Your payroll obligations when it comes to apprenticeship wages
Payroll is a complicated subject at the best of times, but when it comes to paying apprentices, maintaining compliance with Government policy is absolutely vital to avoid fines, penalties and potential disputes.
In short, if you are running an apprenticeship scheme (employing apprentices), you need to understand how much to pay them and the extra measures your payroll department should undertake.
They’re not like regular employees. They are often – though not always – younger members of your team, so have their own rights under employment law and must be accounted for slightly differently.
Apprentices vs regular employees
There are major differences between employing apprentices vs regular employees.
Apprenticeships are structured training programmes designed to provide individuals with skills and qualifications specific to their chosen industry.
You may be receiving financial incentives and Government support for hiring apprentices, which is often a bonus for your business (more on this later).
When it comes to pay, apprentices typically receive a lower minimum wage, but this increases as they progress through their training.
Regular employees, on the other hand, are hired under standard employment contracts and receive the National Minimum Wage (NMW) or higher, depending on their age and experience.
Here are the wages (per hour) you are legally obligated to maintain from 1 April 2024:
· Aged 21 or over (National Living Wage (NLW)) = £11.44
· Aged 18 to 20 (NMW) = £8.60
· Under 18 = £6.40
· Apprentice = £6.40
As you can see, an apprentice is entitled to the same pay as an individual under the age of 18 but is not entitled to the full NMW or the NLW.
Can you pay an apprentice more than the minimum?
Yes.
Often companies will do this to make their apprenticeship scheme more competitive and to promote loyalty amongst their workers.
So long as their wage is £6.40 per hour, or above, you are within your right to pay your apprentice as much or as little as you like.
How does payroll differ for apprentices?
Your requirements under payroll differ slightly from when dealing with regular employees.
At first, the apprentice is entitled to the apprentice wage (£6.40), but this increases when the apprentice has completed their first year and is over the age of 19.
At this point, they are entitled to either the NMW (between 19 and 20 years old) or the NLW (21 and over).
So, if you are employing an older apprentice, this is something to consider.
If you are employing an apprentice you will need to establish a formal apprenticeship agreement with apprentices, outlining the terms and conditions of their training.
This is separate from the standard employment contract.
Additionally, apprentices are required to dedicate a portion of their time to off-the-job training or education, which the employer must facilitate and cover the costs for.
Larger employers may be subject to the Apprenticeship Levy, contributing to the funding of apprenticeship training nationwide.
What does the Government say about apprenticeships?
The Government states that apprenticeships must last at least a year but can take up to five years depending on the level being studied.
You are responsible for ensuring your apprentice(s) learns ‘job-specific’ skills, gets time off during their working week to complete out-of-work training, and that they work with an experienced staff member.
The Government does offer financial support for apprenticeship training.
You may be eligible for payments of £1,000 based on the apprentice that you hire.
The amount of funding you can receive depends on whether your business is subject to the Apprenticeship Levy or not.
If you don’t pay the Apprenticeship Levy, you must contribute five per cent towards training costs, agree on a payment schedule with the training provider, and pay them directly for training.
The Government covers the remaining 95 per cent, up to the funding band maximum.
For apprentices who began before 1 April 2019, employers contribute 10 per cent, and the Government covers 90 per cent until the apprentice completes their training.
If an employer pays the Apprenticeship Levy, they receive funds for training and assessment, with an additional 10 per cent contribution from the Government.
Who pays the Apprenticeship Levy?
As an employer, you have to pay Apprenticeship Levy each month if you:
- Have an annual pay bill of more than £3 million.
- Are connected to any companies or charities for Employment Allowance purposes and have a combined annual pay bill of more than £3 million.
When should you get your accountant involved?
As you can see, apprenticeships are slightly more complicated than hiring regular employees.
As such, we always recommend telling your accountant if you are planning to/ already hire apprentices.
We can look at your finances and tell you if it’s the right option for your current business model.
Furthermore, if you are worried about the payroll obligations of hiring an apprentice, we can guide you through the process or even handle the whole affair for you.
Either way, it is always advisable to speak to your accountant sooner rather than later when it comes to apprenticeship matters.
To speak to an experienced accountant or payroll specialist, please get in touch with the team at Iceberg Accounting.