Guidance

058/21 Change to State Aid Guidance and Valuing of aid

Updated 5 December 2024

Date Issued	16 March 2021
Review Date	15 March 2022

1. Who should read

This Action Note goes to all Grant Recipients including CFOs, Direct Bid Recipients and Intermediate Bodies.

2. Purpose

Earlier versions of the State Aid Guidance listed a set of ‘Groups not Included’ for State Aid purposes. This arrangement is no longer available and should not be relied upon by Grant Recipients. Further detail is below.

In addition, the Managing Authority is setting out the requirement to ensure aid applied to the project is valued appropriately by the applicant and Grant Recipient and this is reported on in submitted claims.

3. Background

Previous versions of the ESF State Aid guidance stated that supporting the following customer groups or activities should not be regarded as state aid:

• Full funding for literacy and numeracy at all levels.

• Shared investment (employer and public funding) for English for Speakers of Other Languages (ESOL) at all levels.

• Full funding for all Apprenticeships (including Advanced) delivered to 16-18 year olds.

• Co-funding for Apprenticeships.

• Co-funding for first Advanced Apprenticeships.

• Full funding for first Level 2.

• Full funding for Level 3 jumpers (people who miss out level 2).

• Full funding for first full level 3 for 19 to 25 year olds.

Previous versions of the ESF State Aid guidance stated that supporting the following customer groups or activities should not be regarded as state aid:

• Full funding for literacy and numeracy at all levels.

• Shared investment (employer and public funding) for English for Speakers of Other Languages (ESOL) at all levels.

• Full funding for all Apprenticeships (including Advanced) delivered to 16 to 18 year olds.

• Co-funding for Apprenticeships.

• Co-funding for first Advanced Apprenticeships.

• Full funding for first Level 2.

• Full funding for Level 3 jumpers (people who miss out level 2).

• Full funding for first full level 3 for 19 to 25 year olds.

These groups are no longer exempt from State Aid, so where projects are working with these types of participants or beneficiaries, the full State Aid test should be applied.

3.1 Valuing of aid

As part of a submitted application and ongoing delivery of the project the applicant and Grant Recipient must set out and have considered the value of aid applied to the activities within the project. There are two methods available:

Method 1 relates to an average of the costs if that support was bought privately. Using this method, the Grant Recipient will need to explain how they have calculated that average, for example through comparison of three other suppliers and calculating the average of the costs based on this information; or

Method 2 relates to their real costs (such as the hourly rate of the member of staff who is providing the support, plus the 15 or 40% FRIC attributed to that salary. The Grant Recipient should use the hourly rate applied to the member of staff undertaking the cost with an uplift of the appropriate FRIC for the project by the number of hours to complete the task to identify the level of aid.

These are the only methods available for use. No other methodology proposed by Applicants and Grant Recipients can be used.

3.2 Worked Examples

Method 1

A Grant Recipient is providing an SME with a Training Needs Analysis, and then developing a training plan for a group of the staff who work for the SME.

In this case, the Grant Recipient takes an average of the costs 3 other providers would charge the SME for this activity, so, for example;

Joe Bloggs Training Ltd would charge £1,500 for a TNA for an SME with less than 50 employees, and a further £500 for a training plan, giving a total of £2,000

Jane Doe College Services Ltd would charge £1,350 for a TNA and a further £700 for a bespoke training plan, so total would be £2,050

Training R Us Ltd would charge £1,700 for the TNA, and include the bespoke training plan free of charge.

Therefore, the average of these providers would be (£2,000 + £2,050 + £1,700 = £5,750 divided by 3) £1,916.67 worth of aid.

If the project is using the De Minimis route, this would be the amount of De Minimis aid that they need to tell the SME that they have received. If the project is using the GBER, this is the total aid amount, and they will need to seek the SME contribution to this total (under Training Aid for example, the SME must contribute 50% of these costs, so the Grant Recipient would need to invoice the SME for £958.34).

Method 2

The Applicant or Grant Recipient is providing an SME with a Training Needs Analysis, and then developing a training plan for a group of the staff who work for the SME, as above.

In this case, the Grant Recipient should take the hourly rate for the member of staff doing the Training Needs Analysis, include the Flat Rate Indirect Cost (FRIC) uplift, then multiply that by the number of hours taken to carry out the Training Needs Analysis and development of the plan. For example, £27:15 per hour (including 15% FRIC) x 43 hours = £1,167.45 worth of aid.

If De Minimis applies, this is the amount of De Minimis aid the Grant Recipient will need to inform the SME they have received, and if they are using the GBER they will need to invoice the SME for 50% of the costs (£583.73).

The Managing Authority have updated all relevant guidance for applicants and Grant Recipients.

4. Action

This arrangement is no longer available. Any ESF Grant Recipient operating on this basis should conduct the full State Aid assessment for these types of participant or beneficiary, and will need to conclude how any aid (if present) will be treated. If this assessment results in a conclusion that there is aid, you must notify your Contract Manager, with full details of how you will monitor and manage the aid - including your recording and reporting processes. ESF State Aid guidance has been updated.

The valuing of aid is applicable to all projects and should form part of the audit retained by the applicant and Grant Recipient. The approach applies from 16 March 2021.

5. Contact

Is you have any questions about this Action Note or the guidance product please contact ESF.2014-2020@dwp.gov.uk.