If you run a small business and need an extra pair of hands, an apprentice can be one of the best-value hires you will ever make. You get a motivated worker trained to your way of doing things, and for most small employers the government pays all or nearly all of the training cost. Yet many small firms never take one on, because the funding rules look complicated and the jargon — levy, co-investment, funding bands — puts them off.
This guide explains what hiring an apprentice involves in England in 2026/27: what it costs, what funding you can get, and the process from choosing a training course to signing the contract. Note that apprenticeship funding is devolved: this guide covers England. Scotland, Wales and Northern Ireland run their own systems.
What is an apprenticeship, and why hire one?
An apprenticeship is a real job combined with structured training. The apprentice works for you, is paid a wage, and spends part of their working time learning — on the job with you and off the job with a training provider such as a college. At the end, they are assessed against a national standard and gain a recognised qualification. Apprenticeships run from Level 2 (GCSE equivalent) to Level 7 (master’s equivalent); most small businesses use Level 2–3 standards, and training must last at least eight months. You can recruit a new apprentice or put an existing employee onto an apprenticeship; both routes qualify for funding.
The obvious benefit is cost: training is heavily subsidised and apprentice wages start lower than the adult minimum wage. The less obvious benefits often matter more: apprentices learn your systems and customers from day one, retention tends to be strong, and if experienced hires are unaffordable, an apprentice lets you grow your own skilled worker.
What does an apprentice cost you?
There are two separate costs: wages, which you always pay, and training, which is usually mostly or fully funded.
Wages. Apprentices must be paid at least the apprentice rate of the National Minimum Wage: £8.00 an hour from 1 April 2026. The apprentice rate applies if the apprentice is under 19, or if they are 19 or over and still in the first year of their apprenticeship. Once an apprentice aged 19 or over completes their first year, they move to the rate for their age — £10.85 an hour for 18 to 20 year olds, or £12.71 an hour (the National Living Wage) for those aged 21 and over. That step-up is triggered by completing the first year, not by a birthday, so build it into your payroll planning from the start.
Apprentices must be paid for all their working time, including off-the-job training, and paid through PAYE; they cannot be self-employed. For context: an apprentice working 37.5 hours a week at £8.00 an hour earns £300 a week, or £15,600 a year. Employers also pay 0% employer National Insurance on the earnings of apprentices under 25, up to the upper secondary threshold of £50,270 a year.
Training. The rules below apply to apprenticeship starts from 1 August 2026 under the 2026/27 funding rules, now overseen by the Department for Work and Pensions.
If your annual pay bill is under £3 million, you do not pay the apprenticeship levy at all. Instead, you access government co-investment through the apprenticeship service. For apprentices aged 16 to 24, the government pays 100% of training and assessment costs, up to the funding band maximum for that standard. For apprentices aged 25 and over, you pay 5% and the government pays 95%, again up to the funding band maximum. If training costs more than the funding band maximum, you pay the excess, so check the band before you commit.
If your pay bill is over £3 million, you pay the levy — now called the Growth and Skills Levy — at 0.5% of your pay bill, less a £15,000 annual allowance, spent through your apprenticeship service account. Two changes from August 2026 are worth knowing: the old 10% government top-up on levy funds has been removed, and levy funds now expire after 12 months rather than 24. If your levy funds run out, the government fully funds training for apprentices aged 16 to 24, but for apprentices aged 25 and over you pay 25% and the government pays 75%.
Two extra payments may apply. Employers receive a £1,000 incentive for taking on an apprentice aged 16 to 18 (or 19 to 24 with an education, health and care plan, or a care leaver), paid in two £500 instalments at 90 and 365 days. From October 2026, small and medium-sized employers can also receive a £2,000 hiring incentive for newly hired apprentices aged 16 to 24, paid in two £1,000 instalments at 90 and 365 days. Your training provider will normally help you claim these. And if you know a large local employer with unused levy funds, ask about a levy transfer: levy-paying employers can transfer up to 50% of their annual levy funds to another employer.
