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Apprenticeships: what they are, the benefits and pitfalls and how best to structure them for your organisation

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.

The national minimum wage for apprentices is generally much lower than the adult national minimum wage. However, employers should be careful 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 national minimum wage applicable to their age.  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 (whichever is the sooner).

Apprentices are employees, and therefore ‘broadly’ have the same employment rights as other employees. However, in some cases, apprentices get enhanced rights making it much harder for employers to dismiss them.

Types of apprenticeship

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

  1. Contract of Apprenticeship: This is entered into and governed by common law. Training is the primary purpose and doing work for the employer the secondary purpose.  No particular format is required.
  2. Apprenticeship Agreement: This is the newer form of apprenticeships and 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.

The following four conditions are required for an agreement to qualify as an apprenticeship agreement:

  • The apprentice must undertake to work for the employer.
  • The agreement must be in the “prescribed form”. The prescribed form is laid down in the Apprenticeship Agreement Regulations.
  • The agreement must state that it is governed by the law of England and Wales.
  • The agreement must state that it is entered into in connection with a qualifying apprenticeship framework

We should also mention the Modern Apprenticeship. This is a tripartite 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 fulfil 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.

However, 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, employers have certain additional responsibilities. These affect the employer’s ability to terminate the apprenticeship before the expiry of the fixed term. 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 the employee is eligible to bring a claim for unfair dismissal (i.e. before they have 2 years’ service). This essentially means that unless there is some extreme gross misconduct or complete business closure, an employer will be tied into the contract until the end of the apprenticeship. If an apprentice’s contract is terminated early then the apprentice may be entitled to damages for their loss of earnings and of training during the remainder of the term of the apprenticeship and also for the diminution of their future prospects. The financial risk to an employer who gets this wrong can, therefore, be significant.
  • Apprenticeship Agreement – Apprentices under an Apprenticeship Agreement do not benefit from any enhanced contractual rights. This means that employers can treat apprentices the same way as other employees. Therefore, employers can effectively performance manage under-performing apprentices as they would any other employee.

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 to get your apprenticeship agreements correctly drafted. By issuing a standard contract of employment to an apprentice it is likely that a contract of apprenticeship will have been created, even if this was not the intention.

Top tips for protecting your organisation

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

  • Documentation is key! 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). We can help you with watertight drafting.
  • Do not use just an ordinary employment contract as it is likely that you will have inadvertently created a contract of apprenticeship, and therefore the employees will benefit from enhanced rights on termination.
  • As an apprenticeship will usually be for a fixed term and/or until a level of qualification is reached, make sure this is clearly set out in the agreement.
  • 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 government funding body.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 to avoid claims for unlawful deduction from wages.National Minimum Wage. Ensure you are paying your apprentices at least the national minimum wage. Currently, this is as follows:
  • Adult rate (Aged 21 and over) – £6.50
  • Development Rate (Aged 18-20 inclusive) – £5.13
  • Apprenticeship Rate (Under 19 or aged 19 and over in the first year of their apprenticeship)  – £2.73

If you need any further advice on apprenticeships then please contact our Employment & HR team on 01332 227596

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