Apprenticeship funding update with the SFA

Transcription

1 Apprenticeship funding update with the SFA 18/08/16 #levyconsult Agenda Welcome and introduction to apprenticeship funding reforms Nick Linford, author of the Complete Guide to Funding Apprenticeships New update on levy funding for small and large employers Kirsty Evans, SFA s Director of Funding and Programmes Break for refreshments Entry into the market revealing the new apprenticeship provider register Kirsty Evans, SFA s Director of Funding and Programmes Break for lunch Paying the apprenticeship levy Nick Linford Modelling the impact of the new levy system Nick Linford Workshop end #levyconsult lsect.com 1

2 Thank you to our exhibitor today #levyconsult Introduction to apprenticeship funding reforms Nick Linford #levyconsult lsect.com 2

3 What four? 1. Four years so far In June 2012 Doug Richard was asked by the government to review apprenticeship content and funding 2. Four skills ministers so far John Hayes Matt Hancock Nick Boles took over Sept 2012 took over July Four consultations so far Robert Halfon Took over July 2016 Published last Friday and closes in three weeks #levyconsult 4. Key changes 1. All frameworks to be replaced by standards Key changes: Standards are being designed by employer groups, require an endpoint-assessment and often don t require any qualifications. Frameworks being switched off in phases through to 2019/ National funding rates replaced by negotiated rates Key changes: From April 2017 the SFA will no longer determine apprentice funding values using a formula. Instead, providers and employers will negotiate a level of subsidy within one of 15 upper limits. 3. Extra 1bn for apprenticeship via a levy Key changes: From April employers will pay an extra 0.5% of their payroll above 3m into their levy pot. It s expected this will generate 2.5bn per year for England and providers will access this pot via a new Digital Apprenticeship System. 4. A 90% subsidy when the employer levy pot is empty Key changes: If an employer has no levy pot (98% of employers) or it runs out, the SFA are consulting on paying 90% of the negotiated rate on condition the employer has paid 10% in cash first. In the pilot, running since 2014, the subsidy was only 67% once 33% paid in cash #levyconsult first (concern over introduction of a mandatory cash contribution). lsect.com 3

4 What s the reform really for? Reforms intended to be the solution to the problem of a lack of employer demand Employer demand will go up as will be in the driving seat and have ownership of: > The content & assessment (standards) > The funding (levy, fees and negotiation) > The oversight (Institute for Apprenticeships) But not everyone is convinced an employer owned model is also good value for the apprentice nor the public purse #levyconsult All published by DfE last Friday > How it will work [5,800 words] webpage > Proposals for apprenticeship funding in England from May 2017 [23 pages] PDF > Proposed funding bands for individual apprenticeship frameworks spreadsheet > Proposed funding bands for individual apprenticeship standards spreadsheet > Apprenticeship employer-provider guide [31 pages] PDF > Proposals for a Register of Apprenticeship Training Providers (RoATP) [18 pages] PDF > Information on apprenticeship levy payers [9 pages] PDF > Apprenticeship Funding Proposals online survey running until 5 September > Estimate my apprenticeship funding online tool #levyconsult lsect.com 4

5 Apprenticeship Funding Funding reform Lots of information about the new funding system has already been confirmed. Here s a recap lsect.com 5

6 What is the apprenticeship levy and who pays it? Starts on 6 April 2017, at a rate of 0.5% of pay bill, paid through PAYE. Applies to all employers in all sectors. Levy allowance is not a cash payment and cannot be used to purchase apprenticeship training. The allowance means only 2% of employers will pay the levy. 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. Paying the levy LEVIED EMPLOYER Employer of 250 employees, each with a gross salary of 20,000 Pay bill: 250 x 20,000 = 5,000,000 NON LEVIED EMPLOYER 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 5,000,000 = 25,000 Allowance: 25,000 15,000 = 10,000 annual levy payment Levy sum: 0.5% x 2,000,000 = 10,000 Allowance: 10,000 15,000 = 0 annual levy payment Employers pay their levy to HMRC, through the Pay As You Earn (PAYE) process. Single employers with multiple PAYE schemes will only have one allowance. Connected companies can share one allowance. lsect.com 6

