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Exploring the ESFA’s draft apprenticeship funding rules 2022/23

Towards the end of May, the Education and Funding Skills Agency (ESFA) published their draft apprenticeship funding rules 2022/23 which – following a ‘clarification’ period where stakeholders are invited to give feedback – will come into place on 1 August. The three headline changes include revisions to rules on the recognition of prior learning (RPL), the off-the-job training requirement (OTJT) and the English and maths policy. There are also a raft of other amendments that will have an impact on the sector in various ways. AELP are in productive, ongoing discussions with the ESFA on this, but it may be useful to outline the proposed changes and what these might mean for providers.

Recognition of Prior Learning

As expected, the ESFA has implemented a prescribed and new formulaic approach to the RPL. The initial assessment will be, as ever, critical to test the level, currency, and relevancy of any prior learning for each apprentice. The outcome of the provider’s initial assessment will then feed into the formulaic reduction to calculate the maximum amount of funding the provider can access through the funding band.

It is positive that the ESFA have finally recognised initial assessment as an eligible cost. This is welcome but unfortunately the cost of this will not be reflected in funding bands until each standard is reviewed. In the meantime, it is added to the eligible cost list but if the provider is already charging the maximum within the funding band they won’t see any cost benefit of this. As initial assessment is an activity which is required for all apprenticeships, AELP believes that funding bands for all 650+ apprenticeships should just automatically be uplifted to reflect this cost immediately, rather than waiting for this to wash through the system in a piecemeal way. This is especially important at a time when inflation is driving up wider delivery costs.

This new formulaic approach requires prior learning to be converted to OTJT equivalent time in the full duration programme. The ESFA now expects at least a 50% reduction in price from the percentage of RPL against the typical programme. As an example, if the provider’s standard programme is 500 OTJT hours, and RPL for an apprentice equates to 100 hours, in this example RPL represents 20%. This is then factored by 50% meaning at least a 10% reduction off the funding band cap.

So, in essence, the 50% is a proxy for fixed programme costs. The ESFA has confirmed this factor is based on the Institute for Apprenticeships and Technical Education apprenticeship funding model methodology for fixed and variable costs. We know that for some of our members the 50% proxy for fixed cost is problematic as is not representative of their actual fixed cost base, which will vary for each standard and also by different delivery models too.

The ESFA have also confirmed that RPL should be applied to the funding band and not the total negotiated price (TNP). This is because RPL is about saving money for the government and in some cases the TNP maybe more than the funding band due to a commercial top-up. Remember the funding band is not the cost, it’s the government contribution towards the cost.

As August 1 is fast approaching, providers will need to act swiftly to prepare their systems and people to be ready for this new approach. We know many providers already use a similar formulaic approach to RPL already, however for others this will represent a sizeable step change in approach.

Off-the-Job Training (OTJT)

The minimum “20%” OTJT requirement based on individual contracted hours is going and will be replaced by a new “baseline” of a minimum of 6 hours a week – based on a typical working week of 30 hours. The previous rules led to a big inequality for apprentices on high contracted hours versus their peers. An example of this is two apprentices, in the same employer, on the same apprenticeship, but one on 35 hours a week and one on 45 hours a week – over the duration of the apprenticeship that equates to an extra mandatory 100 OTJT. It is easy to see how this was grossly unfair.

The introduction of the new baseline for OTJT is a big win for our members after numerous years of trying to get this agreed. It also makes the calculation simpler, with the ESFA saying has been a significant reoccurring theme during compliance visits over the years.

Positively coaching, shadowing and mentoring by the employer remains as OTJT – although there will be a more specific requirement to ensure this is linked directly to the apprenticeship and will be part of the commitment statement (training plan). It is important that coaching, shadowing, and mentoring is properly planned and evidenced and not used to infill activity.

Part-time employees on less than 30 hours a week are not disadvantaged by the new baseline and are still able to undertake apprenticeships with the duration extended as before and based on member feedback we have asked the ESFA to make this clearer in their communications.

Maths and English Policy

The ESFA is finally ditching the arbitrary requirement for all level 2 apprentices to both achieve level 1 functional skills qualifications and attempt the level 2 test. What a welcome move this is. This follows on from the suspension of this requirement during the height of the pandemic and challenges with testing capacity. This is an area that AELP have long called to be addressed as it was extremely damaging to apprentices to be arbitrarily made to take a test that most had no chance of passing. We all know of examples of apprentices who simply refused to take the test and as result were unable to pass gateway and take their end point assessment.

It is, however, important to note this new rule is not a blanket approach. It is linked to the initial assessment outcome. The ESFA believe this change will positively impact circa one in three level 2 apprentices. Ofsted will still expect to see a degree of stretch and challenge for maths and English, so providers need to consider their approach carefully.

The funding rules also only impact new starts from August 1 so this change will only impact new from August 2022, not legacy apprentices already on the programme. The unintended consequence may mean some providers choose to delay recruitment of some apprentices as a result.


