The Institute of the Motor Industry (IMI) welcomed the announcement in the Autumn Budget that apprenticeships will be free for SMEs. However, the IMI believes the numbers do not add up.
The government removed the 5% co-investment for SMEs training under-25 apprentices – estimated to save employers £650–£800 per apprentice.
However, the apprentice minimum wage rise from £7.55 to £8.00 per hour, combined with the employer’s National Insurance contribution increase, means the ‘free training’ is cancelled out and SMEs will face increased wage costs.
Nick Connor, CEO of the IMI said: “The reforms are well-intentioned, but the financial impact is negligible for the employers who need the most support. To boost apprenticeship take-up, the government must address wage affordability, not just training fees.
“Automotive has experienced a 30% decline in apprenticeship starts since 2018/19, an average loss of over 500 apprenticeships per year. And, sadly, it seems the government’s intent is not going to do anything to help the 96,000 SMEs that make up such an important part of the sector.
“To deliver on its ambitions for apprenticeships and tackling youth unemployment, the government must go further by removing additional financial and administrative barriers facing all businesses, regardless of size, recognising that while fair pay for apprentices is essential, rising overall employment costs and system complexity continue to act as major obstacles.”
In terms of hiring a Level 2 Autocare Technician, SMEs save £650 on training but pay £819 more in wages and £122.85 in additional employer NI which means a net cost increase of £291.85.
Hiring a Level 3 Light Vehicle Technician, there is an £800 saving versus £819 wage rise and £122.85 in additional employer NI which means a net cost increase of £141.85