There is an extra cost to consider when you hire an apprentice. You need to pay for their training, as well as their salary. Help is available from the government to pay for apprenticeship training. How much depends on the annual pay bill of your company and whether you are an apprenticeship levy payer.
I have an annual pay bill of £3m plus – you’re an apprenticeship levy payer
From 6th April 2017, there is a legal requirement to pay the apprenticeship levy to HMRC through the PAYE process. The levy is 0.5% of your annual salary bill, which includes the total amount of employees’ earnings subject to Class 1 National Insurance, i.e. wages, pensions, commissions, and bonuses.
Through this levy you will receive funds to spend on training and assessing your apprentices. The government will add 10%.
Example: Cornwall ‘R’ Us Ltd has an annual pay bill of £5m so pays an annual apprenticeship levy of £25,000 (0.5% of PAYE bill).
This is credited into their digital levy account, minus the levy allowance of £15,000, giving them £10,000 to spend on apprenticeships.
The government provides a monthly 10% top-up (based on funds entering the digital account) equating to £1,000, bringing the total funds to £11,000.
The apprentice employed by Cornwall ‘R’ Us Ltd is aged 16-18 so they also receive a £1,000 incentive paid via the training provider.
I have an annual pay bill of less than £3m - you don't pay the apprenticeship levy
You pay 10% towards the cost of training and the government will pay the rest (90%) up to the funding band maximum. They’ll pay it directly to the training organisation. It’s possible that you may even be eligible for further funding support depending on your circumstances. If you employ less than 50 members of staff and recruit an apprentice aged 16 – 18, or 19 – 24 on a health care plan, the government will pay 100% of the apprenticeship.
- Monetary incentive: you will receive £1,000 (paid by the training provider) if you train a 16 – 18 year old, or a 19 – 24 year old who has previously been in care or who has a local authority education, health and care plan
- National Insurance: you are not required to pay National Insurance Contributions for apprentices under the age of 25 on earnings below the higher tax rate of £827 a week (£43,000 a year)
- Maths and English: if an apprentice does not have a GCSE in Maths or English, the apprenticeship will consist of Function Skills in these areas which are fully funded by the Government
Apprenticeship wages and benefits
The minimum hourly rate that you have to pay an apprentice depends on their age and changes every April. Visit Gov.uk for the latest rates.
You must also support them by giving them time to study towards their qualifications and paying them for this study time. They must also be given a proper employment contract and they’re entitled to all the same benefits as any other employee in a similar role or at a similar grade. This includes sick pay, holidays and any extra benefits you offer such as childcare vouchers or mentoring schemes. They should be treated as you would any other employee, only with dispensation to take time towards their studying.