As part of the government’s initiative to “Make Work Pay”, the national minimum wage is set to rise for all age groups from 1 April, to better align pay with the increased cost of living.
It’s estimated that over 3 million workers will benefit. The group set to see the greatest percentage increase in their hourly pay is apprentices, with their minimum wage increasing 18% from £6.40 to £7.55 per hour.
The Labour government has set itself the difficult task of being pro-business, pro-worker and pro-growth. However, these increases to the minimum wage, a rise in employer national insurance contributions and planned workers’ rights changes are making it more expensive and challenging for businesses to recruit.
This has contributed to a decline in vacancies, which last month dropped at their fastest rate since August 2020, according to the latest Recruitment and Employment Confederation and KPMG UK Report on Jobs. Rising employment costs were also cited as the biggest concern for 2025 among employers surveyed by the Chartered Institute of Management Accountants.
The rise in apprenticeship pay may have a similar effect on employers’ ability to take on apprentices, according to some business groups.
The Institute of Director’s principal policy advisor for employment and skills, Alexandra Hall-Chen, says: “Hosting an apprenticeship requires significant investment of employers’ time and capital. While employers remain very supportive of apprenticeship schemes, there is a risk that this increase will make the costs untenable for more businesses, especially SMEs.”
SMEs hit hardest
Trade apprenticeships and programmes run by small businesses are at greatest risk of being scrapped.
Matt Wrankmore, head of garage network at FixMyCar, a price-comparison site, says that many of the mechanics and body shops he works with are already feeling a lot of financial pressure, due to the rising costs of parts, labour and overheads.
“The increase in apprentice minimum wage will not only add to their strain, but it will also sadly force them to rethink this investment, since the financial pressures make it harder to recruit and retain apprentices,” he adds. “There is no doubt that apprentices should be paid fairly, but the extra financial barrier to automotive businesses must be acknowledged and addressed if we want garages to continue offering mechanic apprenticeship opportunities.”
Similarly the hair and beauty sector – which has seen a significant drop in apprenticeship numbers in recent years – could face a further decline in apprenticeship starts.
It’s making an already difficult situation worse
Sarah Abel, director of hair and beauty training provider TNB Skills Training, says many in the industry are questioning hiring a 16-year-old apprentice with no experience when a skilled 18- to 20-year-old would only cost £2.45 per hour more from April.
Abel expects these changes to have a “huge impact” on apprenticeship numbers. “Employers will be reluctant to invest in younger apprentices, which means fewer opportunities for young people to gain experience and enter skilled industries. It’s making an already difficult situation worse,” she adds.
Some hairdressing salons have already laid off apprentices ahead of the April wage increase, according to Nicki Hay, director of apprenticeship strategy and policy at BPP Education Group. Hay has noticed a decline in demand for apprentices across the board, caused by the current dip in employer confidence.
Despite an overall increase in the number of apprenticeship starts in August, September and October of 2024, lower level apprenticeship numbers have fallen to their lowest in four years. The impact of the government’s increase to employer taxes and minimum wage rise, which were announced in the autumn budget, are yet to be seen in the figures.
However, employers hiring apprentices under the age of 25 will continue to be exempt from paying national insurance contributions on their wages, which will offset at least some of the increase in the apprentice minimum wage.
The government also hopes that changes announced yesterday – which will reduce the minimum duration of an apprenticeship to eight months and allow employers to decide if maths and English qualifications are required to pass – will provide a boost to apprenticeship numbers.
While an increase to the apprentice minimum wage was needed, Hay says not enough support has been offered to sectors that will be impacted most. “The rise in line with inflation was probably needed but it always has ripple effects and these need to be considered before announcing any changes,” she adds.
Large businesses continue apprenticeship commitments
Despite these cost increases, apprenticeships remain an effective way to train and develop talent. Apprentices also have high retention rates and can be a cost-effective way to fill skills gaps and ensure talent succession.
Many larger businesses plan to continue hiring apprentices this year and already pay above the minimum wage – even after April’s hike.
The Co-op says that the increase in the apprenticeship minimum wage will not affect the number of apprenticeships it offers in 2025. The company pays all apprentices the real living wage and ensures wages are equal across all age groups.
Its chief people and inclusion officer, Claire Costello, says: “Paying lower wages to apprentices makes the programmes less viable and appealing and this burden is felt the most by those from lower socioeconomic backgrounds who often don’t have the same financial support as those from more advantaged backgrounds.”
The company is calling on the government to abolish the lower apprenticeship rate, which Costello says will help “level the playing-field” and make apprenticeship schemes “fairer and more equitable”.
As part of the government’s initiative to “Make Work Pay”, the national minimum wage is set to rise for all age groups from 1 April, to better align pay with the increased cost of living.
It’s estimated that over 3 million workers will benefit. The group set to see the greatest percentage increase in their hourly pay is apprentices, with their minimum wage increasing 18% from £6.40 to £7.55 per hour.
The Labour government has set itself the difficult task of being pro-business, pro-worker and pro-growth. However, these increases to the minimum wage, a rise in employer national insurance contributions and planned workers’ rights changes are making it more expensive and challenging for businesses to recruit.
