Under-25s exempted from apprenticeship co-investment hike

Ministers have partially reversed a fivefold increase in apprenticeship co-investment costs just days before it was due to take effect.

The Department for Work and Pensions has confirmed levy-paying employers that exhaust their apprenticeship service account will not have to contribute towards training and assessment for eligible new starts aged 16 to 24 from August 1.

The government had planned to increase the contribution required from levy payers with insufficient account funds from 5 to 25 per cent for all new apprenticeship starts from that date.

But apprentices aged between 16 and 24 will now be exempt, meaning their training and assessment will be fully funded by government up to the relevant funding band maximum.

The published 2026-27 apprenticeship funding rules still state that government will cover only 75 per cent of costs when a levy payer has insufficient funds, leaving the employer to pay the remaining 25 per cent.

The rules are expected to be updated in the coming days to reflect the exemption for young apprentices.

Simon Ashworth, deputy chief executive and director of policy at the Association of Employment and Learning Providers, said the announcement reflected reforms his organisation had “championed”.

He added: “With more than one million young people currently not in education, employment or training, reducing the cost of employing young apprentices is one of the most effective ways to tackle youth unemployment.

“It will create more opportunities for young people and help employers build the skilled workforce they need.”

The change follows warnings from employers and training providers that the higher charge would force businesses to reduce apprenticeship recruitment and undermine ministers’ ambition to create 50,000 additional opportunities for young people.

FE Week revealed earlier this month that levy payers faced a fivefold increase in their contribution once their accounts were exhausted.

For an apprentice on the level 3 installation and maintenance electrician standard, which has a £23,000 funding band, an employer’s contribution would have risen from £1,150 to £5,750 over the course of the programme.

Businesses in engineering, construction, dental, childcare and professional services warned that the increase risked turning employers away from apprenticeships.

Around 36,900 employers paid the levy in 2024-25. Parliamentary figures showed 9.2 per cent spent more than the value entering their accounts, suggesting roughly 3,400 could have been immediately exposed to the higher rate.

A further 12.5 per cent spent most of their allocation and could also have faced the charge.

Under plans announced last December, government had already committed to fully fund apprentices aged under 25 when they work for small and medium-sized businesses that do not pay the levy.

Ministers have also said smaller employers can access up to £8,000 in combined support for each young apprentice, depending on their circumstances, alongside national insurance relief for apprentices aged under 25.

The package includes a new £2,000 hiring payment for non-levy employers taking on under-25 apprentices from October.

But the full-funding exemption had not previously extended to levy-paying employers after they spent their account funds.

A government announcement today said apprenticeship training would be free for “all eligible under-25s” from August.

The Department for Work and Pensions has confirmed it will no longer expect co-investment from employers that have spent their levy when the apprentice is under 25.

The change is a partial reversal rather than the abandonment of the new co-investment rate.

Levy-paying employers will still have to contribute 25 per cent once their funds are exhausted for eligible new starts aged 25 and over.

DWP was approached for comment.