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Minimum wage apprenticeships – not plain sailing

A report out in January shows that around 20% of those on apprenticeship schemes are not being paid the National Minimum Wage (NMW), while apprenticeships themselves have fallen in number.

The figures in the Apprenticeship Pay Survey from the Department for Business, Enterprise and Industrial Strategy (BEIS) show the strange anomaly that correct levels of the NMW are largely paid in the first year of an apprenticeship, but often fall below it during the second and third years.

The highest levels of compliance were in management apprenticeship schemes, and the lowest in hairdressing (at 47% non-compliance) and child care (at 34%). Those on formal training for at least a day a week reported that they were less likely to receive compliant pay than those in more informal training.

The Apprenticeship Levy, introduced in 2017, was designed to increase people in apprenticeships by making companies offer formal apprenticeship training. Companies paying over £3 million in wages a year must pay the levy but can claim it back to cover apprenticeship training costs. Firms paying below that level in wages can apply for funding. But since the scheme came in, the number of apprenticeships has declined by 200,000 places between 2016 and 2018.

One issue has been the rise of companies offering apprenticeship training in the more office-based, soft skills and management sector, rather than the technical skills needed, for example, in construction and engineering. This focus has skewed the market towards sectors taking advantage of recuperating the levy funds, to the disadvantage of key sectors. With some traditionally employer-offered training courses rebranded as ‘apprenticeship schemes’, the concept has become watered down as the funding available is swallowed up.

At the end of 2019, the government announced that, the NMW will rise in April by 6.2% to £8.72 an hour. A report from the Resolution Foundation has found that while levels of non-compliance with the NMW fell from the turn of the century, they have risen since the introduction of the National Living Wage (NLW) in 2016. For companies failing to comply with their minimum wage obligations overall, there doesn’t appear to be much incentive to change their ways, with only a one in eight chance of being caught and penalised.

Paying your staff fairly and transparently, and engaging in genuine apprenticeship, training and development practices, is a key element in maintaining staff loyalty, productive recruitment and brand reputation.