Image by Photographer's Name (Credit in black type) or Image by Photographer's Name (Credit in white type) Lancashire Provider Network Siân Owen Head of Stakeholder Engagement (Funding) sian.owen1@pearson.com Pearson The apprenticeship levy – key facts Presentation Title Arial Bold 7 pt 1

To cover Policy background The digital apprenticeship service (DAS) Image by Photographer’s Name (Credit in black type) or Image by Photographer’s Name (Credit in white type) To cover Policy background The digital apprenticeship service (DAS) Institute for Apprenticeships What is changing: standards; levy; funding 4.1) Frameworks to standards 4.2) Levy 4.3) Funding The employer and funding journey Apprenticeship providers Key documents Pearson support Presentation Title Arial Bold 7 pt 2

1. Policy background

Policy background July 2012 Alison Wolf – Fixing a Broken Training System: The case for an apprenticeship levy Nov 2012 Richard Review made a number of recommendations on simplification and on placing employers in the driving seat; government accepted vast majority. Oct 2013 First employers formed as Trailblazers to design new English apprenticeship standards and assessment approaches. All new apprenticeship standards designed by employers, around singular occupations, and include end point assessment , grading where possible, no formal requirement for qualifications. Oct 2014 Target of 3 million new apprenticeships in the life of Parliament announced in conference speeches. Aug 2015 Consultation on the introduction of the levy (closed October 2015). Nov 2015 Chancellor’s Budget Speech, levy announced, and outline published in consultation response. Dec 2015 English Apprenticeships: Our 2020 Vision published. 4

2. The digital apprenticeship service (DAS)

The digital apprenticeship service (DAS) Government will create a digital apprenticeship service (DAS) through which everything from certification to funding (including levy funding) will be channelled. Each employer will have a digital account and apprenticeship funds will be paid into the account via the DAS which employers will then use to pay providers (or themselves in some cases) for their apprenticeship training. This control will not be limited to those paying the levy; every employer in England will use the same system to pay for the apprenticeship training they want. 400 employers and 200 training providers have tested the system. More now being invited to register to take part in pilot of testing during October and November 2016. Representative sample selected will test service from start to finish. January 2017 May 2017 2018 earliest/2020 latest All employers can: Can create account and familiarise themselves with DAS. All employers use DAS to: Select apprenticeship framework /standard. Choose training provider or providers. Choose an assessment organisation. Post apprenticeship vacancies. Levy paying employers can: See funds in DAS (shortly after declaration to HMRC, and after 22 May). Use DAS to pay for apprenticeship training and assessment. All employers : Able to use DAS to pay for training and assessment for apprenticeships. 6

3. Institute for Apprenticeships

The Institute for Apprenticeships (IfA) An independent and employer-led Institute for Apprenticeships will be created in April 2017. Role will include regulating the quality of apprenticeships. Following Sainsbury Review and the Post-16 Skills Plan: will be renamed Institute for Apprenticeships and Technical Education, and responsible for the post-16 framework. Will have remit to develop coherent strategy and put employers at the heart of designing standards across all technical education – college-based as well as apprenticeships. Final remit not clear but direction of travel is for a much larger role. Peter Lauener appointed Shadow CEO (on part-time basis alongside his responsibilities as CEO of SFA and EFA). Permanent CEO will be appointed in 2017. 8

4. What is changing

What is changing Frameworks to standards: ongoing Apprenticeship levy: from April 2017 Apprenticeship funding: from May 2017 10

4.1 Frameworks to standards: ongoing

Frameworks to standards: ongoing (Multi-occupational) Standards (Single standard per job role/occupation) Initial Assessment Initial Assessment On-the-job and off-the-job training including: NVQ and Technical Certificate Maths and English Personal Learning and Thinking Skills (PLTS) Employment Rights and Responsibilities (ERR) On-the-job and off-the-job training including: Qualifications not mandatory – defined in standard and assessment plan – optional qualifications could be built in by provider/assessment organisation Maths and English Formative assessment of behaviours Completion and certification Gateway – Employer and provider sign off learner ready for End Point Assessment Occupational Competence End Point Assessment Completion and certification Occupational Competence 12

Frameworks to standards: ongoing SFA expects to move from frameworks to standards over course of parliament (2020) with most frameworks being phased out and standards in place by the start of funding year 2017/18. Withdrawal phased and notice will be given. June 2016: 7 frameworks withdrawn. December 2016: 56 frameworks withdrawn. April 2017: 2 frameworks withdrawn. 55 frameworks possibly withdrawn (under review).

