The future of apprenticeships in England:
Funding Reform Technical Consultation
Submission to the Department for Business, Innovation & Skills and
Department for Education
Chartered Institute of Personnel and Development (CIPD)
May 2014
Background
1. The CIPD is the professional body for HR and people development. We have
over 130,000 members internationally – working in HR, learning and
development, people management and consulting across private businesses and
organisations in the public and voluntary sectors. As an independent and not-forprofit organisation, the CIPD is committed to championing better work and
working lives for the benefit of individuals, businesses, economies and society.
2. Public policy at the CIPD exists to inform and shape debate, government policy
and legislation for the benefit of employees and employers, to improve best
practice in the workplace, to promote high standards of work and to represent the
interests of our members at the highest level.
3. Our membership base is wide, with 60% of our members working in private
sector services and manufacturing, 33% working in the public sector and 7% in
the not-for-profit sector. In addition, 76% of the FTSE 100 companies have CIPD
members at director level. We draw on our extensive research and thought
leadership, practical advice and guidance, along with the experience and
expertise of our diverse membership base to champion better work and working
lives.
General comments
4. In October 2013, the CIPD responded to the Department for Education
consultation on Funding Reform for Apprenticeships in England. In our response
we expressed our support for addressing the pitfalls of a provider-led market for
skills and training that does not necessarily reflect the needs of the labour market
and/or individual employers. We advocated a simple, secure funding solution that
enables employers to connect their apprenticeship funding with the business and
skill needs of their organisation, and believe that a PAYE payment model would
be the most suitable of the three proposed funding models to provide this.
5. However, we also highlighted that there may be several disadvantages to a
PAYE payment model. This model could increase the administrative burden for
payroll and require payroll employees to undertake duties that are outside of their
traditional remit; the introduction of HMRC adds an additional government body
to the process which some employers may not feel is beneficial; a new online
payments system may have to be developed which could incur additional
charges for employers.
6. With the government’s announcement to route Apprenticeship funding directly to
employers using HMRC and subsequent consultation on technical components of
funding Apprenticeship funding reform, the CIPD consulted members by means
of an online survey, produced by the Chartered Institute of Payroll Professionals
(CIPP), in order to gain feedback on the proposed changes detailed in the
consultation document. A total of 167 CIPD members responded to some or all of
the questions set out in the online survey.
7. In considering and implementing Apprenticeship funding reform, the government
must ensure that small, medium and large employers alike are not
disproportionately affected by considerable increases in administrative duties or
detrimentally impacted by changes to cash flow. There is concern that smaller
employers may lack the incentive to continue or start new Apprenticeship
programmes if the administrative and financial burdens involved are perceived to
outweigh the benefits of employing apprentices. At the same time, the CIPD
welcomes a funding system that allows employers to more accurately align their
business strategy and skill requirements with Apprenticeship training, which may
lead to higher quality Apprenticeship programmes.1
8. Our response to The Future of Apprenticeships in England: Funding Reform
Technical Consultation is informed by the views of our members; experience and
expertise in this area.
1
The CIPD has published guidance for employers on developing high quality Apprenticeships, published in
collaboration with UKCES, as part of the CIPD Learning to work programme:
http://www.cipd.co.uk/publicpolicy/learning-to-work.aspx
Payment mechanism options Question 3: What sort of information would be needed at the outset from a new
employer website for Apprenticeship registration and funding, to give
employers certainty to employ an apprentice?
9. Employers will need a clear, simple and easy to use website providing them with
comprehensive but accessible information on the registration and funding of
Apprenticeships. A lack of clarity, accessibility and adequate information
could deter many employers from deciding to recruit an apprentice.
Employers will need to access a full summary of how the funding process will
work in practice, detailing aspects including:

How much funding will employers be eligible for and how long they will be
eligible for it

Funding availability for different sized employers and for each
Apprenticeship level and age

Timescales and guidance indicating when employers can expect to
receive the funding; whether it will be quarterly, monthly or at the start of
an Apprenticeship, for example

Guidance and information on the process of applying for funds

Information on funding restrictions

Guidance and information on what would happen should an apprentice
leave or fail to complete an Apprenticeship

