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English Apprenticeship incentives - Government support for businesses

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In light of the pandemic, the Prime Minister introduced the new ‘English Apprenticeship Guarantee’ - which is a series of incentives for employers and apprentices alike.

Here we break down these new opportunities:

The guarantee includes:

  • £1,000 for providing unpaid work-experience for a Trainee
  • £1,000 for taking back a Furloughed worker
  • 6 months wage subsidy for hiring an unemployed young person (Kick-start)
  • A payment of £2,000 or £1,500 for taking on an Apprentice (until end Jan ‘21 only)
  • 90 to 100% funding for your Apprentice’s training course

A payment of £2,000 will be made to employers who recruit an Apprentice aged 16-24 and £1,500 for those aged 25+. This is in addition to the existing £1,000 payment for hiring apprentices aged 16-18.

There is no employer size limit and no limit to the number of incentives you can claim.

These new incentives are in addition to the existing support:

  • Employers will still pay for training via their ‘levy’ or if not a levy payer then they will contribute 5% of training costs, unless they employ less than 50 people and take on a 16-18 year old (when the 5% is not required)
  • There will still be rebate of employer National Insurance contributions for Apprentices aged under 25

What you spend the incentive money on is completely up to you. You might use it to provide extra support or mentoring or just to offset your employment costs. 

How many more Apprentices will this generate?

HMT say they made 100,000 Apprenticeship incentive payments available, so there should be no shortage.

For comparison there were just under 50,000 starts for under 19s between August and December 2019 and 250,000 for all ages.

More realistically though, this is about preventing a collapse in opportunities this year rather than an increase in numbers.

However we will have to see any new Apprenticeship roles being advertised soon or potential applicants will be on courses in colleges and it will be too late for this summer’s education leavers.

The return on Apprenticeship investment

There are many good reasons to create Apprenticeships. They can be used to increase social mobility and diversify workforces or to retrain for technological advances.

However at their core Apprenticeships are based on creating Returns On Investment (ROI) and there is no evidence of any large-scale Apprenticeship programme lasting for the long-term if these returns are not clear to all parties.

Overview of relevant terms:

Apprentice

Invests their time and effort. Accepts a potentially lower short-term wage in return for skills and experience, with the expectation of increased future earnings and career prospects.

Employer

Invests in the individual with the expectation of future productivity / profit / other returns

State

Regulates for quality, equality of opportunity and invests in the core Educational costs with the expectation of increased future tax returns.

Education provider

Invests in course materials, facilities and tutors with the expectation of profitable outcomes

These new incentives recognise that it is employers that create jobs (inc. Apprenticeships) and so it seeks to boost their ROI, by making their return both larger in size and quicker to realise.

Therefore increasing the attractiveness of the investment and (hopefully) the number of investors.

The introduction of the Levy had the same intention. It forced larger employers to invest in Apprenticeships; and then to try and recoup that investment. But crucially the Levy allowed employers to decide who they wished to train, and employers do not always prioritise younger workers or job seekers. The new incentives have sought to address this by making these schemes age restricted.

Understanding the ROI of Apprenticeships in the UK

The famous German and Swiss Apprenticeships systems have become part of the fabric of those societies; but they are supported by employers there because they deliver a well understood and proven profit.

The ROI of Apprenticeships is much less well understood in the UK. As Hogarth noted in the seminal Apprenticeship ROI 2010 study:

In countries such as the UK, where the work-based VET pathway is less well established than in, say, Germany...the emphasis is very much upon communicating the potential economic benefits to employers and young people to be derived from participating in this type of training.

- Warwick’s Institute for Economic research (IER) 2010

All of this is as true now as it was in 2010.

A recent (2019) IER study into the ROI that employers of Level 3 Accounting Apprentices can expect found that initial costs of employing an Apprentice can be up to £14,615 in year 1.

This becomes a net benefit ranging from £67 (for a levy payer recruiting an existing employee as an apprentice and retaining them for five years) to £25,784 (for a non-levy payer recruiting a new employee as an apprentice and retaining them for eight years). This demonstrates that there is a clear and tangible business benefit to employing an apprentice.

These COVID response incentives will cushion these initial costs and then only increase the long-term return that employers might expect to see. This hopefully gives them the confidence to recruit now and provide the opportunities that this summer’s Education leavers desperately need.

Want to know more?

Please see our business pages for more information about apprenticeships. Or you can watch our webinar on the subject, which goes into more detail.

This article was sourced from our Apprenticeships Director, Richard Marsh.

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