) plan with their local authority.
Plans to provide an additional £1,000 incentive to both employers and providers taking on 16 to 18-year-old apprentices were confirmed to remain in force, with the DoE stating that this should be sufficient to cover the additional costs both employers and providers will face, regardless of the type or length of apprenticeships they’re conducting. Similarly, employers can opt to direct this incentive payment to their provider if they so wish.
Apprenticeship Levy funding for those from deprived areas
Following the release of its initial proposals, the government came under fire for its lack of focus on those in some of the most deprived areas of the country. In a letter to the Skills Funding Agency (SFA) on the issue, fifty-five MPs warned of the devastating effects proposed funding changes would have on prospective apprentices in economically-disadvantaged areas.
Lead author David Lammy MP branded the changes a “direct attack on social mobility” and claimed the government still viewed apprenticeships as the “poor cousin” of higher education. The Association of Employment and Learning Providers added to these warnings, suggesting that funding alterations risked creating “apprenticeship deserts” in deprived, inner-city areas.
In response, the government revised its proposals and pledged an additional £60 million to help support prospective apprentices in the UK’s poorest areas. In practice, this “disadvantage uplift” payment will be paid directly to providers on the following basis:
£600 for training an apprentice who lives in the top 10% of most deprived areas in England (as listed on the Index of Multiple Deprivation).
£300 for the apprentices in the next 10% of areas on the Index
£200 for the following 7%
As with other elements of the Levy, this will only be in place for the first year of the initiative, while the government assesses the best ways of encouraging equal opportunities across the country.
The Apprenticeship Levy and Apprentice Grants for Employers (AGE)
In past years, eligible employers have been able to gain access to grants via the AGE system when taking on younger apprentices. While this is set to be replaced by the Levy-specific payments for young people as covered above, in some local authorities, it will continue until the 2016/17 year-end and potentially, beyond.
It’s important to note that the criteria for these grants, as well as whether or not they will continue after the Levy’s introduction, can differ, depending on where you’re situated in the country. As such, it’s best to check with your local authority to ensure that grants are still being provided and that your organisation qualifies before applying.
You shouldn’t make the mistake of taking grants for granted either, since they may be limited by budget and offered on a first-come, first-served basis.
With the multitude of relatively last-minute changes and temporary measures taking place in regard to Levy funding for young apprentices, it’s no wonder many are still feeling confused about exactly how much training budget they’ll have access to.
If you’re looking for tailored advice on the implications of these Levy funding changes for your organisation, get in touch with our team of Levy experts today.
And if you’re looking for further information about the Apprenticeship Levy, be sure to download our free, comprehensive ebook guide: