Apprenticeships are a much-discussed but perhaps not widely used working arrangement in the UK.  Commonly, employers either view apprenticeships as having too many negative aspects, or simply don't know enough to consider them. However, apprenticeships can be a cost effective way of training individuals and have a recognisable employment status (going back centuries), and this type of working arrangement, where broadly speaking the apprentice works for and is trained by a master and is paid a minimum level in return, still exists today and is becoming increasingly popular again in a variety of industries.

In recent years, successive governments have sought to refine and update the rules and format of apprenticeships, most recently through the Deregulation Bill 2013/14 which is currently going through Parliament. 

Why use apprenticeships?

Initially, apprenticeships developed in the Middle Ages under master craftsmen, who employed people cheaply in exchange for food, lodging and training.  Nowadays, apprenticeships are viewed as work-based training programmes, which build up to nationally-recognised qualifications, allowing apprentices to develop skills through a mixture of on-the-job and lesson-based training whilst allowing employers to bridge the gap in skills in their workforce.

Looking at other alternative methods of engaging workers, such as internships and/or work experience, employment, and seasonal workers, apprenticeships have a variety of advantages.  Apprentices are employees, and therefore there are no difficulties with their status (unlike interns and work experience arrangements).  However, there are cost advantages for the employer over simply hiring employees; the national minimum wage for apprentices is much lower at least for the first year of engagement (currently £2.68 as opposed to £5.03 / £6.31 for full-time employees), and significant government funding is often also available. Apprentices can carry out actual work (a tricky issue when dealing with interns and work experience where unpaid), and apprenticeships can broadly be terminated in the same way and manner as employment relationships. 

The Deregulation Bill proposes a new "approved English apprenticeship" which is intended to replace "apprenticeship agreements" under the Apprenticeships, Skills, Children and Learning Act 2009 ("ASCLA").

Types of apprenticeship

There are currently three forms of apprenticeship in the UK:

  • Contract of apprenticeship: Training must be the primary purpose, and doing work for the employer the secondary purpose.  No particular format is required.
  • Apprenticeship agreement: Introduced by ASCLA, a contract of service, rather than apprenticeship, which must be in a specific format and include certain specified information.
  • Modern Apprenticeship: Tri-partite agreements involving the employer, the apprentice and a third party training provider.  However, case law has confirmed that Modern Apprenticeships are capable of also being a contract of apprenticeship or an apprenticeship agreement, where they fulfil the correct criteria.

Employment status

Apprentices will be employees under all three forms of apprenticeship, and therefore have all the rights of an employee no matter what form of apprenticeship is involved, but employers have different responsibilities for an apprentice under a contract of apprenticeship. 

  • Because of the focus on training, under a contract of apprenticeship an employer cannot dismiss an apprentice on the same grounds as an ordinary employee; apprentices under a contract of apprenticeship have greater protection, particularly in a redundancy situation. 
  • Apprentices under an apprenticeship agreement have the same rights, and can be dismissed for the same reasons, as other employees. 
  • The treatment of Modern Apprentices will depend on the form of their agreement (i.e. whether it is a contract of apprenticeship or a contract of service).

Apprentices, although they may be employed for a limited period, are not regarded as being employed on fixed term contracts and are excluded from the Fixed Term regulations.

Pitfalls for employers

There are numerous risks and flaws with the current apprenticeship system in the UK such as:

  • Which form of agreement/contract?

This will usually depend on what type of working relationship the employer wants with their apprentices, the funding arrangements and requirements in place and, going forward, the form favoured by legislation.  Currently, apprenticeship agreements under ASCLA are much more common than other forms, simply because they do not give additional protections against termination (i.e. the employer can treat apprentices as they do other employees).  However, given that current plans are for these to be phased out and replaced by authorised English apprenticeships, and the government has indicated they will withdraw funding for ASCLA-based agreements, we would expect to see more authorised English apprenticeships over the next few years.

  • Funding arrangements

There are several sources of government funding available, depending on the size of the employer and its needs.  Employers can apply for funding to cover training costs for apprentices. 

The amount depends of the employer's sector and the age of the apprentice:

  • 16 – 18: 100% costs
  • 19-24: 50%
  • 25 and older: employers may only get a contribution

Small-medium employers may be eligible for a £1,500 apprenticeship grant per apprentice, up to a maximum of 10 apprentices, to recruit apprentices between the ages of 16 and 24.  
This funding is governed by a variety of requirements, and employers do need to be aware of, and to look carefully at,  the requirements for each form of funding.  Funding reforms are also proposed under the Deregulation Bill.

Do the commercial and employment documents tie up?

Employers setting up an apprenticeship arrangement will usually have several documents running in parallel that govern the arrangement:

  • the employment documents, governing the relationship between employer and apprentice;
  • the commercial documents, governing the relationship between employer and training provider; and
  • the funding documents, governing the relationship between employer and government funding body.

Often, these documents either contradict or do not track the obligations of other documents.  For example, it is common for commercial documents to contain obligations imposed on the employer by the training provider in relation to the apprentices, but for the employment documents either not to permit the employer to fulfil these obligations or to remain silent.  This is common with data protection provisions (i.e. the employer is obliged to provide personal information to the training provider, but not permitted under the contract with the apprentice), working hours, format (i.e. contract of apprenticeship or of service), mentor requirements, expenses and health and safety requirements.  Where this happens, employers can find themselves either being prevented from fulfilling an obligation or breaching another, and employers should take care to make sure the provisions under the various documents tie in with each other.

What happens if apprentices don't attend enough training or finish their course?

Funding: Employers are not usually required to pay back grants once given, but this is something that employers should check in their funding agreements.  Further, different provisions / requirements may be included in the contract with any training provider, separate to the funding arrangements, and this is something to consider.

Reclaiming costs: Employers are permitted to seek repayment of any training costs under the apprenticeship, but can only do so where this is a term of the agreement between employer and apprentice (otherwise this could be deemed an unlawful deduction from wages).  Employers should consider inserting provisions for repayment, including allowing a sliding scale of repayment in ratio to the period worked, into the agreement.

National Minimum Wage ("NMW"): Apprentices aged 19 and over who have worked for the employer for over a year (regardless of whether they have completed their first year of training) are entitled to the full national minimum wage (18-20 or 21+ rate).  Apprentices aged 18 or under who have not completed their first year of training will only be entitled the apprentice wage up and until they complete the training or turn 19.

Reforms on the horizon

The aim of the Deregulation Bill is to simplify the current legislative framework for apprenticeships, following consultation and the Richard Review.  Approved English apprenticeships must fulfil certain conditions, to be set by the Secretary of State, and should allow greater industry involvement than previously permitted.  These apprenticeships will also be contracts of service, rather than contracts of apprenticeship, so the additional protections for apprentices will not be applicable.

New funding arrangements are also proposed, including funding to be paid directly to employers rather than training providers. This has caused some concern amongst commentators. 

The intention is for academic years 2015/16 and 2016/17 to be the transition years for implementation of the proposed reforms, and the government aims for all new apprenticeships to be approved English apprenticeships from 2017/18.