4.2 Apprenticeship levy: from April 2017

Levy from April 2017 Overview Target of 3 million new apprenticeship starts in England between 2015 and 2020. To support investment, levy from April 2017, paid by large UK employers (2%). To raise over £3bn a year by 2019-20, £2.5bn for apprenticeships in England. By 2019- 20 spending on apprenticeships (including levy) double that of 2010-11. Levy applies to employers across the UK. Introduced on 6 April 2017. Pay HMRC through PAYE process. On pay bill of employees whose main workplace is England. Rate of 0.5%. Allowance £15,000 each tax year. So, payable on pay bills over £3 million (0.5% x £3 million = £15,000). 10% top-up from government. December 2016: Further employer guidance from HMRC on how to calculate and pay the apprenticeship levy. 15

Levy from April 2017 How much paid and how On pay bill of UK employees. Rate of 0.5%. Allowance £15,000 each tax year. So, payable on pay bills over £3 million (0.5% x £3 million = £15,000). Levy calculator estimates if an organisation will pay the apprenticeship levy, how much organisation will have available to spend, and how much the government will contribute (helps to know pay bill, % of workforce living in England , type of apprenticeship training you need). Employers calculate, report and pay to HMRC, through PAYE process alongside income tax and NI. Example 1: Employer who will pay the levy Example 2: Employer who will not pay the levy Annual pay bill: £6,000,000 Levy sum: 0.5% x £6,000,000 = £30,000 Annual levy payment: £15,000 (i.e. subtract levy allowance from levy sum: £30,000 - £15,000) Annual pay bill: £1,500,000 Levy sum: 0.5% x £1,500,000 = £7,500 Annual levy payment: £0 (i.e. subtract levy allowance from levy sum: £7,500 - £15,000) 16

Levy from April 2017 Funds and access Based on proportion of employer’s pay bill paid to employees living in England. Paid monthly. Allowance also monthly: £1,250 a month, and unused allowance carried from one month to the next. For example, if levy liability in month one is £1,000, levy not paid, remaining £250 carried over to the next month, and allowance in month two will be £1,500 (£1,250 monthly allowance + £250 carried over from the previous month). 10% government top-up applied monthly. If unused allowance in a month, but levy paid previously in tax year, employer can receive credit to offset against other PAYE liabilities. Credit will also reduce amount of levy paid. Single employers with multiple PAYE schemes will only have one allowance. Connected employers allowed to share one allowance. Funds expire after 18 months. Once employer has declared levy to HMRC they will be able to access funding through the digital apprenticeship service (DAS) and pay for training and assessment. Funds first appear in account in late May 2017. 17

Levy from April Spending funds Can be spent on employees working in England. New funding system from 1 May 2017 (May is first month levy paying employers will declare levy payment to HMRC). Employers can commit to apprenticeship starts from beginning of May. Select provider and apprenticeship programme. Funding bands sets maximum that can be spent, actual costs then negotiated with provider. Costs above the maximum band would need to be covered by employer. Commit via DAS and enter into contract agreement with provider. Once committed, funds automatically leave account on a monthly basis, spread over the lifetime of apprenticeship. 20% of total cost held back and paid on completion of the apprenticeship. Information and tools in DAS will help employers forecast funds likely to accumulate in account over time and manage cash flow. Government considering allowing employers to transfer 10% of unused funds to employers in supply chain or sector from 2018. 18

Levy from April 2017 When not enough funds in DAS Buy directly from a provider following the same process as non-levy paying employers. Employers make contribution to extra cost of training that month and pay directly to provider according to payment schedule agreed with provider. Government and employers co-invest : government pay 90%, employers pay 10%. Funds taken from DAS each month to pay training provider DfE work out if the amount paid is less than 100% of amount due that month. DfE calculate how much more has to be paid (using the rate set for co-investment). Provider lets employers know when co-investment needs to be paid. DfE pays government share direct to provider. DfE asks provider to confirm employer has made contribution. 19

