NIC reductions if you employ apprentices
As an employer of an apprentice you will need to be aware of your legal requirements, but it’s also a good idea to keep informed about the financial benefits and reliefs available.
These include a recent change to how you pay Class 1 National Insurance Contributions (NICs) on the earnings of apprentices under 25.
When did the new legislation come in?
At the start of this year’s new tax year: 6 April 2016.
What is the exemption?
Employers who take on an apprentice may not have to pay employer Class 1 NICs on that person’s earnings below £827 a week, or £43,000 a year.
The apprentice must be under the age of 25 and following an approved UK government statutory apprenticeship framework, such as those offered through CMS:
- Human Resources / Learning & Development
- Leadership and Management
- Customer Service
- Sport & Leisure
What are NIC category letters?
These are used when you run your payroll to establish what the employer’s and employee’s (or apprentice’s) National Insurance contribution will be. For apprentices under 25, the category letter is H (unless the apprentice is a foreign-going mariner, in which case it is G).
What proof is needed to apply the relief?
Ideally you will be able to show a written agreement between you, the employer, and the apprentice and a training provider, with details of the dates the apprenticeship is expected to run. If you are based in England or Wales, you must also demonstrate that the apprenticeship is government funded.
Who benefits from the change to NICs?
The employer of the apprentice will benefit – the apprentice will not see any reduction in payments, or changes to their entitlement to contributory social security benefits, eg the State Pension, or to statutory payments, such as sick pay or maternity/paternity pay and leave.
What happens at the end of the apprenticeship?
If the apprentice is offered full employment, the employer will need to change the employee’s NI category letter – also if they turn 25 during the apprenticeship.
Does this only apply to apprentices?
Employers have not been required to pay Class 1 secondary NICs on earnings up to the upper earning limit for any employees under 21 since 6 April 2015.
Find out more
If you’d like to find out more, there are resources at www.gov.uk, or why not contact CMS Vocational and one of our staff will be happy to talk you through the legislation. You may also find it useful to take a look at some of our other blogs on apprenticeships, such as The Apprenticeship Levy – what is it?, Apprenticeship Grants for Employers and Are all apprenticeship providers the same?