Firms to pay 25% more to train workers over 25

The government plans to make it more expensive for companies to train employees over the age of 25. This change would alter how the growth and skills levy is applied to apprenticeship costs in England.

Under the current system, employers can use their levy funds to cover the full cost of an apprentice under 25. The proposal would keep this rule for younger workers. For those over 25, a co-investment rule would apply. Levy money would cover only 75% of the training cost. Employers would need to find the remaining 25% from their own pockets.

The change is designed to steer hiring toward younger people. Currently, workers over 25 account for more than half of all new apprenticeship enrolments. Ministers want to reverse a 40% drop in youth apprenticeship starts recorded over the last decade.

The plan is expected to appear in the government's response to the Milburn Review. That review examines why so many young people are out of work. Chancellor John Healey is expected to announce related measures during the budget. About 1 million people aged 16 to 24 are currently not in education, employment, or training.

Business leaders argue the new cost structure may not solve the problem. Robert Halfon, executive director of policy at Make UK, stated the change would just shift opportunities around instead of creating new ones. He urged the chancellor to increase the total number of apprenticeship places rather than reallocate existing funds.

John Foster of the CBI warned against treating skills as a zero-sum game. He noted that training older workers helps them update their skills mid-career, especially as artificial intelligence changes job requirements. Ben Rowland of the Association of Employment and Learning Providers added that abrupt changes could weaken employer support for the system.

Kate Shoesmith of the British Chambers of Commerce suggested that reducing wider business costs is a better way to promote youth apprenticeships. Firms have asked Healey for relief from high costs linked to the Middle East war and the recent rise in employer national insurance contributions.

The debate comes as Labour’s youth skills strategy faces scrutiny. Only 160 young people enrolled in the foundation apprenticeship scheme in the first eight months. The government aimed for 30,000 starts during the current parliamentary term.

A government spokesperson said the focus on youth apprenticeships is correct. Officials cited £3.3 billion allocated to deliver 50,000 additional apprenticeships. They also pointed to a £2,000 payment for small and medium-sized firms that hire 16 to 24-year-olds. The Milburn Review is due in the autumn.

The final details of the funding change have not been set. Ministers say they will not pre-empt the findings of the review. The proposed 25% cost increase for older workers remains the central point of contention between the Treasury and major business groups.