SME apprenticeships: How to hire an apprentice and access government funding

Small businesses face skills shortages just as much as large ones –  but many are overlooking a key solution; taking on and training up apprentices

And while the Government is keen to encourage organisations of all sizes to take on apprenticeships, there is a challenge in how to deal with widespread reluctance from SMEs to invest in such schemes.

A report published in 2025 said that while apprenticeship starts rose by two per cent in the 2022-23 academic year, those within medium-sized businesses fell by  three per cent, and there was a 12 per cent fall for small firms. SMEs accounted for 37 per cent of apprenticeship starts in 2022-23, down from 40 per cent in 2021-22.

So what factors are fuelling the apprenticeship resistance for SMEs?

According to research from the Social Market Foundation (SMF), when it comes to skilled trades at least, the main problem is a lack of engagement with training providers. Most firms interviewed said they had no consistent connection with their local training providers.

Other barriers included a negative attitude and lack of trust toward younger generations in the workplace, especially among older workers, as well as the perceived cost and administrative burden associated with taking on apprentices. SMEs also said they've struggled to find enough interested and qualified candidates.

Many small businesses wrongly believe apprenticeships require paying the levy, even though it only applies to employers with payrolls above £3 million, charged at 0.5 per cent of total payroll.

However, even those that fall under the payroll threshold can still get help, in the form of co-investment schemes, where the government covers a significant portion of the training costs – up to 95 per cent. 

And there are big benefits for small businesses in taking on apprentices; from filling skills gaps and increasing productivity to improved staff retention. There's even a financial benefit, with government support available that cover a significant portion of training costs, while smaller firms may qualify for additional grants.  

Since last year, the Government has fully funded certain apprenticeships for SMEs with payrolls under £3 million, covering training costs for anyone aged under 21. It also offers free training for businesses with fewer than 50 employees who take on apprentices aged 22 to 24 who have an education, health and care (EHC) plan, or who have been in local authority care.

There's also now more flexibility about who can be taken on, with businesses now allowed to decide for themselves whether learners over the age of 19 will need a level 2 English and maths qualification, which is equivalent to GCSE.

Meanwhile, the minimum length of an apprenticeship has been reduced from 12 to eight months, which should also make it more palatable and affordable for smaller firms

"Businesses have been calling out for change to the apprenticeship system and these reforms show that we are listening," said Secretary of State for Education, Bridget Phillipson. 

"Our new offer of shorter apprenticeships and less red tape strikes the right balance between speed and quality, helping achieve our number one mission to grow the economy." 

As for how to go about it, there are different rules for Scotland, Wales and Northern Ireland, available here, here and here.
 

The basic rules of the apprenticeship scheme

In England, apprentices can be current employees as well as new ones, and you'll need to pay them at least the minimum wage. Apprenticeships can last up to five years, depending on the level the apprentice is studying, and apprentices will need to spend at least 20 per cent of their working hours on off-the-job training.

Make sure your apprentice gets the chance to work alongside experienced colleagues, learn the skills they need for the job, and have time in their working week for training. Their training provider or college should help with this too, offering both on the job and off the job learning.

If you decide to go ahead, you'll need to find a trainer. There's help here, and advice on funding here.

You'll also need to create an apprenticeships service account here, after which you can advertise your apprenticeship and accept employer agreements with the Department for Education (DfE). 

When the apprenticeship wraps up, you’ll need to partner with the training provider to put together a plan for the trainee’s end point assessment. An independent organisation will carry this out, and it shouldn’t cost you much extra as it’s mostly covered by the overall apprenticeship funding.

The FSB says that hiring apprentices can help small businesses in the long as well as short term.

"Apprenticeships offer small businesses a cost-effective way to train people in exactly the skills your business needs, creating loyal employees who understand your values and ways of working," it says.

"Over time, apprentices can develop into key members of your team, often progressing into supervisory or specialist roles. By training staff from the ground up and implementing a well-designed apprenticeship scheme, you can develop employees who are aligned with your business goals, while reducing recruitment costs and turnover."
If you’re keen to say the words “You’re hired” more than “You’re fired” to an apprentice, we know our practical advice and insight will be helpful.

Apprenticeships, after all, can give SMEs a truly competitive and value-rich edge – helping you build employee skills, boost productivity, and grow your business sustainably. And if you’re looking for other smart ways to stay competitive, reviewing your insurance could uncover great savings too. Tap the button below to speak with our team, and get advice tailored to your business.