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Apprenticeships – a new term

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The balmy summer nights are coming to an end and the cries of “back to school” have well and truly begun. Many will be starting a new apprenticeship this month so we wanted to discuss apprenticeships – what they are, the benefits, the pitfalls and how best to structure them for your business.

What is an apprenticeship?

Apprenticeships can be a cost effective way of training individuals. Apprenticeships are essentially work-based training programmes. An apprentice will aim to obtain nationally-recognised qualifications, through a mixture of on-the-job and education-based training. At the same time they help employers to bridge the gap in skills in their workforce.

The concept of an apprentice was developed many many years ago but still exists today and more recently is becoming increasingly popular with employers.

Apprentices are employees, and therefore there are no difficulties for employers in determining their employment status. Apprentices can carry out actual work, and apprentices ‘broadly’ have the same employment rights as employees. However, in some cases apprentices get enhanced rights making it much harder to dismiss them.

There are also cost advantages for employers employing apprentices. The national minimum wage (“NMW”) for apprentices is much lower, at least for the first year of their employment than for employees. However, employers should be careful here as 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 NMW.  Apprentices aged 18 or under who have not completed their first year of training will only be entitled the apprentice wage up until they complete the training or turn 19.

Types of apprenticeship

There are currently two main ways in which an employer can engage an apprentice in the UK:

  • Contract of apprenticeship: This is entered into and governed by common law. Training must be the primary purpose, and doing work for the employer the secondary purpose.  No particular format is required.
  • Apprenticeship agreement: This is entered into and governed by the Apprenticeships, Skills, Children and Learning Act 2009 (“ASCLA”).  This is a contract of service, which must be in a specific format and include certain specified information.

We should also mention the modern apprenticeship. This is a tri-partite agreement between the employer, the apprentice and a third party training provider. However, modern apprenticeships are formalised under a contract of apprenticeship or an apprenticeship agreement, if they fulfill the correct criteria.

What protections do apprentices get?

Apprentices will be employees under all forms of apprenticeship documentation. They therefore have all the rights of an employee no matter what form of apprenticeship is involved. This means only once they have been employed for 2 years will they get unfair dismissal protection. But employers have different contractual responsibilities for an apprentice depending on the type of agreement the apprentice is engaged under:

  • Contract of apprenticeship. Under a contract of apprenticeship, because the focus is on training, an employer cannot dismiss an apprentice on the same grounds as an ordinary employee, even if such a dismissal would be fair for an employee, or if it is before their 2 years’ service.  Apprentices under a contract of apprenticeship have greater contractual protection, particularly in a redundancy situation. These added protections also affect the employers’ ability to terminate the apprenticeship before the expiry of the fixed term. This essentially means that unless there is some really serious gross misconduct or complete business closure, an employer will be tied into the contract until the end of the apprenticeship (like an implied and unbreakable fixed term).
  • Apprenticeship agreement. Apprentices under an apprenticeship agreement do not benefit from any enhanced contractual rights. This means that for all intents and purposes employers can treat apprentices the same way as employees (i.e. before they acquire 2 years’ service they can dismiss without needing a fair reason or following a fair      procedure provided it is not for any discriminatory reason).

The treatment of modern apprenticeships will depend on the form of the agreement they are engaged under (i.e. whether it is a contract of apprenticeship or an apprenticeship agreement).  If a dispute arises over the nature of a particular apprenticeship, it will be for the courts to determine which form of apprenticeship is in place. The form of the agreement and whether it complies with the ASCLA conditions will be key in this respect. An employer who fails to include all the relevant provisions to qualify as an apprenticeship agreement under ASCLA may find they have inadvertently created a contract of apprenticeship. Therefore, it is key that your apprenticeship agreements are correctly drafted.

Top tips for protecting your business.

Here are just some of our top tips for employers in relation to apprenticeships:

  • Use an apprenticeship agreement. These types of  agreements under ASCLA are much more favourable for employers than other forms of apprenticeships; simply because they do not give apprentices additional protections against termination (i.e. the employer can treat apprentices as they do other employees). Our team are able to assist you with drafting.
  • Ensure that all documents tie up. Employers setting up an apprenticeship arrangement will usually have several documents running in parallel that govern the arrangement:

– the employment documents, between employer and apprentice;

– the commercial documents, between employer and training provider; and

– the funding documents, between employer and the government funding body.

These documents can quite often contradict or do not reflect the obligations of other documents. As an example, it is common for the commercial documents to contain obligations on the employer by the training provider in relation to the apprentices, but for the employment documents to either not to permit the employer to fulfill these obligations or to remain silent on the issue. This is common with data protection provisions. Where this happens, employers can find themselves either being prevented from fulfilling an obligation or breaching one agreement simply by complying with another. Employers should take care to check that the provisions under the various documents dove-tail with each other.

  • Check funding arrangements. In instances where apprentices either do not complete their training or finish their course, check that your funding arrangements do not require you to pay back all or part of the grant. This is unusual but something that is worth checking.
  • Reclaiming costs. Where an apprentice does not complete their training or finish their course, employers should consider inserting provisions in the contractual documents for repayment of fees by the apprentice. It is sensible for this to have a sliding scale of repayment in ratio to the period worked. Employers are permitted to seek repayment of any training costs under the contractual documentation with the apprentice, but can only do so where this is an expressterm of the agreement between employer and apprentice (otherwise this could be deemed an unlawful deduction from wages).
  • National Minimum Wage. Ensure you are paying your apprentices at least the NMW. Currently this is as follows:

– Adult Rate (Aged 21 and over) – £6.31

– Development Rate (Aged 18 – 20 inclusive) – £5.03

– Apprenticeship Rate (Under 19 or aged 19 and over in the first year of their apprenticeship)  – £2.68

These rates change in October of each year.

Future changes to apprenticeships

On 1 July 2013, the draft Deregulation Bill 2013-14 (“Draft Bill”) was published.  The Draft Bill introduces the concept of an English Apprenticeship, which will take place under an English apprenticeship agreement. Approved English apprenticeships must fulfill certain conditions and should allow for greater industry involvement than currently permitted.  These apprenticeships will not give apprentices the additional protections.

Over time, the Government propose to cease funding for apprenticeship agreements entered into under the ASCLA. Therefore, we would expect to see more English apprenticeships over the next few years once the Draft Bill is formalised and implemented. The Government aims for all new apprenticeships to be approved English apprenticeships from 2017/18.

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