Key Takeaways
- Hiring an apprentice comes with some costs but is likely far more affordable than you think
- Thanks to the apprenticeship levy, employers with an annual payroll bill of more than £3 million already have apprenticeship funding waiting
- For employers with a smaller payroll bill, the government will provide up to 95% of the costs of hiring and training an apprentice
- An additional £1000 of funding is also available to any employer hiring an apprentice who is 18 or under, or 24 and under if they are a care leaver or have an education, health and care (EHC) plan
What are the Costs and Incentives for Hiring an Apprentice?
Once employers understand the many potential benefits of hiring an apprentice, the next question they tend to ask is “Can we afford it?” You might assume that hiring an apprentice is very expensive, or that it will be beyond your budget if you are a small organisation. However, this is not necessarily the case.
In this post, we will talk you through the costs involved in running an apprenticeship programme as well as the various financial incentives that are available to help you meet those costs.
The Costs of Hiring an Apprentice
The largest financial burden associated with hiring an apprentice is the cost of paying their salary. By law, apprentices must be paid at least the relevant National Minimum Wage for their age bracket and experience level.
Those aged under 19, or aged 19 or over and in the first year of their apprenticeship, are entitled to the apprenticeship rate. Those aged 19 or above and in the second or subsequent years of their training are entitled to the relevant minimum wage for their age. As of April 2025, these rates will range from £7.55 to £12.21 per hour.
As long as your apprentice is under 25 and earns less than £967 per week, you will not need to pay employer Class 1 National Insurance contributions (NICs) on their earnings. The apprentice will still be liable for NICs, which will be deducted automatically from their salary.
Other potential costs of hiring an apprentice include:
- Recruitment costs to find and onboard a suitable apprentice
- Lost output or productivity from team members taking on training responsibilities for the apprentice
- Necessary supplies such as a uniform, safety equipment, or tools
- The costs of any workplace benefits you offer to your employees (apprentices are legally entitled to the same benefits as any other employee)
- Any additional incentives you choose to offer your apprentice, such as subsidised lunch, travel costs, or additional training opportunities
The Financial Incentives for Hiring an Apprentice
The government understands the many benefits that apprenticeships bring to the UK workforce and the advantages they provide for both apprentices and their employers. This means that there are several financial incentives available to help employers meet the cost of taking on an apprentice and to encourage more employers to do so.
What is the Apprenticeship Levy and How Does it Work?
In 2017, the UK government introduced the apprenticeship levy. The levy is a tax paid by employers with a payroll bill of more than £3 million per year and is applied at a rate of 0.5% of the employer’s total payroll less the apprenticeship levy allowance of £15,000. For example, if your annual payroll costs for a given year are £5 million, you will pay an apprenticeship levy of £10,000 for that year.
Your apprenticeship levy contributions are then stored in a digital account, which can be used to cover the costs of apprenticeship training or end-point assessments. The government adds top-up funding of 10% to this account. Unused levy funds sit in your account for two years, after which they expire and are returned to the government. This means that, if you are a levy-paying employer, there is a significant incentive to use your apprenticeship levy funds before they expire.
For apprenticeships starting after April 2019, you will need to pay 5% of the remaining costs if your levy funds run out. The government will cover the rest, up to the funding band maximum for each apprenticeship.
Levy-paying employers can also transfer up to 50% of their unused funds to another business, allowing large organisations to support small businesses in taking on and covering the costs of training an apprentice while ensuring that funds do not go to waste.
What About Employers Not Subject to the Levy?
Employers with a payroll bill of under £3 million are not subject to the apprenticeship levy. If you are a non-levy paying organisation, the government will cover 95% of the costs of hiring and training an apprentice up to the funding band maximum, leaving you to pay only 5%.
Small employers can also apply for a levy transfer, receiving unused funds from a levy-paying employer to help cover the costs of an apprenticeship. Transfer funds can only be used for a new apprenticeship, not for an existing apprentice who is part-way through their training. Visit the government’s pledge page to see what opportunities are currently available.
What Other Incentives Are Available?
Employers can receive an additional £1000 to help with the costs of an apprenticeship if, at the start of the programme, the apprentice is any of the following:
- 16-18 years old (or 15 years old with their 16th birthday between the last Friday of June and 31 August of that year)
- 19-24 years old with an education, health and care (EHC) plan
- 19-24 years old and a care leaver
This money can be spent on any costs relating to the apprenticeship including salary, travel costs, or uniform. It will be paid by the government to your training provider, who will then send it on to you in two instalments: the first 90 days from the apprenticeship start date, and the second a year after the start date provided that the apprentice is still employed by you.
Various charities, not-for-profit organisations, and industry bodies may also offer additional funding on a grant basis to employers providing apprenticeships.
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