The small business guide to employing an apprentice

As of November 2015, the number of young people in the United Kingdom not in education, employment or training stood at 848,000. Commonly referred to as ‘NEETs’, this huge section of society aged 16-24 (the Scottish government limits its NEET classification to those aged 16-19) is a desperate social and economic problem.

BBC News in 2005 reported how NEETs are 20 times more likely to commit crime and female NEETS are 22 times more likely to be a teenage mother. Only 46% of NEETs in 2015 were listed as looking for work or further education, leaving the best part of half a million young people classed as ‘economically inactive’.

A leading country like the UK, competing on the international stage against existing economic superpowers and developing economies, simply cannot afford to have so many people totally absent from working life. Dubbed the ‘lost generation’ of the recession, those leaving school or increasingly graduating from university have been finding precious few job opportunities available.

That is one of the key reasons why the government continues to plough money into apprenticeship schemes in an effort to get some of these people back into work. Indeed over 100,000 people have returned to education, employment or training since November 2014 – and huge numbers of those are in apprenticeships.

But it’s certainly not just NEETs who might be suited by the excellent opportunities apprenticeships offer. They are a crucial option for those leaving compulsory education who don’t wish to go to higher education or university, as well as those eager to make their first steps into the world of work.

Not everyone is suited to traditional education, and apprenticeships provide great prospects and a first step on the ladder, marrying the vocational with the academic. For businesses, there a number of real benefits from employing an apprentice.

This guide has been put together to give a clearer understanding of what an apprenticeship is and how they work. It also sets out the benefits for both the employer and apprentice, as well as tips on how to get involved, and links to further resources.

What are apprenticeships?

Apprenticeships are open to people aged 16 and over and combine real work experience and studying with the end goal of achieving a work-based qualification. This can start at the equivalent of a GCSE, right the way up to degree level.

There are three types of apprenticeships – intermediate, advanced and higher. The key differences are listed below:

Intermediate apprenticeship

• Equivalent to five good GCSE passes (typically A-C would be referred to as ‘good’)
• Apprentices work towards qualifications such as an NVQ Level 2, Key Skills, and generally a BTEC
• Once completed, the skills gained allow entry to an advanced apprenticeship

Advanced apprenticeship

• Equivalent to two A-level passes
• Apprentices work towards qualifications such as an NVQ Level 3, Key Skills and a BTEC
• Generally applicants would already have five GCSEs (C or better) or have finished an intermediate apprenticeship

Higher apprenticeship

• Apprentices work towards qualifications such as NVQ Level 4 and often Foundation degrees
• Apprentices can also progress from a higher apprenticeship to higher education and university

Depending on the apprenticeship being undertaken, apprentices can also gain qualifications such as: International Baccalaureate, BTEC Professional Diplomas, Certificates and Awards, OCR Nationals and many more.

In January 2015 there were just short of 500,000 people taking part in an apprenticeship scheme, a rise of 14% on the previous year. Both male and female apprentices were roughly equally represented (53% women, 47% men) and 73% were involved in three service sectors – Business, Administration and Law; Public Services and Care; and Retail and Commercial Enterprise.

But apprenticeship opportunities are available across a broad range of career paths and industries including: agriculture, horticulture and animal care; arts, media and publishing; construction, planning and the built environment; engineering and manufacturing technologies; and information and communication technology. Check out the government page on apprenticeships for a full list.

Both the employer and the apprentice must meet criteria to make the exercise valid, and indeed legal. An apprentice is there to learn specific skills. For example, an apprentice mechanic would be taught the skills of the trade, learning directly from qualified mechanics.
As in the scenario above, the focus for the employer is teaching the apprentice job-specific skills. They need to be instructed and supported to ensure they pick up these skills. This is a real-life job placement.

Employers must pay the minimum wage. For apprentices aged 16-18, and those aged 19 or over in their first year as an apprentice, the minimum wage is currently £3.30 an hour (until October 2016). All other apprentices are entitled to the minimum wage for their age group.
For their part, apprentices must combine their employment with study at a college or training organisation.

Depending on what qualification the apprentice is setting out to achieve, an apprenticeship can last from one to four years.
Apprenticeships in Scotland are largely the same, but it’s worth checking out the Skills Development Scotland website for further details.

What are the benefits of undertaking your own apprenticeship scheme?

For the overwhelming majority of apprentices, this will be their first real work experience and their opening into the culture of a working day. It’s therefore a fantastic opportunity for you to develop your apprentice’s skills to fit your company’s practices and ethos.

The apprentice is essentially a blank canvas when they start working for you. Mould them and train them to be the very embodiment of what your business represents. They offer great flexibility and enthusiasm as they are new to the role and the sector.

