If you pay the apprenticeship levy, then you already have funds to cover the cost of apprenticeship training across different levels. The government has also made apprenticeships as accessible as possible for businesses across the UK, with various schemes and incentives available.
In this guide, we’ll break down the different areas of funding, so you can have a better idea of how much an apprentice costs you as an employer.
How much does it cost to take on an apprentice?
The cost of taking on an apprentice will depend on a number of factors:
- Whether you pay the apprenticeship levy
- Recruitment costs, if hiring a new apprentice (and not using your provider’s free recruitment service)
- Apprentice wages
- National Insurance payments
- If your apprentice is eligible for incentive payments (and any other government schemes)
How much does apprenticeship training cost?
If you pay the apprenticeship levy, then your training funds are covered by the levy that you’ve already invested into. This is only for your apprenticeship training, not any additional qualifications. It does however include the End-point Assessment, including one resit, an apprenticeship funding change introduced in 2022.
If you have a payroll of over £3 million, then the levy is charged at 0.5% of your total payroll, collected as part of your monthly PAYE. They appear in your Digital Service Account.
The government then tops up all monthly payments by 10%. To calculate your total levy payments, and for real-life examples, you can use the formula detailed in our levy calculation guide. You can also read more about the apprenticeship levy here.
As part of funding application checks, the Recognition of Final Learning (RPL) can also affect the overall cost of apprenticeship training.
This scan identifies accreditations and knowledge gaps to build the apprenticeship programme. If there are any elements of the programme that the learner does not need, these are then removed. These changes will reduce apprenticeship costs based on the number of hours removed from the programme. Find out about the latest changes to RPL here.
Don’t pay the apprenticeship levy? There are other funding options available. You can find out more in the next section.
Apprenticeship co-investment
Apprenticeship co-investment is available if your payroll is less than the apprenticeship threshold (or you exceed your levy amount). Businesses that don’t qualify for the levy do not pay for the full apprenticeship programme.
The government pays 95% towards apprenticeship costs. Your funding will be limited to the funding band for that programme. If your training costs exceed these amounts, then you will need to cover the costs. Looking for more info? Find out more about how apprenticeships are funded here.
Does the government pay the apprentice’s wage?
Apprenticeship wages are not covered by the levy - this is something your business will need to cover like you would any other employee. This also includes any time spent at the workplace, college or with your training provider.
So, how much should an apprentice be paid? Your apprentice must receive at least the apprentice minimum wage - this is £4.81 for 16-18 year olds, as well as for 19 year olds in the first year of their programme. When they move on to the second year, they then must make the minimum wage for their age group at least.
As an apprentice is your employee, they are entitled to holiday and sick pay, as well as any other benefits offered to your staff. They may be eligible for pension auto-enrollment, depending on their age and annual income.
When it comes to National Insurance contributions, as long as your apprentice earns less than £967 per week, you don’t need to pay Class 1 National Insurance. Read our guide for a more in-depth breakdown of employers NI and apprenticeships.
Most employers pay more than the minimum wage to reflect the value their apprentice brings to their business. Your apprentice is bringing new skills to your workforce while levelling up in their career, building resilient teams that are well-equipped for the future. We go into detail about the benefits of apprenticeships in our guide.
Incentive payments for employers taking on apprentices
There are various government grants available to help cover the costs of taking on an apprentice, meaning that they’re even more accessible for your business.
You can receive an incentive payment of £1000 if you employ an apprentice aged 16-18 years old, or under 25 and have an education, health and care plan or have been in the care of their local authority. This helps cover uniform, travel and wage costs. This payment is delivered in two payments, straight to your training provider, 90 days after the apprenticeship starts for them to pay you.
Other schemes include the government’s Skills For Life scheme, launched in 2022. Find out more about apprenticeship incentive payments here.
Cost of apprenticeships: measuring success
Apprenticeships are an invaluable opportunity to invest in both your people and business, using funds from the levy or government co-investment. From higher retention rates, valuable upskilling opportunities and financial benefits, you’ll see a significant difference across your business when you employ an apprentice.
If you’re concerned about the costs of hiring an apprentice, then Lifetime is here to help. We work across many industries to drive and build apprenticeship programmes, ensuring businesses like yours are maximising the levy and getting the best return on investment. We’ll also take care of recruitment too. With our free service, hiring costs are one less thing to worry about.
Looking for more help with your apprenticeship funding? Explore our selection of KnowledgeHub articles or get in touch with our team.