How to define and identify apprenticeships

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Calculating the apprentice rate and when to implement it.

When is an apprentice an apprentice? How much should an apprentice be paid and for how long? How does the funding work and who finances it? Below is a brief outline of apprenticeships and how the funding is accessed.


An apprenticeship is where an individual (16 years or older, not in full-time education), learns a skill, gains experience and is paid by an employer. The apprenticeship can last between one and five years depending on the level of education the apprentice is studying. The individual gains on-the-job training while also spending at least 20% of their working hours completing a classroom-based course with a college, university or training provider which eventually leads to a nationally recognised qualification.

There must be signed apprenticeship agreements with the employer, apprentice, and training provider. If one or more of these is missing, then the individual does not qualify as an apprentice.

The apprentice must

  • work with experienced staff
  • learn specific skills
  • attend apprenticeship training during their working hours.

An apprentice must be paid either the Apprentice rate or the National Minimum Wage (NMW) depending on age and whether they are in the first year of the apprenticeship or not.

Rates and when to implement

The Apprentice rate is for the first year of the apprenticeship or for those under the age of 19.

Remember, all apprentices, aged 19 and above, who have completed their first year of apprenticeship, should be paid the relevant National Minimum Wage (NMW).

Category of worker1 April 2023 £
Apprentices <19 years, and Apprentices 19 years and above and in the first year of apprenticeship5.28
Workers 18 – 20 years
Workers 21 – 22 years10.18
Workers >23 years10.42
Accommodation offset
daily rate
weekly rate

Higher apprenticeships are exempt from the Apprentice rate.

Pitfalls on implementation of apprenticeships

There are several pitfalls to be aware of when paying the apprentice rate or NMW.

  1. Any deductions and payments for expenses or other types of costs connected with the job must not take the individual below the NMW or apprentice rate.
  2. When applying the accommodation offset rate: The accommodation rates (table above) must be considered when calculating the apprentice rate or NMW. This is the only benefit that can be included in the calculation. Note the following:

a. If the charge for accommodation is more than the above offset rate then the worker’s pay will be lower when completing the NMW calculation.

Accommodation is charged above the accommodation rate
An apprentice, aged 25, is paid £12 per hour for 35 hour week, which is above the NMW. The employer charges £9.50 per day for the accommodation. The apprentice lives in the accommodation permanently and is paid fortnightly (14 days).
(£12 x 35 x 2) = £840 – £133 (£9.50 x 14) + £127.40 (£9.10 x 14) = £834.40 ÷ 70 = £11.92
Still above the NMW but the hourly rate has decreased.

b. If the accommodation charge is lower than the accommodation offset then there will be no effect on the individual’s pay.

Accommodation is charged below the accommodation rate
An apprentice, aged 21, is paid £10.30 per hour for 35 hour week, which is above the NMW. The employer charges £5.60 per day for accommodation which is below the £9.10 threshold. No offset rate is applied.
The accommodation charge has no affect on the pay per hour.

c. If the accommodation is free, then the offset rate is added to the workers’ pay.

Accommodation is free
An apprentice, aged 22, is paid £8.60 per hour for 35 hour week, which is below the NMW. However, when the accommodation rate is added pay exceeds the NMW
(£8.60 x 35) + £63.70 = £364.70 ÷ 35 = £10.42

3. Then there is the decision on when to apply the appropriate rate.
a. Paying the apprentice rate when the individual is not an apprentice or before the individual starts the apprenticeship. This is an easy error to make (see above).
b. Not paying the individual for all their working time. For example, attending team meetings between shifts, complying with security checks at the start and finish of their working day.

All of these need to be checked to ensure compliance as the LPC do ‘name and shame’.

Apprenticeship Levy

The Apprenticeship Levy was brought into being in April 2017. It applies to employers with an annual pay bill of £3 million or more and the money is used to fund all apprenticeships. The Levy is calculated as

0.5% x Pay bill – Levy allowance (£15,000 pa)

and collected via the Employee Payment Summary (EPS). Though the funding of Apprenticeships are UK wide, how funding is accessed and how employers arrange apprenticeships are devolved.


Setting up apprenticeships and employing apprentices can enhance a business’s reputation, increase their profits and introduce new and fresh ideas. There are some pitfalls but these can be avoided with a bit of planning and forethought.

Julie Hodgskin is a fellow member of AAT, runs a licensed accounting practice and is a technical materials author for CIPP.

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