If your organisation is looking to employ an apprentice, there will be a lot to consider in relation to the type of individual you can recruit, the role they can take on, the rules on pay and other benefits, as well as making the most of the financial incentives available to employers.
The Government most recently introduced an incentive payment to employers for apprentices hired between 1 August 2020 and 31 January 2021.
However, employers have to remember that apprentices are employees. Therefore, they have the same rights as other employees and you have the same obligations towards them. They are entitled to the apprentice’s hourly rate or the National Minimum Wage, depending on their age, along with paid holiday, rest breaks and in some cases, pension contributions. You have to reconcile this with the fact that all apprentices will spend part of the working week attending college or an external training provider.
In order to hire an apprentice and access government funding, you will need to identify the framework or standard to which your apprentice will work and the training provider with whom you will partner.
Who qualifies as an apprentice?
An apprentice is someone who learns the necessary skills for a job through carrying out a genuine role in the workplace, guided by experienced staff. The apprentice combines their work with some study time.
At the end of the apprenticeship, they will have achieved a framework or standard that equates to recognised levels of educational achievement (GCSEs, A-levels, undergraduate degree etc.) as well as the ability to carry out that particular role in their business sector. Anyone of any age can start an apprenticeship, the only age requirement is that they must be 16 or over.
Who can hire an apprentice?
Employers choose to hire apprentices because they can train these individuals in the specific skills needed by their organisation, resulting in a better qualified and motivated workforce.
A limited company or a sole trader can hire an apprentice. However, if the employer (sole trader or limited company) has not employed anyone before then they will need to register with HMRC. They will have to pay income tax and National Insurance Contributions (NICs) for the apprentice through the PAYE system to HMRC (although see below for exemptions from paying NICs in certain circumstances).
If the prospect of taking on the administrative burden of employing an apprentice is too daunting, it is also possible to enter into a partnership with an Apprenticeship Training Agency (ATA). The ATA employs the apprentice for ‘the employer’ and is paid a fee by the employer’ for doing so. There is a list of authorised ATAs on the gov.uk website.
You can choose to advertise for an apprentice externally, or approach a training provider for a suitable candidate, or hire the apprentice from within your existing workforce.
How much does it cost to employ an apprentice?
You agree the total cost of training and assessment with the training provider. This can be around £9000-£13,000, depending on the type of job for which you will train your apprentice. Because of the considerable government funding available, you could potentially only have to pay 5% of that (see below).
In addition, the support and expertise offered by the training provider can mean that the cost of hiring the apprentice would be lower than normal. Finally, depending on the age of the apprentice, you are only obliged to pay them the minimum wage for apprentices.
However, there are other costs to weigh up. There is a cost to you of allowing your apprentice off the job training time, as during this time they will not be gainfully employed for you. Depending on the role, another drawback of taking on a novice apprentice is that they could take more time to become as useful to your organisation as an employee with more experience hired in the normal way.
What are apprentices’ pay & entitlements?
Pay
Apprentices are entitled to be paid the National Minimum Wage.
If the apprentice is under 19 then they are entitled to the national minimum wage for apprentices which is currently £4.15 per hour, although many employers pay more than that.
If the apprentice is aged 19 or over, but in the first year of their apprenticeship, then they are also entitled to the national minimum wage for apprentices of £4.15. However, in the second and successive years of their apprenticeship, they must be paid the National Minimum Wage.
The National Minimum Wage is set by age:
- for apprentices aged 19 or 20 and in their second or subsequent years of their apprenticeship, the hourly rate is £6.45:
- for apprentices aged 21 to 24 and in their second or subsequent years of their apprenticeship, the hourly rate is £8.20; and
- for apprentices aged 25 and over and in their second or subsequent years of their apprenticeship, the hourly rate is £8.72 (which is the National Living Wage).
Entitlements
As apprentices are employees, they are entitled to paid holiday and rest breaks, sick pay and any other benefits you offer to your employees, for example, gym membership.
The standard entitlement to rest breaks is twenty minutes break for every six hours worked, a break of 11 hours in every 24 and one day off a week or two days off a fortnight. However, if you take on an apprentice who is 16 or 17 years’ old, you must allow them to take a break of 30 minutes if they work for 4 hours and thirty minutes or more, and they must have twelve hours rest per day and two days of rest per week.
Apprentices are also eligible for auto-enrolment into a pension scheme if they meet the qualifying conditions and are aged 22 or over. However, it is possible for an apprentice as young as 16 to request to join the pension scheme, and, again depending on their earnings, you will have to allow this and pay the employer contributions as normal.
Apprentices are subject to the same employment legislation on dismissal as regular employees. Most apprentices are employed on a fixed-term basis, and, in law,the non-renewal of a fixed-term contract does count as a dismissal. Therefore, if you wish to dismiss an apprentice who was employed by you for more than two years, you will have to provide them with a legally fair reason for their dismissal. There is no extra legal duty for an employer to find work for an apprentice at the end of their apprenticeship.
