Employers will have to pay the cash upfront and then claim it back under a new mandatory cash contributions system, with wages on top.
With 80 per cent of the nursery sector comprised of two settings or less, this system is likely to affect the majority of early years businesses across the country.
There had been speculation that it could be delayed or even scrapped after the CBI and other employer’s groups expressed voiced opposition to the scheme.
The levy is a tax on large employers with paybills over £3 million.
Other key details:
- The reforms include giving £2,000 per trainee to employers or training providers that take on 16- to 18-year-old apprentices or young care leavers. Employers with fewer than 50 employees will also have 100 per cent of training costs paid for by Government if they take on these apprentices.
- A new register of training providers will be introduced from April 2017. Under the scheme employers will negotiate the price of training directly with training providers and this is designed to help employers choose.
- Apprenticeship frameworks and standards from April 2017 will be funded from one of 15 bands, each with an upper limit - how much total funding will be attached to each type of apprenticeship - ranging from £1,500 to £27,000. The early years apprenticeship standards have yet to be released after a political struggle over GCSEs.
Those paying the apprenticeship levy will receive a 10 per cent Government contribution for their monthly contribution. On top of this, those without enough money in their accounts after paying the levy will be given subsidies of 90 per cent of these additional costs.
Under the current system, the government provides all of the funding for apprentices aged between 16 and 18. For those aged 19- to 24, the contribution is 50 per cent and for over-25s a contribution is made.
The AELP says that the Government is right to press ahead with the levy, but that it is worried about the impact of the mandatory cash contributions scheme on small business.
A spokesman said the proposed subsidy rate of 90 per cent meant that ‘mass disengagement may now be avoided’ from small employers, but added a cash contribution ‘could still have a very negative impact.’ He said the ‘AELP has asked ministers to keep the matter under review. The requirement should be quickly phased out if our fears about the impact are realised.’
The Government says it is investing £2.5 billion by 2020 in apprenticeships, with the money going to meet the Conservative manifesto pledge of 3 million more apprenticeships by 2020.
The CBI has pointed out that this is 3 million more apprenticeship starts and not qualified apprentices.
The new apprenticeships and skills minister Robert Halfon called apprenticeships a ‘ladder of opportunity’.
He said, ‘Our 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.’
- The consultation on these funding proposals can be found here