Small businesses are often told about financial incentives for employing young people as apprentices, but there is very rarely any mention of employer National Insurance contributions. This has to change, as it is the best incentive for both the employer and apprentice, can quickly cover the 10% employer training contribution and save your business £1,000s!
The financial incentives for employing apprentices
If you have got as far as calling your local college or a training provider about taking on an apprentice, you have probably been told about one or two financial incentives for employing apprentices.
These include:
- £1,000 for employing an apprentice aged 16-18 through their training programme
- £1,000 for employing a care leaver or apprentice with a disability aged 16-24
- Pay 0% training costs if you employ less than 50 people and employ a 16-18 year old, eligible care leaver or apprentice with a disability
Yet, 99 times out of 100, you’ll find the best incentive missing…
Businesses, no matter what size, do not have to pay employer National Insurance contributions when employing an apprentice under the age of 25.
This is a fantastic incentive that all colleges and training providers should be able to explain. Here’s why…
Employer National Insurance contributions explained
Employers start paying N.I. contributions to the government when an employee earns £8,424 a year. This means every penny you pay your staff over and above £8,424 is subject to 13.8% N.I. contribution.
So, if you pay a full-time member of staff the living wage (£7.83ph), you will also be paying £950 to the government in employer N.I. contributions over a year. That’s quite a lot, right? Just at minimum wage.
However, if you employ a 16-24-year-old apprentice the same wage, the government does not collect your contributions. So you save your business £950!
Why does this incentive benefit both the employer and apprentice?
Simple. The more you can afford to pay your apprentices, the more you will save.
For the apprentice, higher wages mean they take home more each week.
For the employer, paying a little bit more in wages, means N.I. savings almost always cover the 10% you have to contribute to the apprenticeship training costs.
This means:
- The apprentice feels more valued and loyal to your company
- You can use additional savings to train mentors to support apprentices
- You can attract better candidates by offering a higher salary
Ultimately, you can deliver a better-quality apprenticeship programme that benefits your apprentice and your business, but not be out of pocket.
Here’s some examples of National Insurance apprenticeship savings
- A care home employs a 23-year-old on a one-year L2 Healthcare Support Worker apprenticeship. They can’t afford high wages. They pay the apprentice £11,000pa. The training cost is £300, yet the N.I. saving is £355.49. The use £55.49 to buy the apprentice a little gift on completion to recognise their hard work.
- A small surveying consultancy employs an 18-year-old on a five-year L6 Chartered Surveyor Apprenticeship. They pay the apprentice more each year, but it averages out at £19,000pa. The training cost is £540pa, yet the average employer N.I. saving is £1,459pa. The use the £919 yearly saving to account for a mentor spending more time supporting the apprentice in their role.
- Even when a company can only afford the legal minimum on wages, they are still likely to save more in N.I. than pay in training fees if the apprenticeship lasts several years. For example, a 20-year-old on a three-year Level 3 Motor Vehicle Maintenance apprenticeship on 40 hours a week, still saves a company:
| Year | Minimum Wage | Training cost | N.I. Saving | Total saving |
| 1 | £7,696.00 @£3.70/pa | £600 | £0.00 | -£600.00 |
| 2 | £15,350.40 @£7.38/pa | £600 | £955.79 | £355.70 |
| 3 | £15,350.40 @7.38/pa | £600 | £955.79 | £355.70 |
| Overall | £1,800 | £1,911.58 | £111.58 |
Use SupplyTrain’s NI Calculator
If you want to know how much you will save in employer National Insurance contributions depending on how much you intend to pay an apprentice, use SupplyTrain’s NI Calculator.
Business-focused apprenticeship advice
If you want more high-quality, impartial, business-focused apprenticeship advice – contact SupplyTrain for support. We can signpost you to suitable training partners, explain the costs and benefits of employing apprentices and describe ways to embed apprenticeships into your organisation successfully.
What’s more, if you employ less than 50 people – this advice is free.