According to the House of Commons, in 2014/2015 there were 871,800 apprentices in the UK, up 14% compared to the previous year. With the cost of university tuition fees rising, and a saturated graduate jobs market, the once-common practice of hiring an apprentice is back in fashion.
More than just on-trend, the burgeoning apprenticeships industry is strongly supported by a system of government grants, meaning that it could be simpler and more cost-effective to employ an apprentice than businesses think. In fact, over the last 3 years we have employed and trained two apprentices here at Edwards Insurance Brokers.
What is an apprenticeship?
An apprenticeship is a way of studying for a qualification which combines on-the-job learning and more traditional studying. Typically an apprentice is aged 16 or over and they must work at least 30 hours a week, with at least 16 on the job (the rest can be accounted for by studying).
This job/study hybrid can last between one and four years and leads to a qualification which can be the equivalent of anything from GCSE level to degree level, depending on the course.
Unlike the university system, apprentices are paid while they learn, making them an attractive prospect for young people wishing to avoid student debt. Businesses are rewarded with an employee who can be moulded to fit their processes and get to know their business inside out.
Are apprenticeships right for SMEs?
Take up of apprenticeships by SMEs has been low. HR magazine reports that while 99% of businesses are SMEs, the proportion of apprenticeships happening in SMEs is just 10%.
However, SMEs are facing a huge skills drought – a study by Close Brothers found that 31% of SMEs feel their workforce does not have all the skills it needs, with more than half (55%) believing they won’t be able to find suitable workers due to a skills shortage (43%) or location (12%). Despite this, only 5% of companies surveyed said they plan to look for an apprentice this year.
Apprenticeships could be a way to bridge this skills gap. According to the survey, companies listed: cost (49%), red tape (19%) and lack of time for training (14%), as the main reasons they hadn’t invested in apprentices. Despite perceptions to the contrary, there are many government funding initiatives in place to help support SMEs hiring apprentices and the process is easier than you might think.
How much will it cost?
Businesses must pay apprentices at least minimum wage, and are required to pay them for time spent studying as well as at work.
Minimum wage is slightly different for apprentices, with an ‘apprentice rate’ of £3.30-an-hour in place, however, apprentices are entitled to the minimum wage for their age if they are both: aged 19 or over, and have completed the first year of their apprenticeship. A business must consider an apprentice as similar to their current entry-level employees and offer the same benefits e.g. paid holidays, sick pay, childcare voucher schemes etc.
Can you try before you buy?
If you’re not sure about the commitment of hiring an apprentice, you can use an apprenticeship training agency to help. If you go via a conduit in this way, then you can end the apprenticeship early, which typically you can’t do if you hire them yourself.
Don’t forget that Employer’s Liability Insurance would help give you cover in the unlikely event an apprentice makes a significant mistake.
Funding for your business
If you’re based in England and interested in the idea of getting an apprentice then you could get a grant or funding from a government initiative to help towards the cost.
Tailored for SMEs, a company is eligible to apply for a £1,500 apprenticeship grant if they have less than 50 employees and the apprentice they take on is between 16 and 24 years old. Typically there is more funding available for taking on younger apprentices (between the age of 16 and 18).
It’s even possible that you could receive 100% of the funding needed to hire an apprentice – the government is keen to develop a more skilled workforce and there are various new initiatives to help support this.
You can use the Skills Funding Agency tool here to estimate how much funding you would get towards your apprentice.
If you’re a larger business that might be eligible to pay the newly introduced apprentice levy – a 0.5% tax on companies with a pay bill of more than £3 million each year – then it might be worth considering getting Credit Insurance to cover you in case anything goes wrong.
What are people saying?
The Independent reported on a poll which showed that 52% of companies that have hired apprentices feel they offer greater value than graduates, and the overall consensus in the business world is that, particularly where a job is practical or requires in-depth knowledge of an industry, an apprentice could be a good fit.