Understanding payroll responsibilities for apprentice wages

Managing payroll effectively is crucial, especially when it involves apprenticeship wages. Employers must adhere to government regulations to avoid potential fines, penalties and disputes.

If your organisation runs an apprenticeship scheme, it is important to understand their specific pay requirements and the additional responsibilities your payroll department must manage.

Apprentices differ from regular employees in several respects. Typically younger, they have unique rights under employment law and necessitate a slightly different approach in payroll processing.

Comparing apprentices and regular employees

Employing apprentices involves integrating them into structured training programmes that offer industry-specific skills and qualifications.

Government incentives for employing apprentices can enhance your business financially.

Apprentices usually start with a lower minimum wage, which increases as they advance in their training, in contrast to regular employees who are entitled to the National Minimum Wage (NMW) or the National Living Wage (NLW), based on their age and experience.

As of 1 April 2024, the legal minimum wages per hour are as follows:

• For those aged 21 or over (NLW): £11.44
• For those aged 18 to 20 (NMW): £8.60
• For those under 18: £6.40
• For apprentices: £6.40

Apprentices receive the same wage as those under 18 but are not entitled to the full NWM or NLW.

Can apprentices earn more than the minimum wage?

Absolutely.

Employers have the choice to offer apprentices wages exceeding the minimum wage. Higher apprenticeship wages bolster the competitiveness of their apprenticeship programme and can foster loyalty within their staff.

Payroll considerations for apprentices

Handling payroll for apprentices requires attention to specific details.

Initially, apprentices earn the apprentice wage of £6.40, which increases after the first year they are over the age of 19, to either the NMW or NLW.

Employers must also establish a formal apprenticeship agreement, distinct from a standard employment contract, and facilitate off-the-job training or education, bearing the associated costs.

Larger employers may be subject to the Apprenticeship Levy, contributing towards the national apprenticeship training fund.

Government support and requirements for apprenticeships

The Government mandates that apprenticeships must last a minimum of one year, extending up to five years depending on the qualification level.

Employers are responsible for ensuring apprentices receive job-specific training and acquire specific skills related to the job, time off for out-of-work training and mentorship from experienced staff.

Financial support from the Government is available for training apprentices.

Employers might qualify for £1,000 payments for each apprentice they hire.

The funding an employer can access varies depending on whether the business pays the Apprenticeship Levy.

If your business does not contribute to the Apprenticeship Levy, you will need to cover five per cent of the training costs, arrange a payment plan with your training provider and pay them directly for the training.

The Government will fund the remaining 95 per cent, up to the limit of the funding band.

For apprentices who started their training before 1 April 2019, employers were required to fund 10 per cent of the training costs, with the Government subsidising the remaining 90 per cent until the apprentice finishes their training.

Employers who pay the Apprenticeship Levy benefit from funds to cover training and assessment costs, plus an extra 10 per cent contribution from the Government.

Who is required to pay the Apprenticeship Levy?

You are obliged to pay the Apprenticeship Levy each month if your business:

• Has an annual payroll exceeding £3 million.
• Is connected with other companies or charities for Employment Allowance purposes and collectively, your annual payroll exceeds £3 million.

Engaging your accountant in apprenticeship planning

Given the complexities associated with apprenticeships, we strongly advise consulting your accountant when considering or already employing apprentices.

They can assess whether apprenticeships align with your business model and assist when navigating payroll obligations. Early engagement with your accountant is key to managing apprenticeship matters effectively.

For professional advice on payroll management or apprenticeships, please contact our team of experienced accountants and payroll specialists.