Ministers consider higher apprenticeship costs for older workers

Ministers are considering restrictions on the use of apprenticeship levy funds for training workers aged 25 and over, in a further attempt to direct employer investment towards younger people entering employment.

Under the reported proposal, large employers would continue to use levy funds for eligible apprentices aged 16 to 24, while training for older apprentices would receive support covering only 75% of the relevant costs. Employers would be responsible for the remaining 25%.

The measure is being developed as part of the government’s response to the decline in apprenticeships among young people. A phased introduction from September 2027 has been discussed, although final rules and implementation arrangements have not been announced.

Any new requirement must be distinguished from changes that took effect in August 2026. Under current apprenticeship funding rules, levy-paying employers whose apprenticeship accounts have insufficient funds already receive a 75% government contribution for new apprentices aged 25 or over.

That restriction applies when the employer’s available levy funds have been exhausted. The latest reported proposal would go further by limiting the proportion of older apprentices’ training costs that could be met from levy funds even where sufficient funds remain available.

The distinction is financially important. The apprenticeship levy is paid by employers with annual payroll costs exceeding £3m, at a rate of 0.5% of their pay bill, subject to the relevant allowance arrangements. Employers can draw on funds held through the apprenticeship service to meet eligible training and assessment costs.

Requiring an additional contribution for older apprentices would change how some employers allocate their training budgets. Businesses already paying the levy could face direct expenditure when using apprenticeships to retrain established employees or recruit experienced workers into new occupations.

Apprenticeships for older participants can be important where organisations need to develop technical skills, introduce new operating systems or address shortages in specialist roles. Employees undertaking them may already have substantial workplace experience but require new qualifications or structured training.

For employers, the decision involves more than the course fee. Apprentices may require supervision, time away from normal duties and support from colleagues, while any newly required cash contribution would be an additional cost.

Younger apprentices have different barriers to entry. Employers recruiting school leavers may need to provide more extensive initial workplace support, and applicants may lack the qualifications or experience necessary to begin particular training programmes.

The government has announced measures intended to increase opportunities for younger entrants, including a £2,000 hiring payment for eligible smaller employers recruiting apprentices aged 16 to 24. The proposed changes to levy funding would form part of that wider policy effort rather than replace existing incentives.

Concern about youth employment has intensified as the number of people aged 16 to 24 outside education, employment or training approaches one million. Ministers are considering recommendations arising from Alan Milburn’s review of the barriers facing young people, with its final report expected after the October Budget.

However, redirecting funding does not automatically produce additional vacancies. Employers must still be able to recruit suitable applicants, provide meaningful work and secure appropriate training provision.

Training providers may also face changes in demand. Some apprenticeship standards attract substantial participation from existing employees and older learners, while others are more commonly used by new entrants. A shift in employer contributions could change the economic case for programmes serving particular occupations.

The government faces a trade-off between prioritising young people’s access to employment and retaining incentives for workforce retraining. Both are relevant to productivity, particularly as businesses adapt to technological and demographic changes.

Employers will need the final funding rates, transitional arrangements and definitions of eligible training before reassessing their plans. Until those details are published, the latest proposal remains under consideration rather than a confirmed change to levy expenditure.