Apprenticeships are a valuable way to fill skill shortages in your business by training new starters or upskilling existing employees.
We outline the employment law implications of apprenticeships below, particularly the importance of putting the correct type of agreement in place.
What is an apprenticeship?
An apprenticeship is a work-focused training course that enables the individual to achieve a formal qualification in the relevant sector.
It involves a combination of on-the-job training provided by the employer, and off-the-job training arranged through an external training provider.
Apprentices must spend at least 20% of their normal working hours completing off-the-job training towards their apprenticeship.
As this training takes place during the apprentice’s normal working hours, this should be paid at their full basic salary.
Apprenticeships last for a fixed term, which must be at least 12 months but can be up to four years for the higher levels.
Apprenticeships are available to anyone over the age of 16, but younger workers predominantly take them up.
For clarity, the focus of this article is the English apprenticeship system.
However, you can find information about:
- Apprenticeships in Wales at Business Wales
- Apprenticeships in Scotland at Skills Development Scotland
- Apprenticeships in Northern Ireland at NI Business Info
Apprenticeship levy and funding
To encourage the uptake of apprenticeships, the government introduced an apprenticeship levy in April 2017.
Employers required to pay the levy
Employers with an annual pay bill of above £3 million must pay the levy at a rate of 0.5% of their pay bill.
An annual pay bill includes all payments made by the employer to its employees which are liable for national insurance, such as wages, commission and bonus payments.
The levy provides the employer with funds to spend on apprenticeships each year, which the government tops up by 10%.
Employers who don’t pay the levy
The government offers extensive funding to employers who do not meet the above threshold.
For apprenticeships starting after April 2019, the government will cover 95% of training fees, subject to the funding band maximum for the apprenticeship, meaning employers must only contribute the remaining 5% of training costs.
For apprenticeships starting before April 2019, the government covered 90% of training costs, and the employer was required to pay 10%.
There is also additional funding available:
- £1000 is given to employers who take on an apprentice aged 16-18 (or 19-24 if they have a local authority education, health or care plan, or have been in local authority care).
- The government will cover the full training costs for small employers (with under 50 employees) who take on an apprentice aged 16-18 (or 19-24 if they have a local authority education, health or care plan, or have been in local authority care).
To access the funding you must make an account with the apprenticeship service.
It is important to note that government funding can only be used towards the training provider’s fees.
It can’t be used to cover other expenses associated with employing the apprentice, such as travel and additional resources.
Selecting an apprenticeship
To benefit from the funding outlined in the previous section, and to ensure that you employ an apprentice under an approved apprenticeship agreement, the apprentice must be working towards an ‘approved apprenticeship standard’.
Previously, there were ‘apprenticeship frameworks’, however, these have been phased out and are no longer available for new apprenticeships from August 2020.
A list of all the current approved apprenticeship standards can be found on the Institute for Apprenticeships website.
Apprenticeship standards are divided up into the following four levels:
- Intermediate (Level 2) – equivalent to GCSE
- Advanced (Level 3) – equivalent to A level
- Higher (Levels 4, 5, 6 and 7) – equivalent to foundation degree and above
- Degree (Levels 6 and 7) – equivalent to bachelor’s or master’s degree
Therefore, you will need to think carefully about what level of qualification your business requires as well as the duration of the apprenticeship as the higher the level, the longer the course will last.
If there is no existing standard for your industry, you can look to develop a new standard as part of a ‘trailblazer’ group.
Unless you are a registered training provider, you will need to engage an external training provider.
You can do this through the government’s find apprenticeship training service.
Some important things to consider when selecting a training provider are:
- The provider’s experience of your industry
- Where and how the training is provided
- The provider’s involvement in the recruitment process
Recruiting an apprentice
Training providers can be actively involved in the recruitment process by advertising the role through the ‘Recruit an apprentice’ service on your behalf.
However, you may prefer to keep control over applications and the selection process within your business instead.
When recruiting for apprentices there are some specific points that you need to bear in mind in addition to the usual recruitment standards.
The term “apprenticeship” should only be used to promote jobs associated with an approved apprenticeship standard as it is a legal definition.
Unless you can reasonably justify your approach, there is a risk of potential age discrimination if you advertise the role exclusively towards younger people.
Due to the lower minimum wage and enhanced government funding, the cost savings by hiring younger people are not a sufficient defence to age discrimination claims.