Although there has historically been doubt on this, the gov.uk website makes clear that you can make an apprentice redundant. You do, of course, have to follow the normal legal procedures for making staff redundant, and pay them a redundancy payment.
Apprenticeship agreement
The apprenticeship agreement is a document that by law you must enter into with your apprentice. It is in addition to, but will form part of, the employment contract. It must include:
- the skill, trade, or occupation for which the apprentice is being trained;
- the apprenticeship standard / level;
- the place of work;
- the start and end date of the apprenticeship (a minimum of twelve months up to a maximum of five years);
- the start and end date of the practical period. This is the period during which the apprentice is expected to work and receive training;
- the amount of off-the job training. This must be a minimum of 20% of the apprentice’s paid hours and take place within the apprentice’s normal working hours. Maths and
- English learning up to Level 2 (approximately GCSE grade C and above) are not included in this.
Apprentices must be employed for a minimum of 30 hours per week.
It is for the employer and the training provider to decide how to deliver off-the-job training. For example, the apprentice might attend college one day a week, or do more intensive blocks of training and be away from the workplace for a longer period of time.
It is also possible for the off the job training to be delivered at the workplace as long as it is not part of the apprentice’s normal working duties.
As far as on-the-job training is concerned, this will depend on the nature of the role, but it is expected that an apprentice be assigned a mentor and work with experienced staff.
Once they have completed their apprenticeship, the apprentice should be able to perform at an industry-recognised level.
Apprenticeship levy
How much financial support you can receive from the government depends on whether your business pays the apprenticeship levy.
The apprenticeship levy is paid by businesses with an annual wage bill of over £3 million each year. It is charged at 0.5% of your total pay bill for the year to date. There are detailed rules on how to calculate the levy depending on which sector you operate in and on your corporate structure, so it is worth checking this carefully. If your organisation does pay this levy, then the funding arrangement depends on whether your business is based in England, Scotland, Wales or Northern Ireland, as this is a devolved matter. In England, you pay the apprenticeship levy on a monthly basis to HMRC via the PAYE process.
You will then receive a 10% government top-up on this amount and can use this fund (the levy plus 10%) to spend on apprenticeship training using approved providers. If you do not spend the money within 24 months then those funds will expire. However, it is possible to transfer up to 25% of your existing funds to another employer.
That employer might be geographically close to you, or within your industry sector.
If your business does not pay the apprenticeship levy, then it will pay 5% towards the cost of training and assessing your apprentice. This will be paid in agreed instalments directly by you to the training provider.
In addition, if you employ an apprentice under the age of 25 you do not need to pay secondary Class 1 employer National Insurance Contributions on earnings up to the Upper Earnings Limit for those employees. That means that you do not have to pay NICs for apprentices under the age of 25 on earnings below the higher tax rate (£827 per week).
Apprenticeship funding
There are various types of funding available to qualifying employers.
Plan for Jobs Scheme 2020
The Education and Skills Funding Agency has published new guidance about incentive payments employers can apply for if they take on a new apprentice between 1 August 2020 and 31 January 2021.
Employers who employ an apprentice aged between 16 and 24 will receive £2,000, while those that employ apprentices aged over 25 will receive £1,500.
This is in addition to the existing £1,000 payment for taking on an apprentice aged between 16 and 18, or one aged over 25 who has an education, health and care plan, or has been in care.
The payment can also be made if recruiting apprentices who had been made redundant, provided they are new to the organisation.
Payments will be made in two instalments, the first half upon the apprentice’s completion of 90 days of work, and the second half after 365 days of work.
Kickstart scheme
The new Kickstart Scheme is a £2 billion fund to create 6-month work placements for those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment.
Funding is available to employers as a grant for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
Certain criteria apply, such as the requirement for employers to offer a minimum of 30 job placements under the scheme. Smaller businesses unable to offer this many job placements are permitted to partner with other organisations through, for example, local chamber of commerce initiatives.
If you are a small employer
A small employer is classed as one with fewer than 50 people working for them. In that case, you will not have to pay the 5% contribution at all where the apprentice is aged between 16 and 18, or is aged between 19 and 24 years, but has previously been in care or under a local authority EHCP (Education, Health and Care Plan).
If you train younger apprentices
All employers are entitled to receive £1000 per apprentice, if, at the start of the apprenticeship, the apprentice is aged between 16 and 18 years, or is aged between 19 and 24 years, but has previously been in care or under a local authority EHCP (Education, Health and Care Plan).
The £1000 is paid in two equal instalments through the training provider.
Legal disclaimer
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing & Content Agency for the Professional Services Sector.