7 Accessing levy funds to spend on training Levy funds will be available through a new digital service on gov.uk initially for levied employers. First funds appear in account in late May 2017 after the employer has completed their RTI submission for April How funds in the account will be calculated How much will each employer will have to spend through the English system? o If 100% of pay bill is in England account o If 80% of pay bill is in England account 100% of levy payment in digital 80% of levy payment in digital 10% government top up to monthly funds entering an employer s account. Funds will expire 18 months after they appear in the employer s digital account unless spent on apprenticeship training. Purchasing training The new funding system comes into effect on 1 May 2017 All apprenticeships started before 1 May will be funded through to completion according to the existing rules. Levied employers buying training from May 2017: employers can commit to apprenticeship starts from the beginning of May after selecting a provider and an apprenticeship programme funds will automatically leave the employer s digital account monthly, spread over the lifetime of the apprenticeship proposal to hold back 20% of the total cost, to be paid on apprenticeship completion. Non levied employers buying training from May 2017: employers that don t pay the levy will make payments for training direct to providers. lsect.com 7

8 Purchasing training 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. Funding reform more details On 12 August, Government published further proposals on detailed funding model. Employers and providers invited to feed back by 5 September. lsect.com 8

9 Provisional funding bands for frameworks Proposals We propose to allocate each individual framework pathway to: a single funding band, regardless of the age of the learner, or geographic location. the nearest funding band based on the current rate of funding the government pays providers for training adult apprentices. For all STEM framework pathways we propose to increase the current governmentfunded adult rate by 40% at Level 2 and 80% at Level 3 and above, and then allocate these frameworks to the nearest funding band. For this purpose, we propose to determine STEM frameworks by sector subject area. We invite feedback from employers and providers about this proposal, including how STEM should be defined. Provisional funding bands for standards Proposals Apprenticeship standards are employer designed and offer a more robust and relevant training experience. Recognised in current and future funding system by allocating higher funding bands to apprenticeship standards, relative to equivalent frameworks. We propose that existing apprenticeship standards are allocated to new funding bands as follows: lsect.com 9

10 Provisional funding bands Number Band limit 1 1, , , , , , , , , , , , , ,000 Every apprenticeship will be placed in a funding band 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. price that government will co invest towards, where an employer does not pay the levy or has insufficient digital funds. Employers can negotiate the best price for the training they require. If employers want to spend more than the funding band limit, using their own money, then they will be free to do that. Funding bands do not have a lower limit ,000 Provisional funding bands for standards Lower cost standards should be allocated to the nearest funding band to current band. Standards currently assigned to the widest and highest cost funding band will be allocated to a new band within this range. Taken into account: i. actual prices employers have negotiated with providers ii. evidence from Trailblazer employers on estimated costs of eligible apprenticeship training iii. funding bands set for equivalent frameworks iv. the level and nature of the training, and consistency across similar types of apprenticeship standard. We invite feedback from employers and providers on these proposals. lsect.com 10

11 Co Investment There are two types of employers who will benefit from government support towards the cost of their apprenticeships training: 1. Employers who haven t paid the levy and want to purchase apprenticeship training from a provider 2. A levy paying employer with insufficient funds in their digital account to pay for the cost of training and assessment they want to purchase. Government 90% We propose that: the government pays 90% of the costs of training and assessment the employer will be responsible for paying 10% of the costs. Additional support for small employers Proposals Employers with fewer than 50 people working for them will be able to train 16 to 18 year old apprentices at no cost. The government will pay 100% of the apprenticeship training costs for these individuals. The government will extend this to small employers who take on a 19 to 24 year old apprentice who was formerly in care or has a Local Authority Education, Health and Care plan. The government will pay 100% of the apprenticeship training costs for these individuals. lsect.com 11