Further changes to draft apprenticeship funding rules

There are also a number of other important amendments to the guidance which will need to be understood by providers including:

  • End Point Assessment Resits. As part of the eligible cost review outcomes the ESFA is limiting the costs associated with this area to one resit per with additional resits to be funded by the employer commercially. There is a risk, however, of additional resit costs either being pushed onto the provider and/or apprentices not completing which will therefore impact on overall programme outcomes. This is against a backdrop of the Department for Education (DfE) trying to drive up the apprenticeship achievement rate. Providers will need to make sure this is appropriately and robustly covered in their contract with each employer.
  • Commitment Statement rebranded. The commitment statement is to return to being called the “Training Plan”. Providers will need to help employers understand the change in terminology. Eventually, the ESFA want the Training Plan to move online onto the apprenticeship service, which is likely to be to allow greater oversight and scrutiny as the ESFA’s role continues to change following the review of the Agency earlier this year – where its role moves from that of a contract manager to more performance manager of the provider community.
  • Active Learning. The active learning requirement is not a new rule, rather a clarification that active learning is either OTJT and/or maths and English. The ESFA do not define the volume or method of delivery so this might be an activity such as giving the apprentice a workbook to complete to meet this requirement – it doesn’t have to be tutor-led. As mentioned earlier the retention of coaching, shadowing and mentoring as OTJT will be key in helping ensure active learning is taking place each month, especially when apprentices are returning to the workplace after flexible block release training models. Employers can deliver OTJT and may or may not be paid for that, but the ESFA has stressed that funding is routed through the provider. This means the provider is always accountable for the planned activity that takes places and should be evidenced regardless of who delivers it or who produces the evidence to support the activity took place.
  • Breaks in Learning (BILs). Again, this is not new – the current rules say that evidence of active learning taking place is required at least every four weeks, or a break in learning (BIL) is needed. The concern here is the need to switch on and off BILs for every missed or cancelled visit, potentially causing additional administrative burden, disruption, and implications in cash flow when BILs were supposed to be for more significant occurrences of absence. There is still a wider issue in the sector of a legacy of Covid driven BILs, so we need to be working together to get this number down rather than add to it. On that basis AELP believes that where learning is clearly taking place on an ongoing basis there needs to be a degree of mitigation to account for some flexibility in the actual delivery timelines to make this more seamless than it could be if auditors followed these requirements to the absolute letter of the law.
  • Enhanced Monitoring of Progress. Aside to the three key changes mentioned at the outset, this is potentially the other significant, but more subtle new rule change as the new rules says that where the apprentice withdraws from the programme - and is more than 4 weeks behind on the planned delivery of training, but the training has not been re-planned, or the apprentice has not been put on a BIL – then “funding is at risk”. Many providers have already expressed concern about the additional cost and bureaucracy of potentially having to update and replan the Training Plan with excessive frequency. This also represents a step change from evidencing monthly learning (active learning) to having to evidence actual progress which is of course much more subjective. AELP feels a better balance needs to be struck between appropriate oversight and bureaucracy and this is an issue we have discussed with the ESFA and will continue to pursue.
  • Progress Reviews. Currently, the ESFA only stipulate progress reviews should be “regular and planned”. The new draft rules beef up this requirement to mean these must now be carried out every 8-12 weeks, which brings somewhat of a sense of déjà vu! Progress reviews should also include a three-way discussion involving the provider, employer, and the apprentice. The strengthening of progress reviews in the new rules is linked to the focus on enhanced monitoring of apprentices’ timely progress and the need to track and re-plan where necessary.
  • PAYE Requirements. The apprentice must be on the PAYE scheme declared in the apprenticeship service account by the employer, the provider will need evidence of this from August. The ESFA say this is to check the apprentice is employed and who the primary employer is. For providers it is important to recognise how the DfE’s and HMRC’s systems are getting more sophisticated and joined-up. This change will give the DfE enhanced ability to track employment changes which might have otherwise gone undeclared, so again it’s important for providers to have systems and processes to identify and action change of circumstances for apprentices on a timely basis.
  • Subcontracting. There is a subtle proposed change which says that the main provider must now not “only deliver elements taught by online or distance learning" to meet the requirement of delivering some of the apprenticeship training and/or assessment. It appears this change is aimed at further strengthening the role and input of the main provider to ensure that their contribution is more substantial and that there is a stronger direct link to the employer.
  • Eligible / Ineligible Costs Update. The eligible and ineligible cost list has been refreshed with a number of these – such as initial assessment and resits – being covered in the detail above. The list of ineligible costs has been updated to include centralised costs that are not directly attributable to the delivery or support of apprenticeship provision.


As you can see, many of the changes are positive and come on the back of lobbying campaigns from AELP – yet there are still a number of underlying issues which may impact on delivery. It is therefore vital that the ESFA takes another look at their draft guidance following the clarification period and ensure that the final rules are published in July work for providers, employers and apprentices. We encourage all our members and their employers to also directly respond to the ESFA by June 24 to feed back further specific concerns or suggestions.


Exploring the ESFA’s draft apprenticeship funding rules 2022/23

View draft apprenticeship funding rules 2022/23 below.

Last published: 09/06/2022