Chancellor George Osborne today announced that employers will no longer have to pay national insurance contributions (NIC) on apprentices aged 24 and under.
In the autumn statement, he announced the abolition in April 2016 of what he described as the “job tax” on employers of apprentices, claiming it would affect bosses of around 500,000 learners. But apprentices themselves will still be required to pay NIC.
He told MPs at the House of Commons: “We back the businesses who employ apprentices, especially young apprentices under the age of 25. At the moment we charge National Insurance on businesses who employ apprentices.
“Today I can announce that the jobs tax on young apprentices will be abolished altogether. When a business is giving a young person a chance in life we’re going to support them not tax them.”
Apprentices under the age of 21 will already be exempt from employer NICs from April.
Nevertheless, Mr Osborne also used the statement to unveil £20m for improving careers advice, but details of how it will be spent have not yet been announced.
“Career change work experience” also featured with the announcement that, “from April 2015 the government will pilot career change work experience and training opportunities for older benefit claimants to help them gain the experience and training they need to re-skill and get back to work.”
Employers currently make NIC for any employees earning more than £153 a week, including apprentices, although those earning the apprentice minimum wage of £2.73 per hour would not breach that threshold.
In the autumn statement document, the Treasury said: “The government is making it cheaper for employers to take on an apprentice by abolishing employer NI contributions for apprentices aged under 25 on earnings up to the upper earnings limit.
“This means that employers of around half a million apprentices will be exempt from paying employer NI contributions.”
The upper earnings limit is currently £805 per week.
The document went on to say the change would cost the government £105m in 2016/17, £110m in 2017/18 £120m in 2018/19 and £125m in 2019/20, with costings based on the 2012/13 annual survey of hours and earnings along with apprenticeship data from the Department for Business, Innovation and Skills.
For more, read edition 121 of FE Week, dated Monday, December 8.