12 Additional support for apprentices Funding for year olds Government proposes to pay 1,000 to employers, and a further 1,000 to training providers if they train a year old apprentice. Disadvantaged young people Government proposes to pay 1,000 to employers, and a further 1,000 to training providers if they train year olds leaving care or who have a Local Authority Education and Healthcare plan. Funding for additional learning support We propose to pay training providers up to 150 a month to support these learners, plus additional costs based on evidenced need. Funding for English and Maths training To meet minimum standard of English and maths we propose to pay training providers 471 for each of these qualifications (Level 1 and 2). Funding rules Transferring funding During 2018, we propose to introduce means for employers to transfer up to 10% of the levy funds, to another employer with a digital account, or to an ATA. Prior qualifications Employers will be able to train any individual to undertake an apprenticeship at a higher level than an existing qualification. An individual can be funded to undertake an apprenticeship at the same or lower level to acquire substantive new skills. Cross border funding Propose to apply a single test for whether apprenticeship training can be funded through the English system: whether the apprentice s main place of employment is England. Workplace is where the apprentice is expected to spend the majority of their time during their apprenticeship. Continuing to work with Devolved Administrations on the scope for reciprocal funding. lsect.com 12

13 Next Steps In August we published apprenticeship funding proposals and are inviting feedback. You can provide feedback through GOV.UK. October 2016 The final funding bands that will apply in the new system. The final, full set of technical rules that underpin the funding system. Confirmation of how the proportion of pay bill that is paid to employees living in England will be calculated. December 2016 Further employer guidance from HM Revenue and Customs (HMRC) on how to calculate and pay the apprenticeship levy. 25 ANNEXES 26 lsect.com 13

14 How the funding system will work 10% Top up Levy paying employer HMRC collect levy (PAYE) Employer views funds in digital account to spend in England Employs apprentice and commits to training Receives training for apprentice Payments to providers taken from digital account Unused funds expire after 18 months Non levied employer Employs apprentice and commits to training Receives training for apprentice Employer pays for proportion of cost direct to training provider SFA pays govt proportion of costs to the training provider Government Training Provider Registers with SFA Pass data on levy payments from HMRC to BIS Employer and Provider Identity Assurance Commits to provide apprenticeship training Provides training to apprentice Timely data on training Provides info via ILR to SFA that training has taken place & that employer has made contribution Check training is complete Paid by SFA and balance by employer If funding unlocked: pay provider 27 The Digital Apprenticeship Service NOTE Employers who don t pay the levy will not need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least When we ask them to start using the digital apprenticeship service to pay for apprenticeship training, we will help them to prepare. 28 lsect.com 14

15 WITHIN THE FUNDING BAND LIMIT Funding limits how they work Example funding band limit = 6,000 OVER THE FUNDING BAND LIMIT Example funding band limit = 6,000 Price you negotiate with your training provider = 5,000 The cost is within the funding band limit Price you negotiate with your training provider = 7,500 The cost is above the funding band limit With enough funding in your account Without enough funding in your account With enough funding in your account Without enough funding in your account 5,000 will be deducted from your digital account over the life of the apprenticeship. If you have 0 in your account we will pay 90% ( 4,500) and you will need to pay 10% ( 500). If you have digital funds available, these will be used first, and then we will pay 90% of the remaining costs, and you will pay 10%. 6,000 will be deducted from your digital account over the life of the apprenticeship. You will be responsible for paying 1,500. This payment can t be made from your digital account If you have 0 in your account we will pay 90% ( 5,400) and you will need to pay 10% ( 600). This is the maximum payable within the limit of the band. You will also be responsible for paying the additional 1,500. This payment can t be made from your digital account WITHIN THE FUNDING BAND LIMIT Funding limits how they work Example funding band limit = 6,000 OVER THE FUNDING BAND LIMIT Example funding band limit = 6,000 Price you negotiate with your training provider = 5,000 The cost is within the funding band limit The training is for a year old apprentice Price you negotiate with your training provider = 7,500 The cost is above the funding band limit The training is for a year old apprentice Employer of under 50 people Employer of under 50 people Government will fund 100% of the cost of apprenticeships training and assessment for employers who employ fewer than 50 people. In this case: We will pay 100% ( 5,000) You will pay 0% ( 0). Government will fund 100% of the cost of apprenticeships training and assessment for employers who employ fewer than 50 people. In this case: We will pay 100% ( 6,000) You will pay 0% ( 0). You will be responsible for paying in full the amount above the funding band limit ( 1,500). lsect.com 15

