Apprentices and your business
21 March 2014 
By Neil Pattemore
Today, this route is maligned by many as a necessary evil, taking on an adolescent youth in the hope that one day they might, just might turn out to be a good technician and actually contribute to the company’s profits, instead of being a black hole of wasted investment. However, think again about this stereotypical image of the poor (in every sense of the word) apprentice who, despite the fact that they might actually want to learn, become part of a successful team and build a successful career, are still considered to be cheap labour that are only given the menial jobs to leave more time for the real workers to generate the company profits.
Firstly, let me expand a little on how I see the modern motor industry and the advantage that apprentices can bring. It goes without saying that modern vehicles are significantly more complex than they were when many of today’s employers were learning their skills. These have therefore changed from being mechanically based to being more electronic – hence the new expression of ‘mechatronics’. Today’s adolescents are much more ‘attuned’ to the interconnectivity and communication of electronic devices, providing a better basis for handing the increasingly complex computer on wheels that masquerades as today’s modern vehicle.
Equally, there are too many young people who feel that unless they go onto higher education, they have somehow failed. This creates the right circumstances to look again at taking on a bright apprentice with the right aptitude and attitude.
The automotive industry provides a wealth of opportunity to anyone who is willing to learn and apply the right work ethic. So think again about who you can attract and what you can offer to a bright young person who could handle electronic, as well as the mechanical requirements and who will become an asset to your business. Think of this as being parallel to investing in workshop equipment – where the return on investment (ROI) is typically calculated as being over a five-year period – although this may be my view, take a look at what the detailed investigation and analysis made by the Institute of the Motor Industry (The IMI) has found.
If we look at this in more detail, the point at which the apprentice’s costs are covered by the income generated by their productivity occurs as early as the end of quarter five (i.e. just over one year), after which the recovery of the earlier investment exponentially increases to the benefit of the employer through to the end of quarter 16 (i.e. end of 4th year) when the apprentice is capable of contributing at the same level as an experienced technician.
In financial terms, based on the current national apprentice hourly rates starting from a 16 year old, which are £2.68 in year one, £3.72 in year two, £5.03 in year three, culminating in an annual salary of around £12,000 by year four. As the employer is able to charge out low-skilled work against the apprentice in the first year, the apprentice is essentially a net productive by the first/second quarter. After this, the return on investment will vary depending on the employer, as the hourly rates you charge, as well as how the apprentice is developing and what work is allocated, will directly impact the ROI calculation.
It is also important to understand the true impact of some of the traditional apprentice activities, such as the ‘housekeeping’ jobs that have always been considered menial, but in reality may free time for other technicians to be more productive.
The IMI study does not include the principal training costs which are paid directly by the government to the training provider but they do include apprentice recruitment costs, basic travel and subsistence during day release and mandatory health and safety training, together with the personal protection equipment needed.
As the apprentice progresses and becomes more productive, the return on investment becomes increasingly attractive, to the point where by the end of quarter 12 (i.e. end of year 3), based on a £50 per hour rate and 25 chargeable hours per week, the apprentice will have created a ROI of 194% (i.e. for every pound invested £1.94 has been generated). If these hourly rates were different, the following ROI figures are created:
£40 per hour = 147%
£60 per hour = 238%
£70 per hour = 280%
Allied to this, the evidence is that once qualified, ‘home grown’ apprentices have cost less to develop and stay with their employers for longer than externally recruited technical staff.
http://theimi.org.uk/agenda/return-investing-apprenticeships
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