Costs involved when employing apprentices. A brief employer guide

Apprenticeships have been in the news recently with changes to functional skills requirements for over 19s and for the rise in the apprenticeship minimum wage which kicks in on 1st April.

Here is our brief employer guide to the costs involved in employing apprentices

Wages 

This is probably the largest financial consideration when taking on an apprentice who is a new hire to your business. An apprentice is entitled to the apprentice minimum wage which, from 1st April 2025 will be £7.55 per hour*. The apprentice minimum wage can be paid to an apprentice if they are under 19 or in the first year of their apprenticeship if over 19. Those aged 19 or over and/or have completed the first year of their apprenticeship are entitled to minimum wage for their age. Wages are not covered by any form of ‘funding’ and employers generally increase an apprentice's wages on a yearly basis in line with their age and as their knowledge and abilities grow. Although the apprentice minimum wages are in place, attracting someone to do your apprenticeship is a competitive process and potential candidates will evaluate what you are offering against other apprenticeships that are being offered. The wage you offer at the start of the apprenticeship depends on the level of apprenticeship you are offering and the age of the person you eventually appoint however, we always encourage employers to be as competitive as possible when considering apprentice wages as the level will effect the number, quality and calibre of the people considering your role (just like any other job!). 

*Don’t forget, from 1st April, apprentices currently in employment with you will be entitled to this minimum wage so you will need to adjust their pay if you currently renumerate them at the old minimum wage (or one below £7.55 per hour). 

Hidden costs

There are costs to the business when administering the apprenticeship, recruiting (if bringing in a new team member), mentoring, training and managing the apprentice. ‘Hidden’ may not be the right word for it however the apprentice is a full-time member of staff (minimum of 30 hours per week) and is entitled to the same terms and conditions as other staff members of a similar level. Whilst a good training provider will support and manage the learning, you will need to put time, effort and resource into making it successful and delivering the in-company learning needed for the programme. The apprentice must also (by law) use 20% of their time (6 hours per week) doing ‘off-the-job’ training. This is time within their working hours that is used to train then in new knowledge, skills and behaviours, so something that needs to be considered in terms of the apprentice’s productivity as they progress through the programme. The off-the-job element is particularly important to consider when using an apprenticeship for an existing member of staff as their productivity will drop to allow for the training to take place.  

Funding for apprenticeships 

‘Funding’, meaning money drawn by the Training Provider from your online ‘Apprenticeship Service Account’ covers the training of the apprentice by the Training Provider and cannot be used for wages, statutory licences to practice, travel and subsidiary costs, work placement programmes or any fees required when setting up the apprenticeship. Funds are drawn from one of two sources depending on the size of your business. You are either a Levy or Non-levy employer, You are a Levy payer if you have a payroll of more than £3 million per year. If you are under £3 million, you are a Non-levy payer.  

Levy payers – you will have been paying 0.5% of your annual pay bill into a ‘pot’. Funding is then drawn from that pot for all the training given or facilitated by the Training Provided up to the negotiated price for the apprenticeship. 

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 an apprentice aged 21 or under on the first day of their apprenticeship, then you are except from co-investment and the government will fund 100% of the negotiated price for the apprenticeship.

Negotiated price?? Each Apprenticeship Standard has a maximum funding band, meaning the max funding that could be drawn. However, the amount that can be drawn depends on who is doing the apprenticeship and what you have asked to be included in the apprenticeship, meaning the negotiated price can be under the maximum funding band. Slightly confusing however, a good training provider will lead you through this process of setting a price for the apprenticeship specific to the individual you have selected to do the apprenticeship.

Incentives

There is an incentive of £1,000 paid to employers who take on an apprentice aged 16 to 18-years on the first day of their apprenticeship. This incentive is passed to the employer via their Training Provider in two £500 instalments.

Understanding your position 

There are lots of different elements to take into consideration when working out what an apprentice will cost you as an employer. As you can see, it’s not a one size fits all exercise, and it is influenced by the rules surrounding apprenticeships set by the Department of Education. But don't fear, we are here to help! Our no obligation, free consultancy meeting with your business can help you to understand exactly what is involved in the delivery of an apprenticeship, the types of training programmes (Apprenticeship Standards) that are available, how best they would fit within your business and the financial elements applicable to you. 

Get in touch today to arrange a meeting.

Conclusion 

Apprenticeships are a cost-effective training method for people coming into your business as well as those already employed and its important to find the right Training Provider who is willing to offer you guidance on the funding, rules and regulations in order to make your Apprenticeships a success.