16 Proposals for a Register of Apprenticeship Training Providers Summary of discussion paper Kirsty Evans Director: Programme Delivery and Implementation August 2016 Transition All SFA funding agreements end 31 July 2017 Apprenticeship funding for 2017 in 3 parts: Existing learners Funding for employers who will pay the levy Funding for employers who will not be paying the levy SFA commitment to learners completing their programmes No transfer to the new register from Register of Training Organisations (RoTO) RoTO continues for Adult education Budget and loans lsect.com 16

17 Content Background to apprenticeship reforms Why a new register is needed for apprenticeships Key proposals and questions for discussion Key dates 33 Background to apprenticeship reforms The aim: A high quality, employer led apprenticeship system....underpinned by a high quality, flexible and responsive provider base. Leading to: Significant change in the apprenticeship provider base Significant investment in, and demand for, apprenticeships over the next few years Supported by: The apprenticeship levy The digital apprenticeship service lsect.com 17

18 A new register for apprenticeships To support an employer led system, a new register will: o Provide assurance to employers and government specifically for apprenticeships o Allow employers who wish to deliver training to their own employees to do so o Set a high bar for providers to meet if they want to deliver apprenticeships in the future. Any provider wanting to deliver apprenticeships to any employer from May 2017 must apply to join the new Register Procurement to work with employers who will not be paying the levy Launch date October Eligibility to apply: proposals We propose that any organisation that wants a role in delivering apprenticeship training from May 2017 must apply to the Register We also propose that intermediary bodies or other body that does not itself deliver education and training to apprentices should not be eligible to apply to the RoATP Q1. Do you agree with the proposal that all organisations wanting to deliver apprenticeship training must apply to the new RoATP, and that they must directly deliver some apprenticeship training themselves? Q2. In what instances do you think it might it be difficult to move to this and why? 36 lsect.com 18

19 Subcontracting: proposals Our proposal is that sub contracting should only be used to complement the main provider s offer, in order to meet employers needs The main provider would always need to deliver a significant majority of each framework or standard they contract with the employer to deliver, and would need to get the employer s agreement to subcontract parts of it Q3. Do you agree with the proposition that sub contractors and supporting providers should be limited to delivering significantly less than half of each apprentice s training and therefore receiving significantly less than half of the agreed price for each apprenticeship? Q4. Do you agree that this proposition should apply to all providers, including employer providers wishing to act as a supporting/sub contracted provider to a main provider? Application routes: proposals The majority of organisations will apply through a main application route The supporting route The route for employers who only want to train their own staff Q5. What merit is there of having a separate supporting application route for providers who only have capacity and capability to deliver parts of apprenticeships on a small scale, in support of the main provider s delivery? Q6. Do you agree with the proposal for a separate application route for employers wishing to deliver to their own staff? lsect.com 19

20 Applicant tests: proposals Due diligence test Financial health test Quality, capacity and capability tests Q7. Do you agree with our proposals for the financial health test? If not, in what areas would you suggest we amend our approach? Q8. What specific questions should we ask providers to determine whether they are a high quality apprenticeship training provider? Q9. What evidence of quality, capacity and capability should organisations who are newly established, have no previous experience of delivering apprenticeships or do not have an Ofsted inspection or QAA review on record be asked to provide? Eligibility and timeline: proposals Eligibility to apply Timeline for applications Q10. How do we ensure there is sufficient, high quality apprenticeship provision for all employers to access through this register process? Q11. Do you agree with our proposal to open the RoATP four times a year? If not, how often should it be open and why? lsect.com 20

