Apprenticeships aim to give young aspiring individuals the real world experience they need whilst they learn a trade and develop skills in their chosen profession. They have become increasingly popular over the past decade with almost 500,000 apprenticeship starts in 2015. A successful apprentice will receive a nationally recognised qualification upon completion.
With over 2.2 million apprenticeships created since 2010 to help establish the UK as the fastest growing economy in the G7, the government has set out to create 3 million more placements by 2020.
Reducing Unemployment, Providing Opportunities
405,000 young people aged 16-24 were unemployed in February to April 2016, this excludes those in full time education. Apprenticeships are designed to deliver ‘on the job’ training and professional higher education qualifications, whilst reducing this figure. Employers recognise that young apprentices may be less productive than their older workers due to inexperience, this is why employers who hire apprentices benefit financially through lower wages, no national insurance and access to government funding. In addition to this, the structured part of the qualification is provided free at a higher educational establishment, this often consists of coursework and exams including maths, English and functional skills.
How do Apprenticeships benefit employers?
Whilst recruiting an unskilled and relatively inexperienced individual for your business can appear at first glance not to be beneficial, in fact, there are several financial and other benefits of hiring an apprentice, as well as a long term investment in their skills:
Pay rates reflecting age and experience
The lower minimum hourly wage rates applicable for apprentices can enable a business to take on more staff without increasing their costs excessively. It can also be a cost effective way to take on a first employee for smaller businesses.
The table below shows how pay rates for apprentices compare to the current national living wage as of April,
|Apprentice||Under 18||18 to 20||21 to 24||25 and over|
You should note however that as an employer you cannot use the ‘apprenticeship’ term just to apply a lower rate of pay to your younger workers. The rules for who qualifies as an apprentice are set out under regulation 5 of the National Minimum Wage Regulation 2015.
No NIC’s for under 21s
Whilst many employers choose to pay apprentices more than minimum wage for their age, they can benefit from the fact that businesses are not required to pay any National Insurance on their apprentices’ wages whilst they remain under 21 – the usual rate is 13.8%.
Bursaries and Grants
The government has set up bursaries which pay employers a lump sum to help cover the excess cost of training an apprentice. Smaller businesses may be entitled to £1,500 per individual for up to 5 apprentices. These are often used to subsidise wage bills for a period of time and can be very beneficial for cashflow.
Longevity of staff
Generally, apprenticeships last 1-4 years depending on the level of the apprenticeship, the ability of the apprentice and the industry sector. Once completed it is common for apprentices to be offered a job with the company that trained them, therefore businesses are able to invest in a trained employee who knows the trade, and will likely stay with them for a long time.
Government Minimum Standards
An apprentice can be a valuable asset to your business, however, in order for your apprentice to make the most of their placement, the government has set various minimum standards for working:
- Your apprentice must be paid at least minimum apprentice wage, ensure your payroll software can identify this and relevant NI amounts if applicable.
- Your apprentice must work with experienced staff and study for a work based qualification during their working week.
- The apprenticeships duration must be no less than 12 months, during which your apprentice must work a minimum 30 hours a week.
- Apprenticeships must offer training to level 2 in English, maths or functional skills if the apprentice doesn’t already have these qualifications.
As of April 2017, most large employers will be required to contribute to a new apprenticeship levy. The money is paid to the HMRC and constitutes of 0.5% of the business’s entire pay bill; with a maximum of £15,000 being paid per tax year. This levy only applies to businesses with a payroll bill of more than £3 million each year or employ more than 20,000 employees, meaning it won’t affect smaller businesses. The money collected will be used solely on improving the apprenticeship scheme and providing learning materials. For more information on how the apprenticeship levy will work, click here.
Need a Hand With Your Apprentice’s Payroll?
If you have any questions regarding your obligations when taking on an apprentice, or need payroll services to ensure you’re paying the correct amount, give our friendly team a call today on 0117 3790810.
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This post was written by Steph Roffey