Deborah Kearns
Owners of small businesses constantly juggle competing priorities as they grow. One way to upskill and motivate existing and new employees is to offer them an apprenticeship.
When you hire an apprentice, you give workers the chance to learn skills on the job through a mix of training and education. This is a win-win for both your business and for apprentices who often stay on with an employer after an apprenticeship is over.
And, as of 1 April, the government made a £60 million investment to fully fund training costs for 20,000 new apprenticeships in the next year for people aged 21 and younger.
This significant investment sweetens the deal for businesses and apprentices alike, all while removing a major financial hurdle for business owners to participate. The government estimates, on average in the UK, that employers see a yearly gain of between £2,500 and £18,000 per apprentice during their training timeframe.
Contrary to popular belief, apprenticeships aren’t just for new or younger workers; existing employees can undertake an apprenticeship. In fact, 48% of the apprenticeships reported through the end of the 2022/2023 academic year were for people aged 25 and older, while 23% were aged under 19 and 29% were between the ages of 19 and 24, according to data from the House of Commons Library.
Apprenticeships are available in virtually every type of profession. However, government data show that the bulk of apprenticeship starts in 2022/2023 were in the following four sector areas:
- Health, Public Services and Care: 98,760 starts
- Business Administration and Law: 90,740 starts
- Engineering and Manufacturing Technologies: 45,970 starts
- Retail and Commercial Enterprise: 30,970 starts
When should you hire an apprentice?
Taking on an apprentice is an investment in the future of your business – and it can reap tremendous rewards for your firm’s growth. But it’s also an investment of time and resources to provide adequate training and mentorship.
“If you’re looking to tackle your medium- or longer-term skills’ needs in your organisation and ensure that you have the skills so that your business is going to succeed in the future, apprenticeships are a fantastic way of delivering those skills for your business,” said Lizzie Crowley, senior skills policy adviser with the Chartered Institute of Personnel and Development.
Crowley added that, unlike other forms of training and development, apprenticeships have higher retention rates, so you’re more likely to keep apprentices on after you’ve trained them up. But if you’re going to offer an apprenticeship, that person needs the opportunity to apply what they’re learning in their day-to-day role, Crowley pointed out.
“You need to have the right line management process in place, need to think about how can you ensure that you’ve got employee mentoring and support available, and then particularly for small firms if they’re dealing with young people, those things become even more critical to the success of the programme.”
For family businesses, which make up 90% of all private sector firms and employ nearly 14 million people, apprenticeships can often lead to long-term career opportunities, Fiona Graham, chief advocacy officer with Family Business UK, said in an email. Family Business UK is a not-for-profit advocacy and support organisation for the nation’s 4.8 million family businesses.
Family businesses take a long-term view, building on their people and resources. “Their commitment to passing a healthy business on to the next generation is embedded within their corporate DNA. Family businesses are motivated by a desire to pass the business on to the next generation in a stronger state than they themselves inherited it,” Graham explained.
Pros and cons of apprenticeships
Plenty of research shows the benefits of apprenticeships, but they’re not without some drawbacks for business owners who must balance the costs, time and resources involved in offering them.
Here’s a closer look at some pros and cons of apprenticeships.
Pros:
- Reduced recruitment costs: With new government funding, it can be a cost-effective way to find and develop talent compared to traditional recruitment methods.
- Enhanced innovation: Apprentices bring fresh and diverse ideas, and perspectives to the table, fostering a culture of creativity within your business.
- Improved staff productivity: Apprenticeships improve job productivity as apprentices contribute to your company while learning and upskilling, Crowley said.
- Builds employee loyalty and retention: Apprenticeships can often turn into long-term employment. In family businesses, Graham said, they often become jobs for life, providing long-term career opportunities.
Cons:
- Requires time investment: Training an apprentice requires time and resources from experienced employees, which may strain a smaller team.
- Initial experience gap: Apprentices may need additional support and more supervision at the start of a programme before earning more autonomy.
- Recruitment process: Finding the right apprentice can take time, effort and some expense to advertise your scheme and find the right fit.
How much does it cost to hire an apprentice?
Although the new government funding fully pays for training costs at SMEs for those aged 21 and younger, hiring an apprentice still comes with some costs to consider. These include:
Apprenticeship levy. A levy of 0.5% of an employer’s annual pay bill is required for employers with an annual pay bill that exceeds £3 million or for employers who are connected to any entities for Employment Allowance purposes and have a combined annual pay bill of more than £3 million, according to government rules.
The government’s new measures also increase the amount of funding apprenticeship levy-paying employers can share with other businesses. As of 1 April, larger businesses can now transfer up to 50% (up from 25% previously) of their unused levy to a different employer, including smaller companies, to fund new apprenticeships.
Depending on the age of an apprentice, there are other costs you’ll have to pay. These include:
- Wages and annual leave. You must pay an apprentice minimum wages (which vary depending on their age) and 20 days’ annual leave, plus bank holidays. Plus, you must allow them to spend 20% of their time on training.
- Liability insurance. You must pay employer liability insurance for all employees, including apprentices. Your policy must cover your business for £5 million and be issued by an authorised insurer.
- National health insurance. If an apprentice is over 25, you’ll contribute toward employees’ National Insurance. The specific rate you’ll pay is calculated based on employees’ earnings and category. The rate is either 0% or 13.8%.
Note: Employers do not have to contribute to National Insurance if an apprentice is under the age of 25, is on an approved UK government apprenticeship standard or framework or earns less than £967 a week (or £50,270 annually).
Small business owners can learn more about hiring an apprentice from government resources.
If you’re interested in applying for an apprenticeship, visit the government’s apprenticeship portal or any job search board to start your search.
Image source: Getty Images
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