Assurances that funding will continue throughout the entire length of an
Apprenticeship, if eligibility criteria continue to be met
10. In addition to information on funding, CIPD members also highlighted that they
would like the following information included on the website:

Comprehensive FAQs and a helpline in case of problems (for instance
when apprentices move from one PAYE scheme to another within an
organisation or if the apprentice leaves employment before completing
their training)

Guidance on what happens after training has been completed

Details of the regulatory/awarding bodies involved, and general
information on how training should be structured in order to ensure quality

Details of local training providers

Details about what kinds of training, such as internal, are eligible
Question 4: When, relative to recruiting an apprentice, would employers want
to know how much funding they would be eligible for?
11. Many employers indicated that they would like to know how much funding they
would be eligible for prior to the recruitment of an apprentice. The majority (62%)
of CIPD members responding to the online survey indicated that they would like
to know how much funding they are eligible for by automated return; 15% said
within one week; 7% stated within two weeks and 10% would like this information
within one calendar month.
12. These findings are echoed in an additional CIPD member online poll. Of 604
respondents surveyed in March 2014, 69% stated they would like information on
how much funding they would receive by automated return and 19% stated they
would like this information within one week.
Question 5: How can data collection requirements be minimised in the
reformed funding system?
13. Employers highlighted several methods of minimising data collection
requirements, specifying that only vital information relating to the funding of an
apprentice should be collected; having to complete over-complicated data returns
on a regular basis can be burdensome for many organisations and particularly for
smaller employers. Methods for minimising data collection requirements
suggested by CIPD members include:

Keep data collection requirements to the start and end of an
Apprenticeship, with immediate notice to be given if an apprentice leaves
a programme early

Link data collection to RTI returns

Relate data collection requirements to key milestones, for example when
an apprentice completes a qualification level

Collect data by using a short, simple online survey/questionnaire
Payment mechanism options – PAYE model Question 6: How would the PAYE model impact organisations’ cash flow?
14. A quarter of members responding to the consultation survey (26%) stated that
this model would not impact their organisation’s cash flow. However, many
employers may not currently be aware as yet of the potential implications that the
PAYE model may have for their organisation’s cash flow; 64% of survey
respondents stated that they were unsure as to what impact this system would
have. Uncertainty regarding lead-in time and notice of payments would
affect an employer’s ability to plan and manage payments effectively, and
so it is vital in any new system that employers are provided with a clear timescale
and notification of when payments should be made.
15. Although only 10% of respondents stated that the PAYE funding model would
impact their organisation’s cash flow, there is concern that smaller employers and
those with tighter margins may be disproportionately affected by this system.
Question 8a: Do employers envisage additional charges for the PAYE model,
such as through the update of payroll software?
16. A significant number of CIPD respondents envisage that implementing the
PAYE model would incur additional charges for their organisation; over twofifths (44%) of employers stated that this would be the case, compared to 16%
who do not foresee additional charges. Employers highlighted that having to
update or upgrade payroll software regularly often brings about additional
charges, which may act as an additional disincentive to employing an apprentice
through the new funding system. It is important that administrative and
software changes are kept simple and to a minimum to avoid large additional
charges from providers.
17. Additionally, 44% of respondents stated that they are already charged for regular
software updates, compared to 27% who are not and 29% who do not know. It is
unclear how employers will respond if significant additional charges result from
implementing the new system.
18. Reflecting the uncertainty over the impact of the new funding scheme highlighted
in the previous question, 40% of CIPD survey respondents were also unsure as
to whether additional charges would result from the implementation of the new
PAYE funding model. Until employers are able to gain a greater
understanding of the full technical requirements of the new system, many
will not be able to fully and accurately assess its impact.
19. The size of the charges will depend on how long the software provider has to
make the changes. If the changes have to be made quickly then this will be
reflected in higher charges. The government should consider whether its
existing timetable will give software developers sufficient time to make the
changes in a way that minimises costs.
Question 9a: If employers have multiple apprentices, how easy would it be for
them to calculate their PAYE deductions?
20. Again, many employers (62% of respondents) were unsure how easy or difficult it
would be for their payroll departments to calculate PAYE deductions, however
only 7% stated that it would not be easy under the new system. Reasons
cited by those who predicted difficulty in calculating deductions include:

