The push by the government to create three million new apprentices by 2020 has been introduced to boost the economy, and hopefully create long term positions for those young people trying to get a foot on the employment ladder, however, while this sounds good in theory it has led to concern amongst organisations as to how these apprenticeships will be funded.

How does it work?

The government currently provides 100% of the funding to cover training costs of apprentices aged 16-18, and 50% for 19-24 year olds, and is payed via the Skills Funding Agency (SFA) direct to the training provider.

At present, apprentices are entitled to be paid the applicable national minimum wage for time spent “on-the-job”, which is currently £2.73 per hour for those under 19, or who are over 19 but in the first year of their apprenticeship, and employers are responsible for paying apprentices’ wages.

What may change?

Under new proposals, it is anticipated that employers could be expected to contribute a third of the funding to cover the training costs for an apprentice, with the SFA contributing £2 for every £1 an employer contributes to the external or “off-the-job” training and assessment costs of an apprenticeship. The SFA contribution will be capped – depending on the applicable apprenticeship standard – at £2,000, £3,000, £6,000, £8,000 or £18,000.

On top of the capped contribution, there may be additional payments for up to 50 employees, for the successful completion of an apprenticeship and for taking on 16-18 year olds. These new proposals and incentive payments are due to concerns that the apprentices are low skilled, and the fact that very few of apprenticeships are taken up by school leavers looking to secure their first job.

What next?

One of the main advantages to taking on apprentices has been that they are relatively inexpensive and the government funding lessens the cost burden. The new proposals may mean that there is far less incentive for employers to take on and train inexperienced young people as the costs of doing so is due to increase.

In order to ensure that organisations continue to take on apprentices, the government must put plans in place to offset the additional training costs and make sure that businesses see the apprentice as a valuable and cost effective resource.