The Education and Skills Funding Agency is clamping down on employers who fail to pay the 10 per cent co-investment fee for apprentices, by withholding completion payments from providers.

A change to a calculation in the agency’s funding software will enforce the new rule from early next month, which will see nearly 20 per cent of the total apprenticeship cash held back until employer payments are up-to-date.

It means that up to £4,860 of ESFA funding, 90 per cent of £5,400, would be withheld if the apprenticeship price is at the highest upper funding band of £27,000, for example.

In a little known monthly update for “MI managers, software writers and suppliers” published this afternoon, the ESFA says: “We plan to update the apprenticeship funding calculation at R04 [Individualised Learner Record data return deadline 6 December] to withhold any completion payments that do not meet the criteria in the funding rules.

“The rules state that co-investment due to be paid by the employer must be collected and recorded in the ILR for the completion payment to be paid.”

Additionally, the agency plans to clawback cash from providers who’ve not claimed the fee from employers.

“This change will also apply to any completion payments already made in the 2018 to 2019 funding year and where necessary payments will be recovered,” the ESFA said.

“We will also identify and recover any completion payments paid to providers in 2017 to 2018 funding year that were not compliant with funding rules. All adjusted payments will be made as part of the December payment run.

“Providers must ensure all co-investment is collected and recorded on the ILR in a timely manner as stated in the funding rules.”

The way the agency funds providers for delivering the training is by paying monthly payments for 80 per cent of the negotiated price up to the funding band, but where the employer has no levy funding or it is insufficient, then co-investment must be paid, currently set at 10 per cent.

The ESFA in future will only pay the provider for the final 90 per cent of the total remaining 20 per cent, once the framework has finished or the end point assessment has taken place and the employer has paid their 10 per cent.

Chancellor Philip Hammond announced last month that the co-investment fee will be halved to 5 per cent, but a start date for this change has still not been revealed.

The return deadline for providers to get their co-investment payments in is tight – December 6.

However, the completion payment is only being withheld until the financial fields in the ILR show the employer has fully paid their share. Once that happens, the completion payment would be released in the next monthly funding cycle.