Review of Schools Forum Operation (11 June 2008 Meeting) s1

Schools Forum Agenda Item 8 Date: 12th October 2016

REPORT TITLE: Apprenticeship Levy and Public Sector Apprenticeship Target.

Report by Caroline Betts, Lead Commissioner for Employment & Skills Contact details: Telephone (03330) 130973; e-mail: [email protected]

1. Purpose of report

1.1 This paper will provide an overview of the newly introduced Apprenticeship Levy and Governments Public Sector Targets to Local Authority Maintained Schools and Academies that fall within the scope.

2. Recommendations

2.1 To note the potential implications of the Apprenticeship Levy.

3. Relevance to Strategic Plans

3.1 Government is committed to delivering three million apprenticeship starts by 2020. As part of this, two significant changes are planned:

3.2 The Enterprise Bill 2015; outlines what a public body is, and clarifies the term ‘public body’ includes all council maintained schools. It also sets apprenticeship targets for public bodies, superseding the Apprenticeships, Skills, Children and Learning Act 2009 and states that, public bodies will have a duty to publish information annually, detailing progress against targets. The target is set at 2.3% of the headcount.

3.3 The Apprenticeship Levy - Separately, an apprenticeship levy will apply to all employers, including public sector employers from April 2017 that have a pay bill of more than £3 million and more than 250 employees.

3.4 The aim and impact of these are:

 Increase the number of apprenticeships in the public sector;  Improve the capacity and capability of the public sector, ensuring that it benefits from the same positive impacts as the rest of the economy  Help to meet the government’s commitment to deliver 3 million apprenticeships by 2020; and  Ensure the public sector is leading by example in terms of the number (and quality) of apprenticeships

1 4. Background

4.1 In April 2017 the way the government funds apprenticeships in England is changing with the introduction the Apprenticeship Levy. Some employers (including some schools and academies) will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers. 4.2 In the Autumn Statement (2015), the Government proposed the Apprenticeship Levy, that will become a legal requirement for businesses with an annual pay bill of £3m and a staff head count of 250+ in April 2017. The rate of the levy will be set at 0.5% of an employer’s pay bill and will be collected by PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment and a 10% top-up to their monthly levy contributions from the government, and the funds generated will be available for them to spend on apprenticeship training through a new Digital Apprenticeship Service (DAS). This will affect maintained schools as they will be part of ECC and any large academies or academies in large multi- academy trusts.

4.4 The Levy can only be used to fund apprenticeships to fund training and assessment costs; however, apprenticeships can range from Level 2, equivalent to 5 GCSEs, to Level 5-8, equivalent to degree level. The Levy can be used to fund new recruits and offer progression routes for existing staff. The Levy will be held in an electronic account which the employer can draw down, the fund must be used within 18 months, as it operates on a ‘use it or lose it’ basis.

4.5 It will become a legal requirement for all public bodies to pay the Apprenticeship Levy. It is unclear at the moment of any legal implications for an organisation that does not meet its apprenticeship targets. The Government are yet to produce their formal response and feedback from the consultation. This was originally due in June 2016.

4.6 Further information on the levy can be found in appendix 2 - FAQ.

5. Financial Implications

5.1 The pay bill will be based on the total amount of earnings subject to Class 1 secondary National Insurance Contributions (NICs). Although earnings below the secondary threshold are not counted when calculating an employer’s NICs, they will be included for the purposes of calculating the amount of levy the employer needs to pay. 5.2 Earnings include any remuneration or profit coming from employment, such as wages, bonuses, commissions, and pension contributions that you pay NICs on. The government will not charge the levy on other payments such as benefits in kind, subject to Class 1A NICs.

2 5.3 The total indicative cost for maintained schools based on the 0.5% of the 2014/15 wage bill is £1.7 million. Refer to Appendix 3 for details on how these figures have been calculated.

5.4 The charge for maintained schools will be top sliced from the Schools Budget. Further details of how schools can access the Digital Apprenticeship Service to draw upon funding for training apprentices will be provided once final details of how the levy will operate are known.

6. Other Resource Implications

7. Consultation with stakeholders

8. Background / Supporting papers.

8.1 Appendix 1 - The Apprenticeship levy for schools – flow chart

8.2 Appendix 2 - Frequently Asked Questions about the Levy

8.3 Appendix 3 - Potential Financial Impacts of the Government Target and Apprenticeship Levy on ECC

3 Appendix 1

The Apprenticeship levy for schools – flow chart

Scanned from a Xerox Multifunction Printer.pdf

Appendix 2

Frequently Asked Questions about the Levy

Levy - FQA.pdf

Appendix 3

Potential Financial Impacts of the Government Target and Apprenticeship Levy on ECC

1. Potential Financial Impacts of the Government Target and Apprenticeship Levy

The Public Sector Target subject to final confirmation on the consultation, if maintained schools met the Government target this would result in the recruitment of around 70-169 new apprenticeship starts per year.

Government Target for ECC and local authority maintained schools Headcount FTE All less All less 16 All less nil All less nil 16 hours hours hour hour contracts contracts contracts contracts or less or less All (FTE All (FTE (FTE (FTE greater greater greater greater than than than than 0.00000) 0.00000) 0.43243) 0.43243) Corporate Payroll 7,363 4,014 5,596 3,450.4 3,058.7 3,450.4 Service Schools Apprentices 169 92 129 79 70 79 @ 2.3%

The Levy - All employers with a wage bill in excess of £3m will be required to contribute towards the Levy from April 2017. The indicative cost for schools based on 0.5% of the 2014/15 wage bill is £1.7 million. This is not the total cost for maintained schools as the figures do not include schools that do not use Essex payroll. 4 The levy is based on 0.5% of the wage bill minus the government allowance of £15k. The apprenticeship levy is payable monthly and placed into the Digital Apprenticeship Service (DAS). Each month the Government adds an additional 10%, so the total available will be £1.8m. This can be used to fund training and assessment of apprentices. The average cost per apprentice is £8,000 at entry level and on apprenticeship wages, so there will be funding for approximately 225 apprenticeships to be based in schools.

Schools Levy 1,653,000 Less the Government -15,000 allowance Total Levy payable 1,638,000 Additional 10% from 163,800 Government Total Levy Fund 1,801,800 Average Apprenticeship Cost 8,000 Number of Apprenticeships 225