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Business Secretary Vince Cable has outlined proposals to simplify and boost the national minimum wage for apprentices.
Business Secretary Vince Cable today (6 October 2014) outlined proposals to simplify and boost the national minimum wage for apprentices, making apprenticeships an even more financially attractive route for young people deciding whether to go into full time employment or to earn whilst they learn.
Based on the current national minimum wage rates for 16 to 17 year olds, the proposal would give around 31,000 apprentices in the first year of their programme a pay rise of more than £1 an hour, rising from £2.73 to £3.79 per hour.
The new policy, which will be presented to the Low Pay Commission (LPC) in the coming weeks, would create a single national minimum wage rate for 16 to 17 year olds in employment and for all apprentices in the first year of their programme.
It will also make it easier for employers to understand and comply with minimum wage law, streamlining the number of minimum wage rates employers have to contend with down from 4 to 3. At the moment the rate an apprentice is paid is dependent on their age and how long they have been on their apprenticeship. It can often be difficult for employers to understand, risking non-compliance.
Business Secretary Vince Cable said:
The national minimum wage has successfully protected the incomes and jobs of the lowest paid workers in the UK. This year we have made the first above inflation rise in the minimum wage since the recession.
With the economy on the road to recovery, all workers - including apprentices - should be able to share in the proceeds of growth. We want apprenticeships to remain an attractive option for young people deciding whether to earn whilst they learn or go straight into employment.
This is why I propose putting apprentices on a level playing field with young people entering the labour market. Applied to current minimum wage rates, this would be an increase on first year pay of over a third, as well as simplifying a pay structure that all too often catches employers out.
In June 2014, the Business Secretary asked the LPC to consider whether the structure of the apprentice rate could be simplified in order to ensure apprentices get the minimum wage they are entitled to and make it easier for businesses to comply with the law. The LPC will make their recommendations on this, alongside the 2015 national minimum wage rates, in February 2015. Government will then decide on any changes to the structure, based on the LPC’s recommendations.
Notes to editors:
As of 1 October 2014 the apprentice National Minimum Wage (NMW) rate is £2.73 per hour and the 16 to 17 year olds NMW rate is £3.79 per hour. The proposal would create a single rate for apprentices and 16 to 17 year olds.
Under the proposal, an apprentice would be entitled to the same NMW rate, with the same incentive in terms of pay, to start an apprenticeship aged 16 to 17 compared to entering any other form of employment with or without training.
The government set out the annual minimum wage remit to the LPC in June 2014. As well as reviewing the NMW rates and making recommendations on the levels the LPC believes should apply for October 2015, the government asked the LPC to focus on how the NMW rates for apprentices could be simplified. For more information please go to government sets out 2015 minimum wage remit to Low Pay Commission.
The combination of the apprentice rate and the 16 to 17 year olds rate will impact an estimated 31,000 apprentices who are paid between £2.73 and £3.79. The evidence shows that the vast majority of employers pay more than £2.73 per hour. The median hourly pay for all apprentices in England in 2012 was £6.00 for apprentices who were either under 19 or in their first year of study.
In October 2013, the Business Secretary requested the LPC to provide advice on what economic conditions would be necessary to allow faster increases in NMW without harming employment rates. The LPC have said that we are now entering a new phase of real rises in the NMW. In October 2014, the NMW rose from £6.31 per hour to £6.50 per hour. This is the first real terms increase since 2007 and is set to benefit more than 1 million people who will see their pay rise by as much as £355 a year. For more information please go to ‘above inflation rise for National Minimum Wage’.
Key facts about apprenticeships:
- a study of 600 businesses showed that 20% of small businesses plan to take on 1 or more apprentices in the next 12 months – 37% of larger businesses plan to do the same
- around a third of those that plan to take on apprentices say this is because they are a core part of their growth strategy
- apprenticeships are growing in popularity; a recent study showed that 43% of employers are more likely to offer an apprenticeship than they were 2 years ago
- nearly 2 in 5 employers said this was because the talent pool had widened as apprenticeships become more popular
- overall, 41% of employers agreed that apprentices stay in the business longer than other recruits
- for more information about apprenticeships visit www.apprenticeships.gov.uk/