More Support To Hire Apprentices For SMEs

3 April 2024 – Twenty thousand incoming apprenticeships may be the government’s answer to SMEs’ current skill and labour crisis. 

A previous iteration of the apprentice support programme saw the government shouldering 95% of apprentice upskilling costs.

This time, the subsidy will cover all the training costs when SMEs hire apprentices. An extra £60 million will support the initiative to guarantee future demand for apprenticeships. 

The current SME labour landscape

The current economic climate has caused costs to overtake SME profit. With inflation raising the prices of critical goods and services to consumers pinching their pennies, most small businesses needed to offload other costs. In most cases, training programmes take a hit. 

Minimum wages will also be raised by this spring to account for inflation. Employees aged 21 and over will now earn £11.44 per hour from a previous rate of £10.18. 

Apprentice pay will see the most significant increase of 21.2% or £6.40 per hour.

All these factors, plus minimal margins in some sectors, forced many SMEs to lay off staff. As a result, a reduced workforce and a widening skills gap are the reality for many small businesses.

More young people are inactive in the workforce

The youth inactivity rate, or the number of people not in or looking for work, rose to 41.6% from 38.5%. 

The Parliament’s statistics also highlighted that the youth unemployment rate at 12.1% is almost back to its pre-pandemic numbers of 12.6%. 

The government hopes apprenticeships will be a new avenue for ‘earning while learning’ to appeal to younger people. The potential of the minimum wage hike and the opportunity to learn hands-on skills will be an attractive option for this demographic.

Plus, the push towards apprenticeships can free up further education centres. This is especially helpful in the case of technical skills that can be easily taught in a working setting. 

Why should SMEs hire apprentices? 

In a report published by The St. Martin’s Group, most businesses that absorbed apprentices in their regular workforce saw improved retention rates, morale, and better chances of attracting good staff. 

According to the same source, apprenticeships contribute to a productive output ranging between £33,759 and £49,500 per year. The St. Martin’s Group even included a sample computation using former wages and subsidies, which led to a £2,496 net benefit to the employer. 

It sounds straightforward: apprenticeship training can solve the recent labour and skill shortage. And with the government fully funding the program, small businesses have nothing to lose.

Additionally, when SMEs hire apprentices, they secure the next generation of regular workers. Entry-level roles secured through the apprenticeship pipeline ensure a smooth transition for both the company and its employees. 

Apprentices are already familiar with the company’s core values and culture, while businesses can utilise the former’s strengths effectively. 

The reality is, it’s not cheap for an SME to invest in apprentices – and it’s important small business owners see it as an investment and not a cost. Handled correctly, apprenticeships can help an SME flourish and at the same time develop the individual apprentice.

Steve Gee, CEO of Close Brothers’ Asset Finance’s Industrial Equipment Division

Levy to be more wisely utilised

Specific funding details highlight the levy changes. Up until now, larger employers could share up to 25% of their unused levy. 

Under the new reforms, these employers can transfer up to 50% of their current funding to help smaller businesses hire apprentices. 

This accounts for more effective use of unused funds and opens more doors for aspiring apprentices and small businesses.

Our Opinion

There is no doubt that the current labour and skills gap is heavily impacting on small UK businesses. And the recent increase in costs, such as minimum wage, won’t help either.

So it’s great news that the government has decided to fully fund 20,000 apprentices to help small businesses. We here at Business4Beginners believe that apprentices are a great investment.

Not only do you provide young people with a chance to learn while they earn, you can also train them to fit your skills gap.

Yes, hiring an apprentice is more work than someone who has got the experience and skills you want. But the rewards you get are so much better. Rather than investing in experience, you invest in potential.

You don’t just get an employee that will do the work you want them to do. With an apprentice you get a young person who might turn your business around. Apprentices tend to be eager to learn and make their mark.

They also tend to be more loyal to their first employer so are more likely to stay on and move up the ranks in your business. Who knows, the apprentice you hired to help you out might end up managing your business, so you can enjoy the fruits of your labours.

Any small business looking for staff should consider hiring apprentices. And with the new funding available, it could even save them money.

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The Business4Beginners news team consists of several writers who each have their own unique experience in businesses. By keeping their fingers on the pulse, they bring you the latest in news and trends impacting small UK businesses.
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