21 Significant dates 5 September: survey closes 3 October: Register opens for applications February 2017: first edition of the RoATP published October 2016: we will invite applications in for apprenticeship delivery to non levied employers. Successful organisations will be told the outcome by March Q12. Are there any unintended consequences of our planned approach and, if so, what are they and how can we avoid them? Q13. Do you have any final comments about our planned approach? Paying the apprenticeship levy Nick Linford #levyconsult lsect.com 21

22 Paying the levy In December 2016 there will be information about further employer guidance from HMRC on how to calculate and pay the apprenticeship levy. levy how it willwork/apprenticeship levy how it will work#paying the apprenticeship levy Digital Apprenticeship System calculator lsect.com 22

23 Digital Apprenticeship System calculator Digital Apprenticeship System calculator lsect.com 23

24 Digital Apprenticeship System calculator Digital Apprenticeship System calculator lsect.com 24

25 The Digital Apprenticeship System [Not online yet, I got these screen shots ed to me from the SFA] lsect.com 25

26 Modelling the impact of the new levy system Nick Linford #levyconsult Calculating funding for apprenticeships There are now three active funding methodologies Framework starts before 1 st May 2017 Listed rates unchanged from 2012/13, with 20% for achievement, double payment in month one and variations for: delivery location; disadvantage; age at start; size of employer and no mandatory employer cash contribution. Standards starts before 1 st May 2017 Pilot upper limits worth 2/3 rd of provider income with mandatory employer cash contribution (1/3 rd ) substantial employer incentives for 16-18, small employers and end-point assessment achievement Framework and standards starts from 1 st May upper limits worth 100% for levied employers based on negotiation up to the upper limit, 100% of upper limit for SMEs with 16-18s from SFA for as SMEs and 90% of negotiated upper limit for non-levied employers. #levyconsult lsect.com 26

27 Framework starts before May 2017 funding (per qual) BR x PW x DU x ACU x Discount = s Base rate Cash rate listed on LARS for fully-funded based on 12/13 SLN & National Funding Rate (NFR) NFR 2, NFR 2, NFR 2, is 7.23% more than % less than Programme Weighting Weighting for sector type, listed on LARS PW Weighting A (Base) 1 B (Low) 1.12 C (Medium) 1.3 D (High) 1.6 E (appren only) 1.72 G (Specialist) 1.72/1.92 H (appren only) 1.2 J (appren only) 1.25 K (appren only) 1.5 L (appren only) 1.15 Disadvantage uplift Weighting based on learner home postcode in the ILR. Could be as much as 32% (1.32) extra in most deprived area. When planning use a historical average Area cost uplift A south east (mainly London) weighting based on main delivery location. E.g. Up to 20% (1.2) extra if delivered in central London Co-funding & employer discounts 19+ cofunding means the funding is halved (0.5) 19+ large employer (1000+ employees) discount reduces funding by a further 25% (0.75) Funding 80% for monthly onprogramme payments (double in month one) 20% for achievement of Eng and Maths and rest when fully achieved framework Unweighted funding example in 14/15 and 15/16 Level 2 accounting framework (excl. DU & ACU) L2 accounting Level 2 Certificate in Accounting LARS rate 3, Level 1 Functional Skills in Mathematics Level 1 Functional Skills in English co-funding discount = 50% Large employer discount (LED) = 25% L2 accounting SLN from 2012/ X Level 2 Certificate in Accounting Level 1 Functional Skills in Mathematics Level 1 Functional Skills in English Total Compared to total LARS x LARS x 0.5 LARS x 0.5 x LED LED 4,142 1,931 1,448 1,545 1, ,084 2,655 1,991 2,124 1,593 52% 39% 42% 31% Not on LARS (but same as 12/13). ICT is 224 for and ICT rate on LARS is 345 (before 50% taken off for co-funding) LARS x 0.5 x 0.8 LARS x 0.5 x 0.8 x 0.75 lsect.com 27

