Apprenticeships: what employers need to know

The apprenticeship sector may be about to enjoy something of a rebirth. The government recently said it will invest £3.3 billion in funding apprentices – the most ever – and in June the work and pensions secretary, Pat McFadden, announced his department would offer £2,000 to small and medium-sized businesses for every apprentice they take on who is under 25 and will pay the full training costs.

In further good news the skills minister, Jacqui Smith, announced in June that the government is reviewing the funding bands for apprentices. It has long been a complaint by training providers that the bands have not kept pace with inflation and higher delivery costs. They may well have a point: six out of the 20 most-used apprenticeship standards have not had their funding increased since they were launched. However, no new money has been announced so it looks likely some apprenticeships will be defunded to pay for any increases.

The government wants to see 50,000 more apprenticeship starts by 2029; this would turn around nearly half of the 40 per cent decline in apprenticeship starts over the past decade.

These announcements follow the report by Alan Milburn in May into youth unemployment, and the rise of the so-called Neets, those not in education, employment or training. About one million young people fall into this category and six in ten of them have never worked.

Against this worrying backdrop the government’s new focus is welcome and we must hope the planned investment and other changes support British companies to play their part in lifting young people out of worklessness.

Now that this at-times somewhat neglected sector appears to be coming back into favour this is the ideal time to look at what is involved in taking on an apprentice. Companies that do so should take pride in giving a youngster a start in life and take comfort from data that shows the estimated yearly gain for them per apprentice is between £2,500 and £18,000 – the amount by which the value of an apprentice’s output exceeds the costs of the training.

What is an apprentice?

Apprentices do real jobs that are accompanied by training and a skills development programme. Apprenticeships enable people to earn while they learn and gain the skills and experience to perform a specific job role.

Apprentices should be 16 and above and not in full-time education. They can be already employed within the company.

The roles should include training in the workplace, off-the-job training and the chance to practise the newly acquired skills at work.

The apprenticeship levy

Companies that have an annual pay bill of more than £3 million are subject to the apprenticeship levy, which is charged at the rate of 0.5% of the employer’s annual pay bill. Eligible companies must pay the levy even if they contribute to industry-specific levies such as the Construction Industry Training Board Levy.

Companies can be eligible for the Apprenticeship Levy allowance, which reduces the amount they have to pay by £15,000 over the year.

In return for paying the levy companies get funding for apprentices. For example, a company taking on a level 2 apprentice to learn carpentry and joinery would receive £13,000 in funding. A level 4 software developer apprentice would attract £18,000.

Funding for non-levy companies

The government will pay all the costs of training and assessing apprentices at companies that do not pay the levy if they are:

• aged 21 or under;
• aged 24 or under and have an education, health and care (EHC) plan
• aged 24 and under and have been in care.

For other apprentices the government will pay 95% of the cost of training and assessment.

Other funding and funding bands

The government offers £1,000 to support an apprentice in the workplace if at the start of the apprenticeship training the apprentice is:

• 16 to 18 years old;
• 19 to 24 years old with an education, health and care plan; or
• 19 to 24 years old and has been in care.

This can be spent on things like salary, travel costs or a uniform.

Funding bands

All apprenticeships conform to one of a number of standards, which set the required level of attainment the apprentice should achieve. All the standards are in a funding band, which ranges from £1,500 to £27,000. These sums are the maximum that the government is willing to commit to each apprentice. Any sums above that will have to be paid to the training provider.

Foundation apprenticeships

An employer may be eligible for up to £2,000 for apprenticeships doing a foundation apprenticeship, which are level 2 qualifications (equivalent to grades 4-9 in GCSE). Apprentices must be:

• 16 to 21 years old;
• 22 to 24 years old with an EHC plan;
• 22 to 24 years old and have been in care; or
• 22 to 24 years old and are in prison or leaving prison.

Foundation apprenticeships cover the following areas:

• construction and the built environment;
• engineering and manufacturing;
• health and social care; and
• digital.

The employer’s responsibilities

The apprentice must be given a genuine job with a contract of employment that lasts for at least as long as the apprenticeship does, which must be at least a year. The apprenticeship needs to be backed up by:

• an apprenticeship agreement;
• a commitment statement signed by the employer, the apprentice and the training provider;
• a written agreement with the training provider.

The employer should ensure apprentices are on the correct wage for their job, taking into account time spent at work, undertaking training and studying.

At least 20% of an apprentice’s time should be spent on off-the-job training. This can be increased if apprentices have additional training needs, such as bringing their maths up to standard or improving their English.

The employer and the training provider decide how the off-the-job training is delivered. Typical options are day release, block release or special training days or workshops.

The training must be directly relevant to the apprentice’s work and can be delivered on site so long as it is not part of normal duties. It can take the form of shadowing, mentoring or site visits, for example.

By the end of the training, apprentices should be able to perform their tasks competently and to the required standard.

Apprentice pay rules and choosing a training provider

Apprentices must be paid at least the National Minimum Wage (NMW); however, what they are paid will vary according to their age and what year of their apprenticeship they have completed.

The minimum rate for apprentices aged between 16 and 18 and aged 19 or over in their first year is £8 an hour. Those who have completed their first year and are 19 or over get the NMW, which in April 2026 went up to £10.85 for workers who are 18 to 20 and £12.71 for workers who are 21 or over.

Choosing a training provider

The apprenticeship is delivered in partnership with a training provider that is chosen from the apprenticeship provider and assessment register. The employer and provider agree a total price for the cost of the apprentice’s training and assessment, including the final assessment.

Employers use a government service to search for a course, type, work location and training type [https://findapprenticeshiptraining.apprenticeships.education.gov.uk/search], whether short apprenticeship units, foundation apprenticeships at level 2 or apprentices from level 2 to level 7.

Leading apprenticeship providers include:

BPP Professional Education – provides higher-level legal, finance and business qualifications.
Kaplan Financial – finance, accountancy and tax.
Lifetime Training – retail, hospitality and early years care.
Multiverse – artificial intelligence and data skills.
QA – digital, technology, data and software engineering.

What next for companies and the sector?

The recently announced extra support for apprenticeships is unlikely to be the last. The university sector is no longer the priority it was for governments and Labour increasingly sees vocational training as the route to work for young people and an effective way of tackling relatively high youth unemployment.

Businesses that have decided they do want to take on an apprentice or two will want to know more about how to set about it. This will be covered in another, future article.

And, of course, adding to your headcount will have tax and financial implications. Finsbury Robinson is here to talk you through becoming an apprentice employer and would be happy to advise you on any other tax or accounting matter related to your business.

Please contact our friendly and highly experienced team on 020 8858 4303 or via email at info@finsburyrobinson.co.uk