Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what consideration his Department has given to the potential merits of increasing incentive grants to offset higher employer contributions under the revised apprenticeship funding rules.

As we introduce new products, such as apprenticeship units and foundation apprenticeships, we are also simplifying the Growth and Skills Levy, improving its transparency and making it more efficient.

From August, we are changing the employer’s co-investment rate from 5% to 25% for levy-paying employers once they have exhausted all their levy funds. Levy-paying employers will still be able to benefit from a very generous 75% government contribution once their funds are exhausted, but it is right that employers who utilise all their levy funds contribute more to apprenticeship training and assessment. This will support greater employer investment in skills overall and ensure funding is available to roll out further flexibility for business and increase opportunities for young people.

We have undertaken extensive engagement with businesses and other key stakeholders in the design of these reforms and will continue to work closely with key partners as we develop the detail of any planned changes

To support employers of all sizes to take on apprentices the government pays £1,000 to both employers and providers for apprentices aged 16-18, and for apprentices aged 19-24 who have an Education, Health and Care Plan (EHCP) or have been, or are, in local authority care. On top of this, employers will receive additional payments of up to £2,000 for eligible foundation apprenticeships. Additionally, employers are not required to pay anything towards employees’ National Insurance for all apprentices aged up to age 25 (when the employee’s wage is below £50,270 a year).

The government is also supporting non-levy paying employers (essentially SMEs) meet the additional costs of taking on young people by introducing a new £2,000 incentive payment when they hire apprentices under the aged of 25 as new employees.

We will carefully monitor the impact of these changes once they take effect.