Report

Apprenticeships for 16-18s in UK – The average annual cost to providers is higher than for adults by around £2502 per apprentice per year

1. The average annual cost to providers of delivering apprenticeships for 16- 18s is higher than for adults by around £2502 per apprentice per year.
This is largely driven by ancillary support; sub-contracting of external training providers or assessors; and teaching. Therefore if we assume an average duration of an apprenticeship across both age groups and across all frameworks of 20 months3, over the course of an entire apprenticeship the overall average cost differential would be approximately £4004. One-off recruitment costs are also on average around £50 per apprentice higher for 16-18s compared to adults.
2. The cost of delivering apprenticeships for 16-18s is similar for both big and small providers but big providers typically have lower costs in delivering apprenticeships for adults.
Among the providers within our sample, we found that the average annual costs per 16-18 apprenticeship were similar for both big5 providers and small providers
at just under £4,000 per apprentice per year. We find similar results when we compare colleges, which are typically larger in their scale of operation, with private providers.
We also find that for both big and small providers, the costs of 16-18 apprenticeships (per apprentice) are higher than for adults. For big providers, however, they appear to operate with economies of scale as their costs per adult apprentice are lower than for small providers. Therefore, the difference in recurring costs6 between 16-18s and adults is larger for big providers (around £350 per apprentice per year) than for small providers (around £150 per apprentice per year).
Alongside likely economies of scale for large providers, our qualitative evidence suggests that costs per apprentice facing all providers are however also likely to be influenced by the business model used along with the nature of apprenticeships being delivered (technical apprenticeships are more costly to deliver than service-based).
3. The annual average net cost across all frameworks of employing apprentices aged 16-18 is lower than for adults…
For the 27 employers in our sample, the annual average (recurring) cost per apprentice is around £650 lower for 16-18s than for adults. Although employers spend on average around £900 per apprentice per year more on supervision for 16-18s than adults, this cost is outweighed by the lower salary typically paid to young apprentices relative to adults (young apprentices are paid on average £1,350 less than adults).
It is also important to consider the net costs for employers, after accounting for other income employers receive per apprentice (such as through grants) and the productive contribution of the apprentice. After accounting for these factors, we find that young apprentices have a lower average productive contribution than adults (by £600 per apprentice per year), though they attract more income for the employer than adults (by £500 per apprentice per year). The average net cost to the employer is therefore £550 more for a young apprentice than for an adult.
4. …but for technical apprenticeship frameworks, 16-18 apprentices cost the employer more than adults.
We find that the type of apprenticeship is a more important driver of costs for employers than the age of the apprentice per se. Technical frameworks7 in our sample typically cost employers more overall than service-based frameworks8, and for 16-18s relative to adults. This is largely driven by the higher costs to the employer of supervision, particularly for 16-18s. For employers in our sample, technical apprenticeships for 16-18s cost employers on average around £500 more per apprentice per year than for adult apprentices. After accounting for other income employers receive per apprentice (such as through grants) and the productive contribution of the apprentice, 16-18s impose a net cost on employers of on average around £350 more per apprentice per year than adult apprentices.
Across the whole duration of an apprenticeship, the difference in costs between technical and service-based frameworks is even greater. This is because the average duration of technical apprenticeships is longer (35 months) than for services frameworks (15 months). For illustration, a 16-18 apprentice on a technical apprenticeship could cost the employer (in terms of recurring costs) around £1,500 more than an adult apprentice on the same framework, or around £1,000 more than an adult in net cost terms.

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Chosen excerpts by Job Market Monitor. Read the whole story at  Costs and behaviours in the 16 to 18 apprenticeship system

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