Levy from April 2017 Employers who operate across the UK Apprenticeships a devolved policy; authorities in each of UK nations manage own apprenticeship programmes, including how funding spent on apprenticeships. The levy will apply to employers across the UK but the amount entering the DAS account will be how much an employer has available to spend on apprenticeship training in England. Scotland, Wales and NI have their own arrangements for supporting employers to access apprenticeships. To calculate how much employers will have to spend the DfE plan to use data they hold about the home address of employees. This data will be used to work out what proportion of an employer’s pay bill is paid to employees living in England. The approach is being tested and the DfE will provide more details in October 2016, and the assessment will be made in early 2017. The DfE are seeking views on proposals that employers should be able to use their digital funds (and access government co-investment in other cases) for training employees whose main workplace is England. 20

4.3 Apprenticeship funding: from May 2017 (proposals)

Funding from May 2017 The levy How funding will flow Employer contribution Additional payments Funding rates Funding flow Contribution Additional payments Rates Levy Frameworks and standards Frameworks Standards Non-levy 22

Funding from May 2017 How the funding will flow Funding flow Frameworks and standards Levy Employer and government contribution into DAS, paid by employer to provider via DAS. Non-levy Employer contribution paid to provider according to agreed schedule, government contribution to provider paid via SFA contract. All employers will use DAS to pay for training and assessment by 2018 earliest, 2020 latest. 23

Funding from May 2017 Employer contributions Frameworks and standards Levy Employer pays 100%. Government tops this up by 10%. Once levy spent, employers use same model as non-levy payers. Non-levy For all age apprenticeships employers co-invest 10% and government co-invests 90% (mandatory). No funding reduction for apprentices aged 24+. Funding band is the maximum amount towards which government will co-invest 90%. Small employers (<50) do not have to co-invest 10%; government pays 100%. 24

Funding from May 2017 Additional payments Frameworks and standards Levy and non-levy 16-18 year-olds attract £1,000 to employer and £1,000 to provider. 19-24 year-old care leavers or with an LA EHC plan attract £1,000 to employer and £1,000 to provider. Small employers (<50) do not have to co-invest 10%. Government pays 100%. Flat rate of £471 for English and maths direct from government to provider. £150 each month can be claimed by providers from government for those with learning or physical disability requiring extra learning support. Where there is evidence of greater learning support needed additional funding may be provided. No area uplifts or disadvantage funding. 25

Funding from May 2017 Funding rates All apprenticeships will be allocated in one of 15 funding bands, upper limit ranges from £1,500 to £27,000. Upper limit of each funding band caps the maximum amount of digital funds an employer who pays the levy can use towards an individual apprenticeship, and the maximum price government will ‘co-invest’ towards where an employer does not pay the levy or has insufficient digital funds and is eligible for extra government support. Frameworks Levy and non-levy Individual framework pathways allocated to nearest funding band based on current rate of government funding for adult apprentices. For STEM framework pathways proposal is to increase the current government-funded adult rate by 40% at Level 2, and 80% at Level 3 and above, and then allocate to nearest funding band. Standards Allocated to new funding bands according to principles: Lower cost standards allocated to the funding band that most closely aligns with current funding band standard is assigned to. Standards assigned to widest and highest cost funding band, (£12,000 to £27,000) allocated to new band within this range. New system will recognise standards are ‘more expensive to deliver’ by allocating higher funding bands to apprenticeship standards, relative to equivalent frameworks. 26

Funding from May 2017 Funding rates Number Band upper limit 1 £1,500 2 £2,000 3 £2,500 4 £3,000 5 £3,500 6 £4,000 7 £5,000 8 £6,000 9 £9,000 10 £12,000 11 £15,000 12 £18,000 13 £21,000 14 £24,000 15 £27,000 27

Funding from May 2017 Comparing old and new Basic funding rate. 16-18, 19-23, and 24+ and employer contributions. Small/large employers. Achievement/successful completion, and completion. Negotiation (standards only). Area uplift (frameworks only). Disadvantage funding (frameworks only). English and maths. 28

Funding from May 2017 Comparing old and new Current Frameworks Standards Funding rate After May 2017 29

Funding from May 2017 When proposals will be confirmed October 2016 final funding information published Bands that will apply in the new system. Final levels of government support. Additional support for 16-18-year-olds. English and maths payments Final full set of technical rules Confirmation of how proportion of pay bill paid to employees living in England will be calculated. 30

