Apprenticeships are a great opportunity for employers to recruit new talent, and for apprentices to gain new skills and qualifications alongside work experience.

However, it is important that employers are aware of the different apprenticeship contracts, and the implications of each, before taking on apprentices.

The two most well-known types of apprenticeship contracts are:

1. Common law apprenticeships, otherwise known as a contract of apprenticeship; and

2. Modern apprenticeship agreements in accordance with the Apprenticeships, Skills, Children, and Learning Act (ASCLA) 2009.

Common law apprenticeships

The common law apprenticeship was created with the primary goal of training the apprentice.

As such, the apprentice is subject to different terms, and receives greater protection against dismissal and redundancy, meaning an employer cannot terminate the apprentice unless there is clear evidence that their conduct/behaviour makes it impossible to train them.

Where a common law apprenticeship is terminated without such evidence, the employer can be liable for a range of penalties, predominantly the cost of damages for lost salary and/or benefits until the official end date.

There are further risks with common law apprenticeships.

Under this contract, apprentices are not recognised under National Minimum Wage (NMW) regulations.

Therefore, they would need to be paid according to their age from the onset of their employment, and if neglected, this could leave employers open to claims of unlawful wage deduction and HMRC penalty fees.

Modern apprenticeship agreements

A modern apprenticeship agreement focuses on the provision of work alongside training, usually through an external training provider, and includes terms and protections equal to that of an employee.

A modern apprenticeship agreement is required to meet the following ASCLA guidelines:

  • The apprentice is undertaking work for the employer;
  • The apprentice agreement includes the basic terms of employment, as per section 1 of the Employment Rights Act (ERA) 1996;
  • The agreement includes a statement of the occupation and/or trade that the apprentice shall be trained under;
  • The agreement must state that it is governed by the law of England and Wales; and
  • The apprenticeship is conducted under a Government-approved apprenticeship framework.

Should any of the above not be met, or an agreement was not issued in writing, the apprenticeship will be classed under common law and subject to enhanced protections.

Under a modern apprenticeship agreement, apprentices would receive the apprentice rate of pay at the beginning of their employment.

However, on completion of their first years service, and if they are aged 19 years or over, their rate of pay would then be determined by the minimum wage for their age group.

As they’re given the same terms as employee contracts, apprentices will also receive greater protections following two years’ continuous service, meaning employers would be required to follow a fair and consistent process should they wish to dismiss, and in redundancy situations, would be required to provide the appropriate redundancy pay for apprentices.

Changing apprenticeship contracts

Should an employer wish to transfer an apprentice from common law to a modern agreement, they would need to treat this as a change of terms and conditions, which means that they would need to seek the apprentice’s consent to do so.

In cases where this applies to multiple apprentices (20 or more), this may then fall under a collective consultation process.

Discrimination risks

Irrespective of the agreement formed, employers must also remain cautious about the potential risks of age discrimination for both younger and older apprentices.

For example, avoid specifying an upper age limit during the recruitment process, thus discriminating against older individuals who may wish to apply.

Another example is applying inconsistent terms to younger apprentices compared to those of a similar job status.

Training costs for apprenticeships

Another general area of consideration is training costs.

The Department of Education (via the Apprenticeship Funding Rules) states that apprentices cannot be requested to pay training costs during or after their employment.

In particular, apprentices cannot be required to cover apprenticeship levy costs.

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