As most qualifications and training courses for apprentices are designed with the help of employers, the apprentice will develop the skills and knowledge needed in your workplace. They are reliant on you to help them advance their careers and as an employee they will feel valued, which increases their loyalty and commitment to you.

With their training, they will learn and become familiar with the latest legalisation and regulation, and are often better equipped to understand and use new technologies. They can become a crucial asset in teaching and helping the existing workforce with new challenges. As they grow in their role, skills shortages and gaps can be filled by apprentices you trust.

Businesses can improve their reputation in the local community by hiring apprentices. People look fondly on companies supporting young people – ‘giving something back to the community’. By making local schools and colleges aware you recruit apprentices, you can often market your business through channels not otherwise available.

Apprentices are a great way to maximise your recruitment budget. The initial outlay of hiring an apprentice is often smaller than many companies think as a result of government funding and the fact that they are paid a smaller wage. A UK Commission on Employment report found 88% of employers viewed apprenticeships as a cost-effective way to train staff.
Compare this to the experience of many companies that use unpaid interns. An intern is (usually) motivated when they start, knowing that if they impress enough they could get a full-time paid job. If they do star and gain employment however, their productivity often drops as they believe they are safe in their job.

A study by the University of Warwick in 2008 charted the progress of apprentices placed with 60 employers and concluded that apprentices were 20%-30% more productive than colleagues who had not completed an apprenticeship.

Depending on your business, employing an apprentice can allow you to price your services or products more competitively, and in time they will help reduce the work burdens of other staff, leading to a better, and more productive work environment. From April 2016, employers of apprentices under the age of 25 will no longer be required to pay National Insurance contributions for those employees.

You will have first option on your employee at the end of their apprenticeship. Having trained them up and helped them complete their qualifications, you have in most – if not all – respects, an ideal candidate for a full-time position should you wish to expand your workforce.

Taking a wider look and it is estimated that for every £1 spent on an apprentice, the economy receives a return of between £26 and £28.
The costs section below will give you information on what funding and grants you could be eligible for if you take on an apprentice, as well as other costs to your business.

What are the costs?

Like any employee, an apprentice must be paid the minimum wage. As mentioned above, this is £3.30 an hour for 16-18 year olds, and for those who are 19 or over in their first year of an apprenticeship.

If the apprentice is neither of the above then you could be paying £6.70 an hour (for someone 21 and over), rising to £7.20 by April 2016. They must usually be employed for a minimum of 30 hours per week (unless the apprentice for some reason cannot complete the full 30 hours) and are entitled to most benefits of a regular employee, such as holiday pay. Normal unfair dismissal rules also apply too. You can obviously attract the best apprentices by offering above the minimum wage.

Countering some of those costs is a government report that states 96% of employers who employed an apprentice reported benefits to their organisation, with each apprentice increasing a company’s productivity by £214 per week – over £10,000 a year.

Many businesses are also eligible for funding to cover the costs of training apprentices. The amount depends on the sector your business is in and also the age of your apprentice.
This could total however, all the costs of a person aged 16-18, half the cost for someone 19-24 and a quarter of the costs for those 25 and older.

You may also be eligible for a £1,500 apprenticeship grant for employers (AGE) if your business has less than 50 employees and the apprentice is aged 16-24. If this is you, then you can claim financial support for up to five apprentices.

Aside from the obvious financial costs, you will be responsible for committing an agreed amount of time to your apprentice. This must be factored into the working week – which member(s) of your team will be responsible for this and how much of their time will be taken up by this?

You will also have the primary responsibility for the health and safety of the apprentice and any costs associated with this. This might include one or more of the following: induction, training, supervision, site familiarisation and any protective equipment that might be needed.

What are the benefits for apprentices themselves?
The number one benefit is that apprentices ‘earn while they learn’. Not only will an apprentice acquire key skills in their chosen field, coached and supported by a strong network of people, they will pick up a wage. For young people, this is their first step into the ‘real’ world and a key move towards independence.

There really isn’t a better way to learn a trade than by doing an apprenticeship. Surrounded by qualified people, they have the opportunity to put their skills and new-found knowledge into practice straight away.

Having information resources in the shape of other staff is a huge asset. Asking questions, taking on more responsibility, and throwing themselves into their new role will not only be rewarding, but will lead to better career prospects.
As their skills progress and their value to their employer rises, apprentices can often expect wage increases, plus bonuses for meeting targets and hitting top grades in their qualifications.

Once someone has finished their apprenticeship, they’ll be in a strong position in regards to their career path. They may be able to simply carry on working for the same employer, or move to a similar job at another company.

Experience is critical in a competitive job market like the UK. Being able to boast a completed apprenticeship on their CV will give apprentices a huge advantage over many other applicants, while also providing proof that they are a dedicated and talented individual.

