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The new, better way for SMEs to develop their workforce
As an employer, it’s essential to find the best employees. People with the skills, attitude, behaviours, and confidence to guarantee you succeed. More than ever, apprenticeships might be the answer.
The apprenticeship landscape has evolved over the past year – it’s now much more flexible, more accessible and better aligned with the needs of small and medium‑sized businesses (SMEs).
For many employers, these changes open up new opportunities to develop talent, address skills gaps and strengthen workforce capability in a cost‑effective way
People Director Sasha Ashton outlines the key developments and sets out how businesses can make the most of support available.
What’s changed in the last 12 months
Several confirmed reforms and policy updates over the last year have shaped the current apprenticeship system:
- Foundation Apprenticeships, introduced in 2024, provide a new entry‑level route into skilled employment. With rollout continuing through 2025 and into 2026, they focus on developing core employability skills and preparing individuals for full apprenticeships or sustained work. For employers, they offer a structured way to bring early‑career talent into the business.
- Greater flexibility in apprenticeship delivery came into effect for new starts from August 2025. Some standards can now be completed in as little as eight months (where appropriate), giving employers more adaptable training options.
- Mandatory English and maths exit requirements were removed for apprentices aged 19 and over in February 2025, widening access for adult learners and removing a common barrier to completion.
- Updated 2025–26 apprenticeship funding rules introduced clearer guidance on off‑the‑job training, updated eligibility rules, more flexible delivery models and clearer expectations around breaks in learning and evidence requirements. These changes make it easier for employers and providers to plan training around operational needs.
- The government has also continued to develop plans for a future Growth and Skills Levy, intended to replace the Apprenticeship Levy and give employers greater flexibility to fund a wider mix of training. Implementation timelines are still to be confirmed.
Benefits of apprenticeship funding for employees
Apprenticeships offer individuals a structured and supported way to develop valuable skills while earning a wage. They provide a debt‑free route to recognised professional qualifications and certifications, clear progression opportunities and training that directly supports their role, all of which help strengthen long‑term career prospects.
For existing employees, apprenticeships offer a practical route to upskilling, increasing job satisfaction and enabling meaningful career growth.
Benefits of apprenticeship funding for employers
For SMEs, apprenticeships provide a practical and cost‑effective way to build a skilled and motivated workforce tailored to business needs. They help organisations address skills gaps, develop talent from within and improve retention by offering clear progression pathways. This not only reduces recruitment costs and turnover but also helps employees feel valued and invested in.
Apprentices bring fresh ideas and energy into the workplace, boosting productivity and sparking innovation. By supporting continuous learning, organisations can stay competitive and ensure their workforce remains adaptable to changing market demands. Apprenticeships can also help increase workforce diversity by attracting candidates from a wide range of backgrounds and experiences.
Financial incentives for SMEs
Alongside the workforce benefits, SMEs can access several financial incentives that make apprenticeships a cost-effective option.
Government-Funded Training
SMEs with a pay bill below £3 million, contribute just 5% of training costs, with the government covering 95% or for apprentices aged between 16 and 21, the government will fund 100% of training costs.
National Insurance (NI) Savings
Employers do not pay Class 1 National Insurance for apprentices under 25 earning less than £50,270 annually, reducing payroll costs.
Access to Extra Funds
SMEs can benefit from unused levy funds transferred by larger employers, covering much or all of their apprenticeship training costs. The apprenticeship levy transfer allowance is 50% of a levy-paying employer’s previous financial year’s apprenticeship levy funds.
Government Incentive Payments
Employers hiring apprentices aged 16-18 (or under 25 if the apprentice has an education, health and care (EHC) plan or has been in care) receive an additional £1,000 payment per apprentice. This can be spent on any costs related to their employment, for example their salary, travel costs or uniform.
Sector specific Funding/Incentives
Some sectors, particularly construction* also benefit from additional grants and funding streams.
The wider skills picture
Skills England continues to shape the UK’s workforce strategy. Its 2024 report highlighted that employer investment in training is at its lowest level since 2011, with more than 2.5 million roles in critical demand. Apprenticeships, and the reforms surrounding them, are a central part of the response.
The proposed Growth and Skills Levy aims to give employers greater flexibility to invest in the training that matters most to them, while still protecting funding for apprenticeships. Although details are still emerging, the direction is clear: more flexibility, more choice and a stronger focus on employer‑led skills development.
Maximising the benefits of apprenticeship funding
Apprenticeships provide SMEs with a cost‑effective way to develop talent, strengthen loyalty and support business growth. With greater flexibility, clearer rules and improved financial incentives, it is easier than ever for organisations to stay competitive while building a skilled and motivated workforce.
At People Puzzles, our team of expert People Directors are helping organisations optimise the government funding and make the most of their levy by:
- Developing a workforce strategy aligned with business objectives.
- Identifying skills gaps and using apprenticeships to address critical shortages.
- Designing career pathways and aligning relevant apprenticeships to define the required skills, training, and experience for progression.
- Partnering with training providers to tailor programmes to organisational needs.
- Establishing metrics to measure impact and return on investment (ROI).
With the right strategy, SMEs can use apprenticeships to meet today’s skills needs while building a stronger workforce for the future.
To better understand how apprenticeships could enhance your business and to learn more of the latest trends in your sector – please call 0345 646 5201 or email [email protected]