Most apprenticeships do not require the apprentice to have any previous experience or skills within the sector.
Therefore, the selection criteria you use when recruiting apprentices should be strengths-based and assess the individual’s potential rather than requiring specific experience and skills.
If you want to take advantage of government funding, the apprentice must satisfy the eligibility criteria; namely:
- they must not be enrolled in another apprenticeship or education programme.
- not contribute towards the cost of the apprenticeship (this includes taking out a student loan).
- not already hold an equivalent or higher-level qualification to the apprenticeship unless it is substantially different (i.e. someone with a biology degree could complete a business apprenticeship).
Once you have arranged the apprenticeship with the training provider and found a suitable candidate, you will need to issue the new apprentice with an apprenticeship agreement before they start working for you.
There are two main types of apprenticeship agreement:
1) Approved apprenticeship agreement
An approved apprenticeship agreement must include all the general terms which are legally required for any contract of employment.
However, it must also:
- Provide for the apprentice to work in a sector that has an approved apprenticeship standard.
- Provide for the apprentice to receive training to help them achieve the approved apprenticeship standard.
- Set out the apprentice’s practical period (time spent working and training) – this must be at least 12 months.
- Establish how much off-the-job training that the apprentice will receive – this must be at least 20% of their normal working hours.
2) Traditional apprenticeship agreement
If the legislative conditions of an approved apprenticeship agreement as outlined above are not met, the contract will be a traditional apprenticeship agreement by default.
This gives the apprentice enhanced protection compared to other employees and makes it extremely difficult for you to dismiss them, even if they have committed gross misconduct.
Dismissal is only permitted under this type of agreement if the apprentice’s conduct or performance is so poor that it means they are ‘unteachable’ and making the apprentice redundant is virtually impossible.
- There are also serious implications for breaching the apprenticeship contract.
- If an apprentice successfully claims breach of contract under this type of agreement, you may be required to pay them compensation in respect of:
- the remuneration and benefits they are entitled to for the remainder of the apprenticeship; and
- your failure to provide training, which reflects the increase in salary they would have earned had they successfully completed the apprenticeship and also loss of future career opportunities.
Therefore, it is critical that you satisfy the legal specifications for an approved apprenticeship agreement to give your business greater flexibility and protect yourself from the risk of expensive claims.
Training and supervision
You must provide the apprentice with regular training and supervision for their role to supplement the formal off-the-job training.
To evidence this training and supervision, you should appoint an experienced individual within the business who can mentor the apprentices to ensure that they develop the skills needed to achieve the approved standard.
Internal training and daily supervision costs cannot be covered using the government levy fund, so it is essential that your business budgets for this.
Apprentices must be paid at least the national minimum wage for their age unless:
- they are aged under 19; and/or
- they are in the first year of their apprenticeship.
If either of these conditions apply, then the apprentice can be paid at a lower apprentice rate of pay, which is currently £4.30 per hour.
If you employ apprentices under the age of 18, they will have enhanced employment rights which include:
- a working time limit of 8 hours per day and 40 hours per week
- 30-minute break if they work at least 4.5 hours per day
- 12 hours rest in any 24-hour period during which they work
- 48 hours rest taken consecutively each week
- Limits on night working between 10:00pm and 7:00am
However, some sector-specific exceptions to the above working time limits may apply depending on the nature of the apprentice’s work and your business.
Dismissing an apprentice
Provided you employ the apprentice under an approved apprenticeship agreement, as outlined above, the following principles will apply.
Since an apprenticeship is a fixed-term agreement, it will automatically expire on the termination date, and you are not under any legal obligation to offer the apprentice a permanent position in the business.
However, an apprentice with over two years’ service will have unfair dismissal rights like any other employee, so it is advisable to explore vacancies for them in these circumstances.
It is also important to include a clause in the agreement which allows you to dismiss the apprentice before the end date, for example, if their performance or conduct is unacceptable.
Unless you include such a clause, early termination would be a breach of contract, and the apprentice may be able to bring a claim.
In summary, to employ an apprentice you need to:
- Select an approved apprenticeship standard
- Find a registered training provider for the standard
- Recruit a suitable candidate
- Apply for funding
- Get the apprentice to sign an approved apprenticeship agreement
- Ensure you have suitable training and supervision in place