Employing an apprentice can be a positive experience for a business and the apprentice, boosting productivity and broadening skills.

Government research shows:

• 86% of businesses advise apprenticeships assisted them develop skills relevant to their company
• 78% advised apprenticeships boosted productivity
• 74% said that having an apprenticeship improved the quality of the service or product

We’ve put together a guide to hiring an apprentice for your SME.

What is an apprentice?

An apprentice is an individual who is 16 years or older and employed by a business to work with experienced staff. Throughout the duration of the apprenticeship, the apprentice must receive training and work tasks that are related to their job role whilst taking time to study. By the end of the apprenticeship, they should have a well-rounded view and understanding of their chosen career path.  

An apprentice must be paid a salary that is at least the minimum wage and is contracted to work for the business for at least one year.

An apprentice can range from:

• school leavers
• university graduates
• individuals who want to change or progress their careers
• current employees who want to upskill.

How do you fund an apprenticeship?

This depends on the size of your payroll bill.

Under £3 million

If it is under £3 million, you don’t have to contribute towards the apprenticeship levy and you pay just 5% towards the cost of training and assessing an apprentice.

The Government will pay the rest up to the funding band maximum.

You’ll pay the training provider directly and agree on a payment schedule.

If you employ fewer than 50 employees, the government will pay 100% of the apprenticeship training costs up to the funding band maximum for apprentices aged:

• 16 to 18
• 19 to 24 with an education, health and care plan provided by their local authority or has been in the care of their local authority

If you exceed the funding band maximum, you’ll need to pay all the additional costs.

If your apprentice started before 1 April 2019, you pay 10% towards the cost of training and assessing your apprentice and the government pays the rest. This rate continues until your apprentice completes their training.

Over £3 million

As an employer with a pay bill of more than £3 million, you’re required to pay the apprenticeship levy. You can manage funds using the apprenticeship service and spend it on training and assessing your apprentices.

The Government will apply a 10% top up to the funds you have in your account.

If you don’t have enough funds, you just pay 5% of the outstanding balance and the government will pay the rest. This is up to the funding band maximum allocated to each specific apprenticeship.

What is the apprenticeship levy?

The apprenticeship levy is a tax that UK employers with an annual pay bill of more than £3 million must pay to the Government. It was introduced in April 2017 as part of a Government initiative to increase the number of apprenticeships in the country and boost skills development.

Employers who are subject to the levy pay 0.5% of their total pay bill and receive an allowance of £15,000 to offset against their levy payment. The money collected from the levy is used to fund apprenticeships, and employers can access these funds to pay for apprenticeship training and assessments.

Employers can use the funds to pay for apprenticeship training for their own staff or to pay for training for apprentices employed by others. To access the funds, employers must use an online apprenticeship service account, where they can see how much funding they have available and how to use it.

The apprenticeship levy has faced criticism from some employers, who argue that it is a tax on business and that they do not receive enough value in return. However, supporters of the levy argue that it is an important investment in the future of the UK workforce and will help to create a more skilled and productive workforce.

Overall, the apprenticeship levy is an important part of the UK government's efforts to increase the number of apprenticeships and boost skills development. While it may not be without its challenges, it is an important tool in supporting the development of the UK's workforce.

Apprenticeship salary

Employers must pay apprentices at least the national minimum wage. Remember from 1 April 2023 these rates will increase.

If the apprentice you hire is under 25 years old, on an approved UK Government apprenticeship framework and earns less than £967 per week, you may not have to pay Class 1 National Insurance contributions.

How are apprenticeships managed?

The Education and Skills Funding Agency manage a platform called the Digital Apprentices Services (DAS) which SMEs use to register their apprenticeships and organise the training and development of their employee.

Using the Government online tool is valuable for you and the apprentice. You can manage training costs, provide feedback on apprenticeship’s training and give training providers permissions to carry out tasks on your behalf and more.

For more information on hiring an apprentice please refer to gov.co.uk.