The PAYE system will be too resource heavy, burdensome and
complicated for payroll departments

Calculating different PAYE deductions for various age groups and
apprenticeship levels would be too time-consuming and complex
21. In total, 30% of respondents stated that they would find calculating PAYE
deductions ‘easy’ or ‘very easy’, presumably because HR is largely already
responsible for Apprenticeships.
Question 9b: How confident are employers that they would be able to calculate
the correct deductions?
22. Over half of employers responding to this question stated that they were
either ‘confident’ (41%) or ‘very confident’ (12%) that they would be able to
calculate the correct PAYE deductions; 20% more employers than those who
stated that they would find calculating PAYE deductions ‘easy’. In total, as many
employers stated that they were unsure (41%) whether they would be able to
calculate the correct deductions as those stating that they were ‘confident’ in their
organisation’s ability to do so. Just 6% answered that they were ‘not confident’ in
this regard.
Question 9c: If an employer made an error, how confident are they that it would
be simple to resolve?
23. This depends on who makes the error. If HR makes the error then it would be
hard for payroll to know a mistake has been made when they adjust how much
PAYE to pay over to HMRC. Either payroll would need to check with HR to make
sure that it had calculated the deductions correctly and that these figures had not
been subsequently transposed. HMRC needs to inform payroll what is being
claimed by HR so that payroll can make the correct adjustment.
24. Employers appear divided with regard to whether errors would be simple to
resolve, with 22% of respondents confident as opposed to 19% who are not. The
majority of respondents stated that they did not know whether errors would be
simple to resolved, perhaps reflecting a lack of clarity over the process by which
errors would be handled.
25. Employers who were not confident that errors could be resolved simply
expressed considerable concern and frustration towards involving HMRC in what
some considered to be an already complex funding process. Comments included:
“Experience has shown nothing is ever simple to resolve when HMRC are
involved. Too many people handle the problem all saying different things”
“This would be new to my department who have never had to deal with
training funding before”
“If changes occur after a payroll run it takes a while to “undo and correct”.
Having to add into this mix apprentice payments, which are really nothing to
do with payroll, would put additional burden on the HR and payroll
departments”
Payment mechanism options – PAYE model for employers who do not make
sufficient PAYE payments
Question 10a: How easy would employers find the process of reimbursement
funding?
26. Once more, employers responding to our survey (61%) were largely unsure how
easy they would find reimbursement funding, which could be due to a
combination of factors, such as lack of familiarity with the proposed
reimbursement process, lack of detail as to how the process would work and
uncertainty that payroll departments would be confident in handling the proposed
changes.
27. Over a fifth of respondents stated that reimbursement would be either ‘easy’
(18%) or ‘very easy’ (5%). This contrasts to 16% of employers who stated that it
would not be a simple process. Of those who were concerned about the ease of
this process, comments included:
“It all seems very complicated and I think it would end our apprenticeship
programme…the PAYE route is too much an administrative burden”
“Adds another layer of administrative/reporting requirement”
“As an employer who sits in this category, we have never found anything with
HMRC easy”
28. However, over time even those firms that do not make sufficient PAYE payments
may, as apprentice earnings increase, be lifted over the lower earnings limit.
Question 10b: What impact would this have on employers’ finances?
29. The vast majority of respondents (69%) stated that the PAYE funding model
would have some impact on their organisation’s finances; 35% stated it
would have very little impact, 29% said that it would impact slightly and only 5%
stated that it would impact their organisation’s finances severely. A total of 8% of
employers said this would have no impact.
Question 10c: Would this impact on an employer’s decision to employ an
apprentice?
30. Around half of CIPD members (49%) responding to the online survey
conducted in March 2014 stated that the PAYE system would have no impact
on their decision to employ an apprentice, and 27% said that they did not
know. However, almost a quarter (24%) commented that this proposed
funding model would impact their decision to employ an apprentice,
commenting that the model appears too complicated, time-consuming and
bureaucratic; particularly for smaller businesses.
Payment mechanism options – Apprenticeship Credit model Experiences of other online accounts and services
Questions 12a & 12b: Do employers already use online accounts, payment
gateways and electronic payments (in purchasing training or any other service
or product)? And, what could be learnt in the design of an Apprenticeship
Credit from any existing online accounts and payment gateways that
employers use?
31. Almost half (47%) of employers who responded to the CIPD member consultation
stated that they already use online accounts, payment gateways and electronic
payments; 37% do not and 15% were unsure.
32. Members commented that an online accounts or payment gateway must:

