Apprenticeship Levy – Funding the Gap
On 1st May this year, we saw the biggest transformation in recent times in the Workplace Learning sector, with the introduction of the new funding mechanism for Apprenticeships. This is expected to create an industry worth over £2.5 billion, and puts employers firmly in control of the purse strings.
Despite this shift in power, the majority of the conversation and headlines around the new Apprenticeship funding regime have focused on the impact on employers – how will it work? What apprenticeships can they offer? How will it affect their business and staff? I can’t help but think that the colleges and training providers have been woefully overlooked in this debate.
The Levy regime means that where the employer falls into the SME category with a payroll bill of less than £3M, the training provider will be responsible for collecting 10% of the funding available direct from the employer client in order to receive the 90% balance directly from the ESFA (Education and Skills Funding Agency).
To cut to the core of the issue, this new scheme forces colleges and training providers to think and act like businesses, with all the associated financial skills of debt collection, bad debt management and credit control. This requirement will not only take valuable time away from providing top quality workplace learning, but will likely expose a very real skills gap, that could cause training providers to sink with no funding at all.
Top quality service at the front end is critical for training providers, if they are to avoid losing customers to competitors. The market is already saturated with rivals – both levy and non-levy paying employers are at liberty to change providers mid-programme, should they wish. Clearly, this is too fundamental an issue to leave to chance. As all providers know, the cost of marketing, sales, resourcing and providing work place learning can be very expensive and upfront costs are a real barrier to maintaining effective customer relationships – the new funding landscape will put further pressure on already stretched resources.
One of the things that sets Nucleus apart is our sector specific expertise, alongside our in-depth knowledge of business finance. I spent my formative years in banking and commercial finance, working at the likes of HSBC, ABN Amro and the Bank of Scotland. Having completed a post graduate degree in education in 2009, I then worked in further education management at Northbrook College for seven years. This combined background has given me a detailed understanding of the unique funding needs of educational institutions, independent training companies and employability providers. I saw that the new funding landscape would bring a significant financial and administrative burden to Colleges and training providers, with some very real issues looming with cash flow.
It was with this in mind that I lead the development of Nucleus’ new Apprenticeship finance product. This specifically tailored product will prepay the 10% employer contribution directly to the training provider, taking the burden of collection away from them, and ensuring that the remainder of the Government contribution is secure. We also perform a full credit control function, containing all records of collection for each employer in one simple report, providing a simplified audit mechanism ready for ESFA. This will help training providers stay ahead of the game and ensure a smooth transition to the new policy landscape.
Lorraine Heath is Deputy Principal Business at Basingstoke College, the first college to take advantage of our Apprenticeship finance product. She says, “We are proud to be leading the charge in piloting a type of finance structure that we believe will go on to benefit many more training providers around the country. The support from Nucleus will ensure that our team can focus on building relationships with businesses and employers, ensuring that we are offering the right products and continuing to deliver excellent service to those we work with.”
Phillip Speed, Education Specialist, Nucleus Commercial Finance.
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