Choosing the right contract for apprentices

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From April 2017 all businesses with a wage bill of more than £3m will be subject to an apprenticeship levy of 0.5 per cent of the payroll. The aim is to “help create millions of opportunities for individuals and employers” according to the new minister of state for apprenticeships and skills, Robert Halfon. The government has recently brought out a further consultation on how the arrangements will work.

The idea of a levy has received somewhat mixed reviews from employer bodies. The CBI said it was a “significant extra tax for business that would hit many smaller companies” while Business in the Community employment director Catherine Sermon saw it as an “opportunity for businesses to take a more active role in developing skills through vocational learning”.

However, what has received little attention is the complexity of employing recognisable numbers of apprentices as part of the push to fill the skills gap.

The mandatory contribution from large employers to the apprentice pot is likely to encourage many organisations to take on apprentices for the first time. Bigger firms already have the capability and experience of managing the training of apprentices. Smaller businesses, however, are more likely to be unaware of the rights apprentices hold – including rights that extend to employees and additional rights which do not. A failure by an employer to adhere to the rules protecting the status of apprentices could result in costly claims.

For instance, if a company plans on redundancies, many employers will assume that an apprentice is treated in the same way as other employees with regard to placing them at risk of redundancy and undertaking the same redundancy consultation process. However, an employer cannot usually make apprentices redundant simply because they cannot afford to pay them as they have a contractual obligation to train them over a fixed period.

In a similar vein, it is inevitable that as workplaces welcome higher numbers of apprentices, instances of serious or gross misconduct will occur and it is the organisation’s responsibility to ensure it is ready to deal with these. The difficulty here, however, is that common law apprentice agreements are essentially fixed-term contracts, which means that dismissing an employee following misconduct can be significantly more difficult to achieve than with other employees.

Given these potential difficulties, many businesses might be expected to take on apprentices under the framework prescribed by the Apprenticeships, Skills, Children and Learning Act 2009 and subsequent associated regulations.

Such an apprentice agreement must:

Be in writing
State it is governed by the law of England and Wales
State the skill, trade or occupation for which the apprentice is being trained
State it is being entered into in connection with a qualifying apprenticeship framework
Place an obligation on the apprentice to work for the employer
Contain information on the basic terms and conditions of employment as required by the Employment Rights Act 1996 (section 1)
If the agreement satisfies these conditions, it will be regarded as a ‘contract for services’ and not a ‘contract of apprenticeship’. This will have the benefit of giving businesses more certainty when taking on apprentices than the traditional common law model could.

While the new model will provide greater certainty when engaging staff, employers should remember that if a legal issue does arise, a tribunal has to consider all the circumstances when determining whether an employer acted fairly. With that in mind, a tribunal may hold employers to even higher account when considering the steps an organisation has taken when dealing with an apprentice.

All employers have a ‘duty of care’ for the well-being of anyone working for them, but especially to those who are not well-versed in the workings of a business environment. Businesses need to evaluate the level of resources and time they have to invest in taking advantage of the new apprenticeship arrangements.