5. The employer journey and the funding journey

The employer journey Plan apprenticeship, choose training and assessment 1 Advertise a vacancy to recruit an apprentice 2 Manage the funding for your apprenticeship 3 Start a new apprenticeship contract 4 Estimate how much funding you will have to spend on apprenticeships Find the right apprenticeship training for your business Choose a training provider Choose who will assess your apprentice at the end of their apprenticeship Work with your training provider to post an apprenticeship opportunity If you are a levy paying employer, carry on to next steps If you are a non-levy paying employer, work with your training provider to complete next steps Register securely to set up an employer account View the balance of your levy and any previous transactions Forecast your funding available in the future Confirm support available if you don’t have enough levy Agree how much you want to pay a training provider from your levy account Manage payments to your training provider and see when they will be paid

The funding journey Levy paying employer Non levy paying employer HMRC collect levy Employer views funds in digital account Employers employs apprentice and commits to training Employer receives training for apprentice Payments to providers taken from digital account Unused funds expire after 18 months Non levy paying employer Employers employs apprentice and commits to training Employer receives training for apprentice Employer pays proportion of cost direct to training provider SFA pays proportion of costs to provider Training provider Registers with SFA Commits to provide apprenticeship training Provides training to apprentice Provides information to SFA that training taken place and employer made contribution Paid by SFA and balance by employer

6. Apprenticeship providers

How providers will be contracted and funded From May 2017 SFA procurement and contracting Digital apprenticeship service Levy-paying employers N/A Purchase apprenticeship delivery direct from providers using DAS. Non-levy paying employers Procured and contracted by the SFA for a transition period, until at least 2018, for apprenticeship delivery (as now). Employers will continue to make payments direct to providers. Providers will receive government contributions. 2018 earliest and 2020 latest, will purchase apprenticeship delivery direct from providers using DAS in same way as levied employers.

How providers can offer apprenticeships SFA currently uses Register of Training Organisations (RoTO) to obtain assurance about providers delivering publicly funded education and training. Now want to provide assurance focused solely on apprenticeships, and allow employers to deliver training to own employees. Will introduce new Register of Apprenticeship Training Providers (RoATP). All providers must apply to join the RoATP if they want to deliver apprenticeships from May 2017. SFA will run a procurement exercise for the delivery of apprenticeship training to non-levied employers until at least 2018 (i.e. until these employers join levied-employers and use the digital apprenticeship service to purchase training). Expectation that this will be one-off procurement. RoATP will be separate from the RoTO (which will continue to operate for the Adult Education Budget and Advanced Learner Loans) Organisations currently on RoTO to deliver apprenticeships will need to apply to the new register. No automatic transfer. Three application routes: main route, providers adding value to delivery of apprenticeships, employers who want to train their own employees (employer-provider). Due to open 3 October but delayed; new timeline expected shortly.

7. Key documents

Key documents Proposals for apprenticeship funding from May 2017 Proposals for apprenticeship funding from May 2017: includes proposed funding bands for individual apprenticeship frameworks and standards.   A new register for apprenticeship providers, and a guide for employers Proposals for a new Register of Apprenticeship Training Providers : explains how organisations will apply if they want to deliver apprenticeship training from May 2017. Employer-provider guide: explains what employers need to do to become an apprenticeship training provider. How the apprenticeship levy will work DfE briefing on the Apprenticeship levy: how it will work: updated and provides more information for levy paying employers. Further information about the new apprenticeship system Information on the apprenticeship levy: with data broken down by size and sector and total apprenticeship budget. Online levy calculator: employers can use to estimate if they will pay the apprenticeship levy, how much an organisation will have available to spend on apprenticeships and how much government will contribute.

8. Pearson support

Summaries of key documents Funding Focus – Apprenticeship funding after April 2017 Funding Focus – Proposed allocation of frameworks and standards to new funding bands from May 2017 Funding Focus – Comparing proposals for new apprenticeship funding from May 2017, with existing funding Funding Focus – Proposals for a Register of Apprenticeship Training Providers, and Guidance for employers wanting to become apprenticeship providers Funding Focus – Apprenticeship levy All of the above are available on the Pearson Funding News website. Also, the Pearson Handy Guide to Apprenticeship reform is available which is designed to give a quick overview of Apprenticeship reform in England. It is written to help you understand the different changes that are currently being implemented or that are due to be introduced throughout 2016, 2017 and beyond.

Questions? sian.owen1@pearson.com