Employers that pay the apprenticeship levy will have the option to transfer 10 per cent of their annual apprenticeship funds to other organisations from April 2018 – giving them extra flexibility in how they use it to help close skills gaps, the government has announced.
The Education and Skills Funding Agency said that employers wishing to transfer a proportion of their annual levy funds will be able to choose who they want to give it to – providing their designated recipient wants to receive it and both parties are registered on the apprenticeship system.
Up to 10 per cent of levy funds can be transferred, calculated from the total of the employer’s declared levy value and the government’s 10 per cent top-up, including a percentage for English apprenticeships.
The apprenticeship levy, introduced on 6 April 2017, applies to employers with an annual pay bill of more than £3m.
In its guidance to transferring apprenticeship service funds, the government confirmed that any employer registered on its apprenticeship service is eligible to receive and use these transferred funds, and that the money can only be used to pay for the training and assessment cost of the apprenticeships agreed with the receiving employer.
There are no restrictions as to whom employers can transfer the funding to, however.
Funds are to be paid monthly for the duration of the apprenticeship, and companies making transfers and those receiving funds are required to agree on the details of the transfer, including factors such as how many apprentices it will cover.
Jake Tween, head of apprenticeships at ILM, welcomed the development, which he told People Management would give employers “more control over apprenticeships” and represented a shift towards genuine employer ownership.
Tween said this flexibility was what “employers have asked for since the consultation on the levy first took place in 2015. It is extremely likely to have a positive effect on productivity.”
Tween added that it would also incentivise employers to take on more apprentices and upskill their existing workforces, and had “huge potential to strengthen the ties between employers in the wider supply chain, fostering more seamless collaboration and greater portability of skills”.
The regulations the government will introduce alongside this new option include that where an organisation currently has an apprentice funded by a transfer, it cannot transfer funds to another employer and, once a transfer is made, organisations cannot refund it to the sending employer.
Should the business funding another employer’s apprenticeship run out of funds, the government will pay 90 per cent of the remaining cost, and the receiving organisation will be required to pay the remaining 10 per cent contribution – known as co-investment. But employers are free to choose to which organisations funds can be transferred.
Mark Dawe, CEO of the Association of Employment and Learning Providers (AELP), told People Management that AELP found it “interesting” that the government’s guidance was that the transfers can be given to any employer the levy payer chooses.
The difficulty in policing “big employers helping out smaller firms in their supply chains” may be the reason the government has introduced this level of flexibility, he said.
The change may be a response to companies calling for greater flexibility in the apprenticeship levy. Assessing the early impact of the apprenticeship levy, a report from the CIPD published on 11 January found that 53 per cent of employers that pay the levy wanted a more flexible ‘training’ version.
A study released this week by recruitment company Alexander Mann Solutions revealed that a third of businesses viewed apprentices as the most valuable source of emerging talent in 2018. Twenty-eight per cent of those surveyed were finding it difficult to fill graduate roles this season.
With Britain’s exit from the EU on the horizon, upskilling British citizens through apprenticeships and other training is widely required to help close the skills gaps.
This is particularly pertinent as potential new government visa restrictions may also result in fewer EU migrants working in the UK. The number of EU migrants arriving in the UK for work fell for the first time in a decade in February 2017, according to the Office for National Statistics.
Becci Newton, associate director of the Institute for Employment Studies, said the change was a positive move: “It is intuitively beneficial to all stakeholders – government, employers, potential apprentices – that other businesses can draw on these resources to enable them to provide training.
“The change should, in principle, increase the number of apprenticeship opportunities available,” even if the administrative demands could be off-putting to some, she added.