Minimum Apprentice Wage Loophole Carries Financial Risk, Warns Croner

blog-publish-date

12 Dec 2014

blog-read-duration

  • Hair and beauty businesses most likely to be impacted 
London 21 January 2014 – Employers using a National Minimum Wage (NMW) loophole to pay their apprentices at a lower rate are at risk of a claim or fines by HMRC, warns employment law and pay experts, Croner, part of Wolters Kluwer. The apprentice minimum wage (AMW, currently £2.68), which has been in place since October 2010, applies to contracted apprentices who are in their first 12 months of the apprenticeship and haven’t reached the age of 19. Apprentices who are 19 and over and have worked more than 12 months must be paid the appropriate NMW rate for their age (currently £5.03). Some employers however are exploiting a loophole, which sees apprentices being paid the AMW for two years rather than one, which can be a significant detriment to the apprentice and a business risk for the employer. The loophole centres on advice by the Pay and Work Rights Helpline run by HMRC. They are telling businesses that there is a further scenario in which the AMW can be given: where two apprenticeships are carried out at one workplace, providing that the second apprenticeship was unforeseen at the time of beginning the original apprenticeship. Martin Jackson, Tax & Payroll Consultant at Croner, explains: “Essentially what this means is that an apprentice, who initially trains to Intermediate level and then decides with the agreement of their employer to progress to Advanced level, could be paid the apprentice minimum wage for a further year, rather than the NMW. “While it is not expressly allowed within the National Minimum Wage Regulations 1999, it would appear that the Pay and Work Rights Helpline is relying on the fact that the Regulations only deal with the circumstance where the apprentice has previously been employed by someone else, and not where they have the same employer. “Employers, particularly those in the hair and beauty industry who we know are already taking advantage of this loophole, are in danger of being seen as avoiding making payments of the appropriate NMW rate, and with it comes the risk of fines and arrears by HMRC. Aside from the financial risk, there is also a danger that the employment relationship will break down if the apprentice realises they are being paid at a lower rate, meaning they are out of pocket for a year.” Croner is advising businesses that if they wish to take advantage of this opportunity, they should seek confirmation of their actions from Directgov or write to HMRC before implementing any scheme. In addition they will need to be able to show that the offer of a further apprenticeship was not envisaged at the start of the working relationship.

Free to Download Employer Resources

  • How To Guide: Helping Employees with the EU Settlement Scheme

    FREE DOWNLOAD

    How To Guide: Helping Employees with ...

    Read more
  • Sample Risk Assessment Template

    FREE DOWNLOAD

    Sample Risk Assessment Template

    Read more
  • Upcoming Employment Law Changes - 2019/20

    FREE DOWNLOAD

    Upcoming Employment Law Changes - 201...

    Read more
  • Tribunal Claims Continue to Rocket

    BLOG

    Tribunal Claims Continue to Rocket

    The statistics continue to show that claims are increasing following the removal...

    Read more
  • Bank Holidays: Legal Requirement or Not?

    BLOG

    Bank Holidays: Legal Requirement or N...

    Do you need to give your staff days off on bank holidays? Do you have to pay the...

    Read more
  • Fires at The Ivy, Ocado and Tesla… Is Your Business Next?

    BLOG

    Fires at The Ivy, Ocado and Tesla… Is...

    The following incidents took place at the sites of major businesses in the UK be...

    Read more
  • Solicitors Benevolent Association

    CASE STUDY

    Solicitors Benevolent Association

    “The reason for using Croner was the high-profile track record and the credibili

    Read more
  • John Taylor Hospice

    CASE STUDY

    John Taylor Hospice

    “A large number of the queries are around employment law and rights in areas suc

    Read more
  • Motorsport Industry Association

    CASE STUDY

    Motorsport Industry Association

    “I’m so happy with the service Croner provide, I’d be hard pressed to find a fau

    Read more

Ready to focus on what you do best?

Get your free consultation and speak to an expert today.