Be easy to administer

Be written in plain English

Be simple to use

Be secure

Have accessible online support
Setting up an Apprenticeship Credit account
Question 14: Would employers want to set up an Apprenticeship Credit
account before or after negotiating and agreeing training with a training
provider?
33. The majority (52%) of employers stated that they would like to set up an
Apprenticeship Credit account before negotiating training with a provider; 23%
said they would like to do this afterwards, 17% had no preference and a further
8% were unsure.
Making payments into your Apprenticeship Credit account and paying training
providers from your Apprenticeship Credit account Question 15: What might determine the frequency of employer payments into
the Apprenticeship Credit account?
34. Employers stated that payroll frequency (62%) and the frequency of financial
accounting (41%) were the key aspects in determining the frequency of employer
payments into the Apprenticeships Credit account. A further 19% stated ‘time’
would determine the frequency and a further 10% did not know.
Question 16: How would the Apprenticeship Credit account affect employers’
cash flow?
35. In response to this question, a third (33%) of employers stated that the
Apprenticeship Credit account would not affect cash flow for their
organisation, compared to 26% who stated the same for the PAYE funding
model. On the other hand, 12% of employers stated that the Apprenticeship
Credit account would affect their cash flow (10% for the PAYE model). Much like
the PAYE model, there was a large degree of uncertainty from employers as to
how the Credit account would impact on cash flow: 55% of respondents stated
that they were unsure (64% for the PAYE model).
What is the preferred choice?
36. When asked what their preferred funding model choice is, 41% of employers
stated the PAYE model, 30% stated the Apprenticeship Credit account and a
further 21% had no preference as to which model was used.
Assurance Question 18: What factors need to be taken into account in the development of
an approved register?
37. Employers will need to be certain that any chosen provider can offer high-quality
training which accurately reflects their organisation’s business needs. With this in
mind, it will be important that any approved register makes provider quality
paramount and details the service track record and apprentice
attainment/outcomes of those on the register.
38. CIPD members suggested that provider credit/financial track records should be
accessible for assessment by employers; for example by the inclusion of a
government rating indicator, a star rating system or a provider kite-mark viewable
on the register. A register should highlight the competence of each provider and
include data on the quality of training outcomes. One member also suggested
that providers should be ranked in a league-table format.
39. Data should be presented clearly and consistently to ensure that employers are
able to make accurate comparisons of each training provider operating in their
area.
Question 19: How can burdens on employers be minimised whilst providing
assurance for the funding systems and enabling good budget management?
40. Employers stated that in order to minimise burdens incurred by Apprenticeship
funding changes, particularly for smaller organisations, the administration and
bureaucracy required by either of the proposed funding models should be kept to
a minimum. Requirements on employers must be communicated with utmost
clarity and simplicity. A helpline may also need to be developed in order to
support employers in navigating either of the proposed funding models. It may
also be helpful for payroll departments, HR departments and software providers
to bear in mind that in many cases new Apprenticeship programmes follow the
timetable of the academic year, rather than the tax year; the development of
software should reflect this.
Question 20: What support should government provide to help employers
manage the relationship with their training providers to protect their
investment and that of the government?
41. CIPD members highlighted that the following support would be beneficial in
helping employers manage their relationship with training providers:

Regular audits of training providers to assure programme quality

A helpline for both employers and employees who need support and
advice with regard to training being provided

Training for employers on using the new funding model

Clarity on funding criteria and payment dates