How to hire an apprentice: step by step
Step 1: Choose the apprenticeship standard. Start with the job you need done, then find the standard that matches it. The government publishes every approved standard with its level, typical duration and funding band maximum, and your local college or training provider can help you match a vacancy to a standard.
Step 2: Find a training provider. The provider delivers the off-the-job training and arranges the end-point assessment. Compare a few providers on pass rates and experience with small employers — a good provider is the single biggest factor in whether an apprenticeship works well.
Step 3: Create an apprenticeship service account. Every employer in England manages apprenticeships through the apprenticeship service. If you do not pay the levy, use your account to reserve funding up to three months before the expected start date, or give your training provider permission to reserve funding on your behalf. Since April 2023, small employers are no longer limited to ten new apprenticeship starts.
Step 4: Recruit. Advertise on the government’s Find an apprenticeship service, through your provider, or through your normal recruitment channels. Treat it like any other hire: write a clear job description, interview properly, and check eligibility — the candidate must be aged 16 or over, not already in full-time education, and have the right to work in England. Our guide to right to work checks (https://businessmine.co.uk/right-to-work-checks-uk/) explains the documents you must see before employment starts.
Step 5: Put the paperwork in place. Apprentices have the same employment rights as your other staff, including paid holiday and sick pay, so they need a proper contract of employment, plus an apprenticeship agreement and a commitment statement with the provider. Our guide to UK employment contract requirements (https://businessmine.co.uk/uk-employment-contract-requirements/) covers what a compliant contract must contain, and your provider will supply the apprenticeship-specific documents.
Step 6: Plan the off-the-job training time. Apprentices must spend a minimum amount of their paid working hours in off-the-job training — learning new skills away from their normal duties. Build this time into rotas from the start: the most common complaint from apprentices is that busy weeks swallow their training time.
Step 7: Support, review and assess. Hold progress reviews with the provider every eight to twelve weeks. At the end of training, the apprentice takes an end-point assessment — a practical test, interview or project marked by an independent assessor.
Common mistakes small employers make
- Paying the wrong rate after year one. An apprentice aged 19 or over moves to the age-related minimum wage once the first year ends — a common payroll error.
- Treating the apprentice as cheap labour. Apprentices must receive genuine training and off-the-job time; using them purely to fill rota gaps breaches the funding rules.
- Choosing the wrong standard. Match the standard to the actual job, not to the funding band, or the assessment result will suffer.
- Forgetting the funding band cap. Government funding stops at the funding band maximum; you pay any excess.
- Assuming apprentices are only for school leavers. Apprentices can be any age, and upskilling an existing employee is often the fastest route to filling a skills gap.
Is an apprentice right for your business?
An apprentice works best when you have a genuine vacancy or skills gap, a team member with time to mentor, and work that can be structured around a training plan. It works less well when you need someone fully productive from week one, or when nobody has time to supervise.
If you have never employed anyone before, read our guide to how to hire your first employee in the UK (https://businessmine.co.uk/how-to-hire-your-first-employee-uk/) first — it covers the payroll, pension and legal steps that apply to every hire. Our guide to employer National Insurance contributions (https://businessmine.co.uk/employer-national-insurance-contributions-uk/) explains the 0% rate for apprentices under 25.
Frequently asked questions
How much of the training cost will the government pay? For apprentices aged 16 to 24, 100% of training and assessment costs up to the funding band maximum. For apprentices aged 25 and over, 95%, with you paying the remaining 5%.
Can I put an existing employee on an apprenticeship? Yes, provided they need substantial new skills and the apprenticeship genuinely develops them. It cannot be used to accredit skills they already fully have.
What happens if the apprentice leaves early? Funding stops, and you are not charged for training that has not been delivered. You should still follow a fair process for ending the employment, as apprentices have the same rights as other employees.
