The government is seeking views on the details of its proposals for a new funding regime for apprenticeships, with a levy on larger businesses and training subsidies for smaller firms.

The levy charged to employers with a pay bill of more than £3m a year will be at a rate of 0.5%. As previously acknowledged, these larger businesses will have to pay two training levies, as they will also be paying CITB (link opens in new tab).

Under the proposals, employers that are too small to pay the levy – around 98% of employers in England – will have 90% of the costs of training paid for by the government.  

Levy-paying employers – those with a pay bill of over £3m that want to spend more on training than is in their ‘digital account’ – will get funding for 90% of their additional apprenticeship training costs.

Employers with fewer than 50 employees will  have 100% of training costs paid for by government if they take on apprentices.

Extra support – worth £2,000 per trainee – will also be available for employers and training providers that take on 16- to 18-year-old apprentices or young care leavers.

“This announcement brings mixed news for construction, but it’s good that Government has responded to what we said on the challenges faced by smaller firms,” said CITB director of policy Steve Radley.

“The co-investment rate for non-levy payers is lower than expected, at 10%, with the remaining 90% covered by funds raised  by the levy.  It’s also encouraging to see that smaller firms will be exempt from co-investment if they take on a 16-18 year old apprentice. With more than half of all construction apprentices under the age of 19, this is a win for the industry. Companies of all sizes will also appreciate the £1,000 incentive for taking on one of these younger learners.”

The government has created a new online calculator to enable employers to understand how much levy they will pay and how they could use their digital funds to pay for training in future (link opens in new tab).

The proposed apprenticeship funding system will be made up of 15 bands, each with an upper limit ranging from £1,500 to £27,000. The upper limit of each funding band will cap the maximum amount of ‘digital funds’ an employer who pays the levy can use towards an individual apprenticeship or that the government will co-invest. All existing and new apprenticeship frameworks and standards will be placed within one of these funding bands and it will be up to employers to negotiate prices with providers. 

Radley added: “But there is still work to do to make sure ensure funding bands reflect the actual costs of training, so that apprenticeships are affordable for companies of all sizes. We will seek further clarification from Government on how the bands have been set, and together with industry, set out the likely impact on construction firms and their ability to take on apprentices.”

“We will now work with Government to ensure the Apprenticeship Levy works for the construction industry. Today’s proposals will inform our ongoing work to reshape the CITB grants scheme, so that it supports the most-needed skills and helps employers take on the apprentices construction vitally needs.”

Apprenticeships and skills minister Robert Halfon said: “We need to make sure people of all ages and backgrounds have a chance to get on in life. Apprenticeships give young people – especially those from disadvantaged backgrounds – a ladder of ‎opportunity.” He added that businesses can only grow and compete on the world stage if they have the right people, with the right skills. “The apprenticeship levy will help create millions of opportunities for individuals and employers. This will give our young people the chance they deserve in life and to build a highly-skilled future workforce that the UK needs.”

CBI director-general Carolyn Fairbairn said: “The Government’s announcement provides business with much needed information which shows some progress, including support for smaller firms, but fundamental problems remain. The Levy is too narrowly defined. It covers only one type of training and employers can only reclaim off-the-job costs. As a result, valuable forms of training risk being cut back, with quantity put ahead of quality.”

She added: “The April 2017 start date will not give firms sufficient time to prepare, so we urge the Government to delay implementation. Though business understands the fiscal challenges, it would be a great mistake to rush ahead before a viable scheme is ready.”

The new apprenticeship funding proposals look like a “fair settlement for small employers”, according to the Federation of Master Builders (FMB). FMB chief executive Brian Berry said: “Small and medium-sized firms do the majority of training in our industry – micro businesses (those employing fewer than ten people) alone train around half of all construction apprentices. It is therefore crucial that new apprenticeship funding arrangements work for these firms and do not impose higher costs on them.”

Berry continued: “The funding arrangements announced today appear to strike a reasonable balance, which takes into account the support that small employers need. Those employers with wage bills of less than £3 million, who will fall beneath the threshold for paying the new Apprenticeship Levy, will be required to pay 10% contributions towards the cost of training and assessment. This means most small employers should not end up paying more towards training costs than they currently do.”

However, he was concerned about the difficulties and complexities that might come with the new digital apprenticeship service. “Small firms express nervousness at the more hands-on role they are being asked to play in negotiating with and paying training providers, and there is real danger in the new system being time-consuming and complicated to a degree which puts off small firms from training.”

Employers and training providers can give feedback on the proposals by completing a survey by 5 September (link opens in new tab). Final funding proposals will be confirmed in October 2016.

Further details from https://www.gov.uk/government/publications/apprenticeships-proposals-for-funding-from-may-2017.