28 Standards starts before May 2017 funding DfE or BIS payments via SFA Funding cap band Core Gov Contribution (CGC) [max] 2,000 3,000 6,000 8,000 13,000 18, employer incentive [fixed] ,800 2,400 3,900 5,400 Small employer incentive [fixed] ,200 1,950 2,700 Completion employer incentive [fixed] ,200 1,950 2,700 Maximum total government contribution 3,600 4,900 9,600 12,800 20,800 28,800 New for 2016/17 Provider income Employer contribution for training and assessment (to achieve max cap) 1,000 1,500 3,000 4,000 6,500 9,000 Core Government Contribution (CGC) 2,000 3,000 6,000 8,000 8,000 18,000 Co payment' : Provider income (excluding Eng & 471 each) 3,000 4,500 9,000 12,000 14,500 27,000 Total employer incentives Employer contribution greater than fee? Large employer (50+ staff) with completed 19+ keeps Large employer (50+ staff) with completed keeps Small employer (<50 staff) with completed 19+ keeps Small employer (<50 staff) with completed keeps Net cost to large employer (50+ staff) with completed 19+ Net cost to large employer (50+ staff) with completed Net cost to small employer (<50 staff) with completed 19+ Net cost to small employer (<50 staff) with completed ,200 1,950 2,700 1,100 1,400 2,700 3,600 5,850 8,100 1,000 1,000 1,800 2,400 3,900 5,400 1,600 1,900 3,600 4,800 7,800 10, ,000 2,100 2,800 4,550 6, ,200 1,600 2,600 3, ,300 1,800 Number Band limit 1 1,500 Framework and standards starts from 1 May 2017 (proposed) 2 2, , , , , , , , , , , , , ,000 Funding for year olds Government proposes to pay 1,000 to employers, and a further 1,000 to training providers if they train a year old apprentice. Funding for additional learning support We propose to pay training providers up to 150 a month to support these learners, plus additional costs based on evidenced need. Disadvantaged young people Government proposes to pay 1,000 to employers, and a further 1,000 to training providers if they train year olds leaving care or who have a Local Authority Education and Healthcare plan. Funding for English and Maths training To meet minimum standard of English and maths we propose to pay training providers 471 for each of these qualifications (Level 1 and 2). 56 lsect.com 28

29 Assigning upper limits to frameworks Document simply says: We propose to allocate individual framework pathways to the nearest funding band based on the current rate of funding the government pays providers for training adult apprentices. The SFA told me this morning: In the calculation we take into account co-funding for both and 24+; this means the rates are 50% of the overall published rate for and 40% of the published rate for 24+. We weight the rates according to the volumes of and 24+ starts; therefore in framework pathways where there are 24+ starts the calculated rates will be lower than the 50% in the example. We also assign the pathway to the closest band, not the next band above the rate. For example; a calculated rate of 1,700 is assigned to the 1,500 band but a rate of 1,800 is assigned to the 2,000 band. Example impact on framework funding Framework (Level 2) Health and Social Care Business Administration Hospitality and Catering Upper limit + 1k incentive to provider Combined LARS weighted rate Current funding Variance Shortfall Current funding in central London Variance Shortfall 2,500 4,199 4,503-1,699-44% 5,404-2,904-54% 3,000 3,983 4, % 5,126-2,126-41% 2,500 3,953 4,240-1,453-41% 5,088-2,588-51% Management 2,500 3,640 3,904-1,140-36% 4,685-2,185-47% Customer Service 2,500 3,352 3, % 4,314-1,814-42% lsect.com 29

30 Final Q&A Nick Linford #levyconsult lsect.com 30