Apprenticeship Incentives, Funding and Other Costs
The funding and rules surrounding Apprenticeships can be confusing however, they are cost effective and allow you to train people specific to your business needs. The funding and costs associated with the training are always a key area that employers want to understand when considering taking on an apprentice.
I’ve highlighted the main aspects in regard to funding an apprenticeship below however, the best way to understand them is to get in touch so we can organise a no obligation (free) consultancy meeting to pinpoint exactly what is available for your business. Get in touch to arrange a meeting, we are happy to visit you or meet online! Contact us >
Incentives
Last year, the Chancellor launched an incentive scheme to encourage employers (you) to take on new hire apprentices. Since then the scheme has been updated, age restrictions lifted and the timeframe to claim the incentive extended.
Currently, the cash incentive paid to you for hiring a new employee as an apprentice is £3,000. They can be any age but must have an employment start date and apprenticeship start date between April and September 2021.
There is a previous incentive scheme that covers those employed prior to April 2021 (more here). The payment is claimed by you via your digital account (if you are new to apprenticeships, we can help you set up your digital account) and paid in two equal instalments, at day 90 and day 365, providing the apprentice is still employed and in learning.
The incentive can also be claimed if you are taking on someone who has been made redundant from another business and is going to continue their apprenticeship with you (but are a new employee to your business).
Existing Incentive Payment
There is also an existing incentive of £1,000 payed to employers who take on a 16 to 18-year-old. This incentive is passed to the employer via their Training Provider in two £500 instalments.
Incentive Summary
Take on a new employee, enrol them onto an apprenticeship, get £3,000 (£4k if they are aged 16 to 18).
Funding the Apprenticeship Training: Levy or Non-levy that is the question
You are either do or don’t pay into the apprenticeship levy. In short, Levy payers are those of you who have a payroll of more than £3 million per year. Non-levy payers are those of you with a payroll under £3 million per year.
Levy payers – all the training given or facilitated by the Training Provided can be drawn from you levy pot providing you have enough funds. The price for the training will be set prior to the apprentice beginning their programme.
Non-levy payers - the Government will pay 95% of the training cost with you contributing the other 5%, this is called co-investment. If you employ under 50 people and the apprentice is under 19 when they begin the apprenticeship, then you will not have to co-invest, the government will pay 100%.
What does co-investment cost? It is 5% of the price the Training Provider charges for the training up to the funding band maximum. For example, if the funding band maximum was 21k and the training provider required the full amount then the co-investment from you would be £1050.
Cost associated with hiring an apprentice
The funding mentioned above can’t be used for wages, statutory licences to practice, travel and subsidiary costs, work placement programmes or any fees required when setting up the apprenticeship. So what are these aspects likely to cost?
Wages
This is probably the largest financial consideration when taking on an apprentice who is a new hire to the business. An apprentice is entitled to the apprentice minimum wage (£4.30 per hour) if they are under 19 or if over 19 and in the first year of their apprenticeship. Those aged 19 or over and/or have completed the first year of their apprenticeship are then entitled to minimum wage for their age.
Similar to any other job market, the wage level you set for the apprentice will steer how much interest you get in the role and the quality of candidate that may apply. You can also set the wage in relation to the level of the apprenticeship on offer. As an example, we would recommend a level 3 apprenticeship wage of around 12k per year (£6.20 per hour) with stepped yearly increases in line with their age and as their knowledge and abilities grow. You will then have the other costs associated with employing the apprentice such as NI and pension contributions.
Training, Mentoring and Managing
There are costs to the business when administering the apprenticeship, recruiting (if bringing in a new team member), mentoring, training and managing the apprentice. Whilst any good training provider will support and manage the learning, you will need to put time, effort and resource into progressing the apprentice, delivering the in-company training elements through your experienced staff. Of course, this may mean a drop in productivity for that experienced staff member whilst showing and training the apprentice in the skills they need however, in the longer term, it will produce a well-trained and productive apprentice.
Off-The-Job Training
The apprentice must also (by law) use 20% of their time as ‘off-the-job’ training. Not the greatest title as this 20% has to be completed within their working hours so something that needs to be considered in terms of the apprentice’s productivity as they progress through the programme. In basic terms it means a day per week has to be given over to the apprentice learning new skills, gaining new knowledge and behaviours, linked to the apprenticeship standard. Any college course can be used as off-the-job training as can aspects such as shadowing, being mentored, being taught how to complete a task or procedure etc.
Crunching the numbers
There are lots of different elements to take into consideration when working out what an apprenticeship will cost you as an employer. For example; in the case of a new member of staff, you can offset the incentives offered against the first year wage whilst factoring in the cost of training, mentoring and managing the apprentice, plus any required co-investment. Or, for an existing member of staff, you wouldn’t get the incentive payment however the wage is already in the budget. A bigger consideration when using an apprenticeship for an existing member of staff is the loss of productivity and any co-investment required if you are not a levy payer.
Written by Mark, CEO.