By Andrea London
The government's new Apprenticeship Levy came into effect this year; on 6 April 2017 and applies to employers operating in the UK who have a salary bill of more than £3 Million. A levy-paying employer must pay a 0.5% levy on their salary bill each month and as a result is given an Apprenticeship Levy allowance of £15,000 per annum to use on 'applicable training'.
This is where the name 'Apprenticeship Levy' is somewhat misleading; since the Levy need not be used only on apprenticeships; but can be applied to any of the training which the government has deemed appropriate. We assess here what the Apprenticeship Levy actually covers, how employers are affected and what the levy can be used for.
Many employers now also have training reimbursement policies as it is now fairly commonplace for employers who offer training to their employees which has a substantial cost to the business to require reimbursement of some or all of those training costs should they leave during or within a specified number of months after completing their training.
So we look at what, if any, contributions or reimbursements to their training employees can (still) be required to make.
The Apprenticeship Levy
To use the Levy fund employers must sign up with the Apprenticeship Service, through which they can then receive levy funds to pay for management of their apprenticeships and/or make payments to their chosen training provider.
In order to access the Apprenticeship Service and utilise their levy funds, employers must operate within the terms and conditions of their Apprenticeship Agreement for Employers which they hold with the Education and Skills Funding Agency (SFA).
Under this agreement, the employer agrees to abide with the SFA's published funding guidance (which came into effect on 1 May 2017). This guidance covers what an apprenticeship is and what can be funded.
Once levy funds have been exhausted, employers can then access government-employer co-investment ('Co-Investment').
Under Co-Investment, employers must pay 10% of the cost of the apprenticeship/training and the government will pay the remaining 90% up the funding band maximum for that apprenticeship/training.
If the cost of the apprenticeship/training is higher than the funding band maximum then the employer must pay the difference out of its own budget. Co-Investment should also be available for non-levy paying employers in 2018.
What training can be funded by the Apprenticeship Levy?
The Levy can be used for significantly more training programmes than *just* an apprenticeship. The SFA guidance defines an apprenticeship as 'a job with an accompanying skills development programme'.
This does not solely have to be an apprenticeship in the commonly used sense but can encompass any employee training that complies with the government criteria of regulated training.
The 'Apprentice' can commence a new job role, or have an existing job role where they need significant new knowledge and skills. An apprenticeship/the training must last for at least one year and an Apprentice must spend at least 20% of their time in off-the-job training as well as gaining wider employment experience as part of the apprenticeship training requirements.
Can levy-paying employers require employees to contribute to or reimburse the cost of apprenticeship training?
The rules in the SFA guidance expand on the legislative requirement, stating [at 52.4] that in order for employers to use funds in their digital account or use Co-Investment, the individual must not (amongst other requirements) be asked to contribute financially to the direct cost of their learning or assessment (including where an individual leaves their programme early).
The guidance states however that if the funding rules are breached, then the SFA may take action to recover all or part of the government funding from the employer - including Co-Investment funding.
As levy-paying employers are bound by the SFA guidance, it is clear that their employees cannot be asked to contribute towards any training costs that have been funded by the levy or through Co-Investment. This would therefore include, at the other end of the program, seeking any reimbursement of the training costs expended.
It is also worth noting that Levy training is not paid as a lump sum and training providers are paid on a monthly basis. Therefore, should an employee leave his or her employment during their apprenticeship/training the employer can immediately cease payments to a training provider. Employers will also not be required to pay for the remainder of the apprenticeship/training.
What is not clear, however, is whether employers can recover training costs relating to any top up contributions that they have made to the training provider to pay for training beyond the Levy and /or available government funding.
The guidance is silent on this point and so although therefore it is potentially arguable that the employer could be permitted to recover such top-up funding from the employee, it is unlikely since the wording of the guidance suggests (although is not definitive) that the employee contribution restriction is absolute.
Not all employee training costs will relate to courses that receive the necessary accreditation for payment from the Levy fund or through Co-Investment.
Accordingly, there is no reason why - as currently - employees undertaking such training (paid for solely by their employer) should not be required to reimburse or contribute towards such training costs in accordance with the terms of their employment.
The SFA have confirmed that they consider it is acceptable for an employer to have two separate training policies in this regard.
So, are dual training policies viable?
Employers therefore can, and should (if applicable) consider amending their training policies and/or employment terms to make a distinction between training funded wholly or partly under the Apprenticeship Levy framework; which will not be eligible for employee reimbursement and any other training funded purely by the employer outside the framework (which will be eligible for employee reimbursement).
For any further guidance or information on this matter or any other employment matters, please contact Andrea London, Partner and Head of Employment.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.