With everything that’s happened in 2020, it's no surprise that the job market is in turmoil as many businesses have had to cease trading whilst others have seen a significant drop in turnover. The unemployment rate fell to a record low of 4.1% earlier this year according to the Office for National Statistics. Over 750,000 jobs have been lost as companies make cuts to try and reduce their costs where possible. To add to this, the furlough scheme (which has been paying 80% of employee’s salaries since March) is being wound up in October after phasing down the government contributions to 60%, and is being replaced with the less generous Job Support Scheme.
The Office for Budget Responsibility has made several predictions regarding what may happen to unemployment rates. The most optimistic scenario predicts a peak unemployment rate of 9.7% this year with a full recovery by 2022 whereas the least optimistic scenario predicts a peak of 13.2% in 2021 and settling at 6.3% by the end of this scenario in 2024.
Unfortunately, the demographic worst hit by job losses has been 16 to 24-year-olds. This is because young adults are more likely to be employed in areas such as hospitality, retail and tourism which have been hard hit by the national lockdown.
However, Rishi Sunak has recently announced the Kickstart Incentive scheme which means any firm that hires a new apprentice aged 16 to 24 will receive £2,000, whilst those who hire an apprentice aged 25 and over will be paid £1,500 on top of the current support. Here's a look at how apprenticeships and the Kickstart Scheme work:
What is an apprenticeship?
An apprenticeship is a real job where the apprentice learns and gains experience whilst being paid. The apprentice will be a normal employee with a contract of employment and annual leave. By the end of the apprenticeship, they will receive a qualification to prove they're qualified in their chosen field.
It can take between one and six years to complete an apprenticeship depending on the industry and qualification. Apprenticeships are funded from contributions made by the government and the employer.
A common misconception is that apprenticeships are for people without many qualifications, but this is simply not the case. Anyone who meets the below criteria can start an apprenticeship, whether they have just completed their GCSEs or if they have a master’s degree.
- Be 16 or over
- Not be in full-time education
- Live in England.
Benefits to the apprentice
An apprenticeship is a great way to get into a profession by learning on the job, all whilst getting paid to do so. The main benefits of an apprenticeship for the apprentice include:
- Learn and train for a specific job or trade
- Get paid and receive holiday pay whilst you learn
- Get hands-on experience in a real job
- Study for at least 20% of your work hours – usually at a college, university or with another training partner
- Receive a qualification at the end of the apprenticeship
- Be on a career path with huge future potential.
Benefits of an apprentice to the employer
There are, now more than ever, several good reasons for employers to consider hiring an apprentice. As part of the Kickstart Scheme launched by Rishi Sunak, any employer who takes on a new apprentice between 1 August 2020 and 31 January 2021 will be able to claim an incentive payment from the government.
In addition to this incentive, companies will still be able to claim the regular payment of £1,000 for any apprentice who is either:
- 16 to 18 years old
- 19 to 24 years old and has an Education, Health and Care (EHC) plan provided by their local authority or if they have been in the care of their local authority.
As well as the financial incentives of taking on an apprentice, there are several other benefits. The main one being that, when you take on an apprentice, you are able to take on a young individual who is open to learning and then train them in a chosen profession so that they can qualify for a trade. This is a great opportunity for a business to both develop and support the next generation of their workforce by training them on the job. This means not only will they have the academic training, but they will also get practical experience alongside their studies and once they have completed the apprenticeship, you can take them on as a fully-qualified member of staff.
Similarly, taking on an apprentice will help bring on board additional resources and fresh perspectives on work processes. Offering apprenticeships is also a good way to boost your brand reputation by being seen to support the next generation and developing fresh talent.
Conditions of the Kickstart Scheme
To be eligible for the Kickstart Scheme, employers must create new 6-month job placements for young people who are currently on Universal Credit and at risk of long-term unemployment. Alongside the outlined incentives above, the government will also provide funding for each placement to cover:
- 100% of the relevant National Minimum Wage for 25 hours a week. The employer can then pay for any additional hours worked
- The associated employer National Insurance contributions
- Employers' minimum automatic enrolment contributions.
Terms and conditions of traditional apprenticeships
To employ an apprentice, the candidate must meet the following criteria:
- Be at least 16 years old
- Not be in full-time education
- Work in a role that is relevant to their apprenticeship
- Work enough paid hours each week to undertake sufficient training to achieve their apprenticeship
- Have the right to work in England
- Spend at least 50% of their working hours in England.
According to HMRC, an apprentice can be a new or current employee already working for you and they must work a minimum of 30 paid hours per week, including ‘off-the-job’ training. As an apprentice, they must be paid at least the national minimum wage which for an apprentice is currently £4.15 per hour (correct for the 2020 tax year). However, if they have completed the first year of their apprenticeship and are aged 19 or over, they are entitled to the minimum wage for their age rather than that for an apprentice. For more information check out the guidance on the gov.uk website.
In addition to the contract of employment, all apprentices must receive training from an approved training provider at a level suitable for the type of apprenticeship being offered. There are four levels of apprenticeship that can be offered depending on the level of qualification awarded at the end of the programme.
- Intermediate – Level 2 qualifications which are equivalent to GCSE passes at grade A*-C (4-9 on the new system).
- Advanced – Level 3 qualifications which are equivalent to A level passes.
- Higher – Levels 4 and 5 are equivalent to a higher education certificate, diploma, or foundation degree
- Degree – Levels 6 and 7 are equivalent to gaining a university bachelor’s and master’s degree, respectively.
In summary, taking on an apprentice can be a good way to develop new talent within your business by training them on the job. Not only will you have a fully-qualified member of staff at the end, but you will also receive financial support from the government. The recently announced Kickstart scheme boosts this further with lucrative funding for taking on an apprentice on a shorter 6-month contract to get them into the world of work.
About the Author
Simon Thomas is the Founder and Managing Director of Ridgefield Consulting - Oxford’s leading independent accountancy firm. Simon has over 15 years’ experience as a chartered accountant and founded Ridgefield Consulting in 2010 after working for EY, one of the big four accountancy firms in London and the UK. Ridgefield Consulting offers a wide range of guidance on Coronavirus support schemes for businesses, proudly earning more 5* Google reviews than any other accountancy firm in Oxford.