The first half of 2017 will see the introduction of the apprenticeship levy in the UK, which is expected to encourage larger employers to take on more apprentices.  Where an employer’s payroll is more than £3m, there is no escaping the levy and many will seek to recoup their levy cost by hiring new employees as apprentices.  As with any new workers, employing apprentices will create pension responsibilities, which employers should bear in mind.  Whilst the size of an employer for apprenticeship levy purposes is different to the way in which the size of an employer is determined for automatic enrolment purposes, it’s likely that if you are subject to the apprenticeship levy you will have passed your ‘staging date’ and will already be subject to the pensions automatic enrolment legislation.  This means that you will need to assess each new apprentice to decide what pension obligations will apply.

In respect of a school leaver apprentice, there will be no obligation to automatically enrol him or her into a workplace pension plan as the minimum age criterion (of 22) will not be met.  However, your new apprentice would still have an entitlement to opt into a workplace pension plan.

Depending upon the number of hours your new apprentice undertakes in any given period, he or she might also be entitled to employer pension contributions if he/she does choose to opt into a workplace pension plan.  An apprentice will be eligible for employer pension contributions if weekly earnings are above £112.  An apprentice aged 19 or under (or in the first year of apprenticeship) will be paid a minimum of £3.40 for each hour of work and training.  A 37 hour week would mean weekly earnings in excess of £112, entitling the apprentice to opt into a pension plan with employer pension contributions.

If the apprentice’s weekly earnings are £112 or less he/she would still have the right to opt into a workplace pension plan, but would have no entitlement to employer contributions and the plan offered could be different to your automatic enrolment pension plan.

In both cases, you would need to inform the apprentice of his/her rights so far as joining your workplace pension plan is concerned.

Also in 2017 we will see the end of salary sacrifice for most types of benefits.  However, it will still be possible to sacrifice salary in return for a higher employer pension contribution.   The Government has said that it has no plans to change that at this time.  Salary sacrifice is a way for employers to save on national insurance contributions and, of course, for those employers that might potentially be subject to the apprenticeship levy, the more salary that is sacrificed the lower their payroll bill will be.  This might mean that some employers, who would otherwise be subject to the new apprenticeship levy, would fall beneath the annual trigger threshold of £3m.

If you have any queries in connection with the apprenticeship levy or in relation to your pension obligations as an employer (either generally or in respect of a specific employee) please speak with your usual Squire Patton Boggs contact.  Alternatively, please contact Matthew Lewis – Partner in the Labor and Employment Team ( or Matthew Giles – Partner in the Pensions Team (