As well, unlike most university graduates, apprentices won’t be saddled with huge debts. Figures suggest apprentices with the highest qualifications can earn £50,000 more than a university graduate over the course of their lifetime. When the costs of a university education are factored in – £9,000 a year for the average student in England – the financial benefits start to become clear.

Another study from the University of Sheffield found someone who started their career through a Level 2 NVQ apprenticeship could earn £70,000 more during their professional lifetime than someone who had not been an apprentice.
It’s worth noting that many of the biggest names in UK industry, business and finance – including Sainsbury’s, BT, Bentley, RBS, Barclays, and the Bank of England – have apprenticeship schemes and many require applicants to have just a few GCSEs.

Ultimately, apprenticeships are a fantastic launch pad into gainful employment.

Is it right for my business? Do you agree with the following statements?

• I want my business to expand and develop
• I would welcome young, enthusiastic talent into my business
• I want to ensure my workforce has the right practical skills and qualifications
• I want my business to stay up to date with the latest technology and best practices
• I would be able to dedicate time and resources to support and encourage an apprentice to flourish in my business

If you were in agreement to all the above, then the answer is most probably yes, an apprentice would be right for your business.

Clearly every business is different, but more and more employers are realising that training people through apprenticeships is the most competitive and efficient way to grow stronger as a business and a growing number of young people are now looking at the schemes, widening the talent pool.

The following industries or sectors suit apprenticeships particularly well:

• Business/Law
• Engineering/Manufacturing
• Retail/Commercial
• Media/Publishing
• Construction
• ICT

That’s nearly everything! The British Army has championed apprenticeships for decades, and almost all of the most exciting and forward-thinking companies have their own apprenticeship programmes. You would certainly not be alone in employing an apprentice.

Of course, it’s worth reading more about apprenticeships before making a decision. The resources listed below have been collated by us and provide further information.

Employ an apprentice
What do I need to know?
Build an apprenticeship programme – businesses with less than 250 employees

The steps involved

Your business will nearly always have to work with training agencies or providers to create an apprenticeship programme. They will support you by:

• Identifying and creating an apprenticeship suited to your requirements
• Recruiting an apprentice
• Developing a training plan which matches the apprentice and employer requirements
• Reviewing and testing the progress of the apprentice and providing feedback
• Providing training to support the knowledge elements of the programme

You will be responsible for helping create and setting out how you will deliver on-the-job coaching and learning, as well as off-the-job learning. You’ll need to demonstrate how mentoring and support will work. In short, contribute to the training plan and describe how you will commit to making it work.

If your business has less than 250 employees, the government has a Small Business Team specialising in meeting your needs. They will guide you through the process of hiring an apprentice. More information and contact details are available here.
You can also search directly for an apprenticeship training provider. The search filters here let you find a training organisation by postcode, keyword and level. Even better, there is a freephone number to call for advice and help.

We would always recommend speaking to a qualified advisor if you haven’t taken on an apprentice before. While there is a multitude of information out there, nothing will help you more in making your decision on whether to employ an apprentice than talking to an expert.

Once you have linked up with a suitable training provider you will need to draw up a Service Level Agreement (SLA). This is a contract that sets out the responsibilities and duties the employer and the apprentice both have, including the measures and deadlines you will both need to follow. Help is available from the government or training organisations in creating this document. A financial contract will also need to be created.

The Office for Standards in Education, Children’s Services and Skills (Ofsted) is responsible for quality assessment of government-funded training, which includes apprenticeships. You’ll be responsible for meeting Ofsted’s contractual quality requirements if you are accessing government funding.

If you are keen on employing an apprentice but cannot currently commit to the length of time needed for a full apprenticeship, an apprenticeship training agency (ATA) can help you. They recruit, employ and arrange training for apprentices on behalf of employers.

Both training agencies and providers will work with you to find you a suitable apprentice, or you can invite people to apply in the same way you would advertise for a job.

Conclusions

As with everything, there are benefits and drawbacks of employing an apprentice. However, it seems obvious that the benefits far outweigh any perceived negatives and there’s an ongoing shift of opinion in the way apprenticeships are thought of by the public and employers.

Nicky Morgan, Education Minister (as of January 2016), has championed a new law ensuring that state schools promote apprenticeships as much as university education. This is planned for introduction during 2016 and marks the latest move away from encouraging university as the primary route available to pupils.

This plan forms part of a wider push to create three million apprenticeships by 2020 – a Conservative party manifesto commitment, in part being funded by an apprenticeship levy of 0.5 % on large company payrolls which will raise around £3 billion a year.

The number of apprenticeships are only going to rise, increasing the technical and professional capacity of the young workforce. Most businesses, regardless of size, would be wise to invest in this pool.

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