Employers face 25% training cost hike for workers over 25

Employers in England will likely have to pay more to train workers over the age of 25 under a new government proposal. The plan requires businesses to cover 25% of the cost of an apprenticeship for older workers, while levy funds continue to cover the full cost for those under 25. This shift aims to steer firms toward hiring younger apprentices.

The proposal is part of a broader overhaul of the apprenticeship funding scheme. Ministers are responding to a review led by Alan Milburn into youth unemployment. The government aims to address the fact that 1 million young people aged 16 to 24 are not in education, employment, or training. Chancellor John Healey is expected to announce measures to support this goal during Wednesday's budget.

Business leaders argue the new cost structure could disrupt existing training efforts. Robert Halfon, executive director of policy at Make UK, stated that the change would merely shift opportunities rather than create new ones. He noted that making it more expensive to train older workers is not the solution to youth unemployment. Halfon urged the government to grow the number of available apprenticeships instead of restricting training for other age groups.

Andy Burnham has made youth employment a central part of his political agenda. His plans include reversing a 40% drop in youth apprenticeship starts over the past decade. Currently, workers over 25 account for more than half of new apprenticeship enrollments. The new rule, known as a co-investment requirement, means levy funds will cover only 75% of training costs for these older workers. Employers will need to find the remaining 25% from other sources.

John Foster, chief policy officer at the CBI, warned against treating skills as a zero-sum game. He emphasized that adult training helps people adapt to workplace changes, particularly as artificial intelligence reshapes jobs. Ben Rowland of the Association of Employment and Learning Providers said any changes must involve employers. He warned that abrupt shifts could endanger the system's stability.

Kate Shoesmith, director of policy at the British Chambers of Commerce, said employers need flexibility to invest in skills at every career stage. She argued that reducing wider business costs is a better way to encourage youth hiring than adding new training barriers. Joe Dromey of the Fabian Society countered that the current system favors older, highly qualified workers. He suggested that difficult choices about public funding are necessary to tackle youth unemployment.

A government spokesperson said the reform is backed by £3.3 billion to deliver 50,000 additional apprenticeships for young people. The plan includes a new hiring payment of £2,000 for small and medium enterprises that take on a 16- to 24-year-old apprentice. The Milburn Review is due in the autumn, and the government said it will not pre-empt its findings.