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New apprenticeship funding rules – what’s changing?

15 July 2021

Employers will need to comply with new funding rules for apprenticeships starting from the beginning of August if they want to qualify for funding. We explain the main changes.

Early this month, the Education and Skills Funding Agency (ESFA) released the new funding rules, which will apply to apprenticeships starting between 1 August 2021 and 31 July 2022. The government is referring to these as “clarification” rules and is seeking feedback before finalising them. We do not expect to see significant changes but will update you as necessary when the final rules are confirmed.

There are separate funding rules for employers (Employer rules), training providers (Training provider rules), and combined employer-providers. The Employer rules form part of the terms and conditions for an employer’s use of its apprenticeship service account or government-employer co-investment. Although the rules are rather technical, it is important for employers to understand them because a failure to comply can affect their ability to claim funding from the apprenticeship levy.

Moreover, those rules which govern aspects of the relationship between an employer and its apprentices may need to be reflected in the apprenticeship agreement. Failure to do so could not only jeopardise funding but also lead to the apprentice having enhanced employment rights. For more information on this, see our Inbrief guide to apprenticeships.

We identify the most significant changes below, focusing mainly on the Employer rules but with some reference to the Training provider rules.

New redundancy policy

New rules around continuation of an apprenticeship following redundancy apply where an apprentice has been made redundant on or after 15 October 2020, replacing previous rules which applied up to that date. The new provisions apply where on the day of dismissal:

  • the apprentice was within six months of the final day of completion of the apprenticeship practical period (see below) or has completed at least 75% of the practical period - in this case, the ESFA will fund 100% of the remaining costs of the training; or
  • the apprentice has competed less than 75% of the practical period and the remaining training will take six months or more - in this case, the ESFA will fund training costs of up to 12 weeks while the apprentice looks for a new employer.

Under this policy, the apprentice can continue to study and work towards their apprenticeship without being employed under an apprenticeship agreement - and will be funded to do so by the ESFA as set out above.

Both the Employer rules and the Training provider rules reiterate that the training provider must be provided with evidence of there being a compliant apprenticeship agreement in place between the apprentice and the employer, but there is an exception where the redundancy policy applies.

Action point: Employers should ensure they retain paperwork in respect of any redundancies amongst apprentices and be prepared to provide evidence when needed. They should also be prepared to obtain relevant evidence when taking on an apprentice who was made redundant by a previous employer.

Clarification of off-the-job training and the practical period

Off-the-job training is a key aspect of an apprenticeship and this takes place during the so-called “practical period” – that is, the period during which the apprentice undertakes both on-the-job and off-the-job training. The new rules clarify that off-the-job training should only be delivered during the practical period.

The rules now also refer more clearly to the possibility of delivering off-the-job training in different ways - for example, via regular day release (e.g. on a weekly basis); block release (e.g. front-loaded training or regular one-week blocks); and special training days and workshops. One point which seems unclear is that the rules now state that the start date of the practical period should equate to the first day of off-the-job training, and that the end date of the practical period should equate to the last day of off-the-job training. Mock testing, assessments and exams do not count as off-the-job training.

While this may not in itself be an issue, employers should remember that a compliant apprenticeship agreement must specify the start and end of the practical period, which must be a minimum of 12 months. Employers need to ensure that the first and last days of off-the-job training are accurately reflected and are at least 12 months apart. For shorter programmes, for instance when delivery of training is via block release or there is flexibility for the apprentice to choose between day and block release (including the timing of the block release), the dates may not reflect a full 12 months.

Action point: Employers should liaise with training providers to ensure compliance with this rule and check the relevant dates.

Breaks in learning

Amendments to the rules provide that apprentices must be involved in active learning throughout the apprenticeship unless they take a “break in learning”. This is where they require a break for more than four weeks, but plan to return. In addition, the new rules clarify that it is possible for an apprentice to take a break from learning without also taking a break from work (or indeed, the other way around).

Action point: Update any relevant policies as needed.

Clawback of costs from apprentices?

Employers often ask us whether it is possible to include a “clawback” clause in an apprenticeship agreement. This is designed to protect the employer in circumstances where it has incurred costs in relation to an apprenticeship but, for example, the apprentice does not complete the training or leaves the organisation shortly afterwards.

The Employer rules previously included wording that individuals must not be asked to contribute financially to the “costs of training”, and there has always been uncertainty around whether this would include non-funded costs such as travel expenses, books and equipment. Having a clawback clause in a contract, or seeking to enforce it, couldbreach the rules and mean the apprenticeship does not meet the relevant requirements for funding.

This has, however, now been clarified to refer only to “eligible costs of training”. According to the rules, the “eligible costs” are in essence those costs covered by levy funding. “Ineligible costs” means anything else, including items such as the initial assessment, travel costs, wages, PPE and other safety equipment, non-mandatory qualification fees, accommodation costs, and student fees required by professional bodies (even where linked to mandatory qualifications). This means that theoretically a clawback requirement will not necessarily be a breach of the rules, although in practice such clauses can still be difficult to enforce.

Action point: Review any existing clauses or policies covering clawback of costs.

Other changes

  • Temporary flexibilities were introduced in relation to the Functional Skills Qualifications (FSQs) allowing apprentices to take their end-point assessment prior to achieving the required FSQ. These flexibilities were introduced in response to the Covid-19 pandemic, which was making FSQ testing more difficult, but they have now come to an end.
  • A new incentive programme is now in place for organisations bringing on new apprentices between 1 April 2021 to 30 September 2021 (with a practical period start date of between 1 April 2021 and 30 November 2021). This replaces the previous incentive programme, which has ended.
  • There are new requirements for employers to ensure that dialogue and selection of the end-point assessment organisation must take place at least six months before the apprentice reaches the “gateway” for assessment.
  • The immigration criteria have been updated to reflect Brexit and other recent changes.

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