Apprenticeships for small businesses are an increasingly popular way to build skills, reduce recruitment costs and support long-term growth. However, many employers are unsure how apprenticeship funding for small businesses works or what support is available.
The reality is that apprenticeships for SMEs are far more accessible than many employers realise. In most cases, the government covers the majority of training costs and the process is simpler than it first appears, especially with the support of an experienced training provider like Damar Training.
Whether you’re looking to bring in new talent or develop existing employees, apprenticeships offer a practical and cost-effective route to do just that. This guide explains how they work for SMEs, what funding is available and how to get started.
Why apprenticeships for small businesses work
Apprenticeships are well-suited to SMEs because they offer a flexible, cost-effective way to build skills within a smaller team.
Rather than hiring fully trained staff at a higher cost, apprentices allow you to develop talent that fits your small business needs from day one. Training is tailored to the role, meaning employees gain practical, relevant skills while contributing to your organisation.
They also support long-term retention. Apprentices often show strong loyalty to the businesses that invest in them, which can reduce recruitment costs and staff turnover over time.
For SMEs with limited capacity, apprenticeships provide a way to grow sustainably and fill skills gaps without overstretching budgets.
Apprenticeship funding for small businesses
One of the most common misconceptions about apprenticeships is that they’re expensive or complicated to fund. In practice, the system is designed to make training affordable and accessible for small and medium-sized employers.
How apprenticeship funding works
Apprenticeship funding in the UK depends on the size of your organisation’s payroll.
Large employers (with a pay bill over £3 million) pay into the Growth and Skills Levy (formerly called the Apprenticeship Levy). SMEs, on the other hand, that don’t pay the levy, access funding through government co-investment, where the government pays the majority of training costs directly to the provider.
What small businesses actually pay
For most SMEs, the cost is minimal.
The government funds 95-100% of training costs, depending on the age of the apprentice. From August, apprentices up to the age of 24 are fully government-funded with just a 5% contributed required for apprentices aged 25 and over.
Where the 5% co-investment is required, many small businesses are able to access levy transfers from larger organisations to cover this cost.
All funding is managed through the the Digital Apprenticeship Service with training providers supporting employers with setup and administration, making the process more straightforward than it first appears.
Employers are still responsible for paying the apprentice’s wages but overall this remains a cost-effective way to recruit and develop talent.
Incentives for small businesses
The government offers apprenticeship grants to employers who hire an apprentice. The grant offers a payment of £1,000 for every new apprentice who is 16 to 18 years old (or is 19 to 24 and has been in care or has an education, health and care plan).
In addition, non-levy paying employers can access an incentive of up to £2,000 when recruiting new apprentices aged 16-24. Read more about these new funding changes.
You should also know that, in most cases, you do not need to pay National Insurance contributions for apprentices aged under 25 (subject to a salary cap of £50,270).
How to hire an apprentice as a small business
Taking on an apprentice is more straightforward than many employers expect. With the support of an experienced training provider like Damar, you’ll get guidance throughout the process to ensure the best fit for your company while reducing the administrative burden often involved in hiring.
1. Identify a skills gap
Start by considering where an apprentice could add value – for example business growth, improved efficiency or building future talent pipelines. You also need to decide whether the skills gap would be best filled by upskilling an existing employee or recruiting a new member of staff as your apprentice.
2. Choose an apprenticeship standard
Apprenticeships are based on specific roles known as standards. These outline the skills and knowledge the apprentice will develop. Damar offer a range of business and professional apprenticeships including customer service, data protection and paralegal.
3. Select a training provider
An approved provider will deliver the training and help you navigate funding, paperwork and compliance. Access our guide on choosing the right apprenticeship training provider to help you find one best suited to your business and workforce development needs.
4. Set up your funding
You’ll use the Digital Apprenticeship Service to access funding. This is typically quick to set up and your training provider will be able to help you navigate this process.
Once you have completed these four steps, you are well placed to implement an apprenticeship programme at your small or medium business – and to start seeing the benefits.
Business benefits of apprenticeships for small businesses
- Increased productivity: Apprentices are trained to meet the specific needs of your business, allowing you to fill skills gaps and enabling your team to perform at their best
- Reduced recruitment and onboarding costs: Apprenticeships offer a structured way to bring in and develop new talent, with 95-100% of apprenticeship training funded by the government for SMEs
- Planning for the future: Apprenticeships enable your organisation to build a pipeline of skilled employees who understand your business and can grow into more senior roles
- Long-term investment in stability and growth: With limited costs and the potential to positively impact productivity, efficiencies, collaboration, innovation and retention, apprenticeships are a great solution for organisations looking to grow, adapt and thrive today and into the future.
Claire Adkins, Business Development Manager at Damar Training, shares: “Every apprenticeship creates a real opportunity to upskill employers or bring fresh talent into an SME business and shape it for the future. With the right support, the process is far simpler and more cost-effective than many expect. I’ve seen first-hand how apprenticeships help small teams grow their own talent and plan with confidence. For SMEs, apprenticeships aren’t just training opportunities, they’re a smart investment in long-term success.”
Next steps
We hope that it’s now clear how apprenticeships for small businesses are actually more straightforward and financially viable than it may initially appear. With Damar Training, you can also expect support throughout the process, from initial recruitment through to progression opportunities once an apprentice completes their final assessments.
If you’re keen to know more, contact us today and speak to our small business specialists.
FAQs about apprenticeships for small businesses
Q: Do small businesses pay the Apprenticeship Levy?
A: If your organisation has an annual wage bill of less than £3 million, you are a non-levy payer and instead access co-investment for the apprenticeship. The government provides 95-100% of the apprenticeship training costs.
Q: How much does an apprentice cost a small business?
A: With most or all of the training funded, your main outlay when hiring an apprentice as a small business is their annual salary.
Q: Can I train existing staff as apprentices?
A: Absolutely. Apprenticeships offer a great way to upskill existing team members. Apprenticeships are suitable for employees of any age (16+) and range from level 2 to higher apprenticeships at level 5 and beyond.
Q: Are there any business requirements for hiring an apprentice?
A: As apprenticeships are regulated training, there are some rules to be aware such as eligibility requirements and your obligations as an employer – including rights and pay rates, access to off-the-job training and implementing an apprenticeship agreement – read more about apprenticeship rules for employers.