Up to 15% labour cost savings from employing apprentices

Employing apprentices can save a company up to 15% in labour costs according to new research published by SummitSkills, the Sector Skills Council for the building services engineering sector.

The report Apprentice cost-benefit analysis looked at the financial savings that can be made by employing apprentices and identifies the cost benefits for both large and small scale projects. The research clearly demonstrates that there are tangible cost savings involved in employing apprentices, alongside other benefits for employers such as having a highly skilled workforce.

On larger scale projects the cost savings are considerable. Employing apprentices can save a company up to 15% in labour costs on large scale projects. For example, on a £1 million electrical contract the cost saving of using apprentices as part of the team was £158 300 – a substantial saving. These figures incorporate both the costs of sending an apprentice to college for 29 days per year and a government grant currently available to cover course fees. All savings were calculated used English college fees and grants.

On a £1 million labour contract the savings were as follows:

• 12-man mechanical gang: a 10% reduction in labour rate – saving of £100 000

• eight-man ductwork gang: a 13.48% reduction in labour rate – saving £134 800

• 11-man electrical gang: reduction of 15.83% - saving £158 300.

The research clearly shows that across various industries within the building services sector significant labour cost savings can be achieved through the use of apprentices with minimal changes to the overall skills of the team.

The report also demonstrates cost savings on smaller domestic scale projects. In addition to the actual labour cost saving it also calculated the displacement saving, where using an apprentice with the appropriate skills freed up the craftsman’s time to make the contract progress quicker. It is, however, essential that health and safety issues are taken into consideration and the apprentice is properly supervised throughout.

The benefits of having an apprentice are not limited to financial savings. Other benefits include:

• an apprenticeship is an effective way of tackling skill shortages

• apprentices will be trained to do a job to agreed standards and they will gain a recognised qualification that shows that they have the skills necessary to do the job

• as apprentices learn through a combination of attending college or training provider and learning on the job, many apprentices find it is a much better way of learning

• apprentices are usually more motivated, because they can see that their employer is investing in their training and development

• they can go on to gain a higher qualification, such as HNC, HND, Foundation degree or full degree, by studying on a part-time basis while continuing to work for the employer. In this way they will be gaining higher-level skills to improve the productivity of the business, but without making too much of an impact in terms of lost time.

Keith Marshall OBE, chief executive of SummitSkills said: “We have known for many years that apprentices can benefit businesses by providing opportunities to develop and grow skills. This report now adds a sound financial argument to the wealth of evidence in favour of employing apprentices. In these challenging economic times, it is critical to grow and develop new talent in the building services engineering sector to help it recover quickly and ensure the effects of the recession are not felt as heavily in future years. Apprentices provide an important part of this solution.”

This view was supported by Paul Jackson, chief executive of the Engineering and Technology Board (ETB): “This report shows the substantial benefits to business of investing in engineering apprentices, particularly at this crucial time when the UK needs a sustained supply of high quality engineering talent to help lay the foundations for the economic recovery.”