Employers need to take care when relying on paying apprentices a lower minimum wage

Under the National Minimum Wage Act, employers can pay those who are under the age of 19 and apprentices or over the age of 19 but in the first year of their apprenticeship a special rate, which was introduced in 2010.  Currently that rate is £2.73 as opposed to a standard rate of £6.50.  However, employers wishing to rely on this lower rate need to make sure that they are genuinely taking on apprentices with a view to providing them with training and development opportunities. The execution of work for the employer is a secondary matter.

This was brought to life in the recent case of The Commissioners for HM Revenue & Customs -v- Jones & Others (T/A Holmescales Riding Centre).  The workers involved were hired as trainees in an equestrian centre run by a family who provided riding lessons and livery services. The documentation for the employees referred to the fact that it was a training position and that they would be working towards their British Horse Society qualifications. The workers performed various duties including general yard and horse maintenance, teaching riding lessons and received some training towards the professional qualifications that they were working towards, albeit that the workers themselves were free to choose which qualifications to take and when. It was expected that, once they reached a certain level of qualification (BHS Stage 3) and they were competent and able to look after up to four horses in a variety of conditions, they would probably move on as there were no vacancies for instructors at a higher level at the establishment.

The employers took advice when the minimum wage legislation was introduced and were advised by a barrister that they were exempt from paying the livery stables trainees the national minimum wage because the work they undertook relates to the family household (they lived in the Jones’ family accommodation attached to the riding school, albeit in a separate part of the property and living separate lives to the family). HMRC intervened and issued the family with a Notice of Underpayment. Unsurprisingly, the Employment Tribunal found that the work wasn’t related to the Jones family household and was not there to support the family in a hobby or leisure pursuit but rather were onerous duties done for the employer’s business benefit. However, the Tribunal found that the employees were working under contracts of apprenticeship and applied the apprenticeship rate.

HMRC appealed this decision so the matter came before the Employment Appeal Tribunal.  The Employment Appeal Tribunal found that if the Tribunal had carried out the correct analysis it would have found that the contracts were very much for the benefit of the employer and that any training aspect was merely incidental and subsidiary to that contract.  It did not accept the family’s argument that training doesn’t have to be a primary purpose of the contract of apprenticeship and that there is no reason why an employer cannot benefit from work done by the apprentice.

On this basis, the employer was liable to pay the full minimum wage.

As apprenticeships become more popular, employers do need to think carefully about the way that they are structuring apprenticeships and need to make sure that managers are aware that the training element of the apprenticeship needs to be at the forefront rather than viewing the workers as a resource like any other employee.

If you have any questions about apprenticeships please do not hesitate to contact Anna Denton-Jones