The recent budget announcement has caused alarm for many business leaders, particularly those with ambitions to invest in their business and grow their workforce. The provision of increased National Insurance Contributions (NIC) in Rachel Reeves’ first budget has had something of a chilling effect for many businesses.

On BBC Radio Ulster’s Good Morning Ulster recently, Suzanne Wylie from the NI Chamber of Commerce said that the rise in NIC for her members could mean an additional £20,000 in annual costs to an SME of 10 people, while for larger firms, the hit could be in the millions.

The CBI too has also found half of firms are planning to reduce headcount, and nearly two–thirds of firms reported that the Budget will damage UK investment. This is underpinned by the OBR’s ‘Economic and fiscal outlook – October 2024’, which indicated that the employer NICs rise could “reduce labour supply by 50,000 average–hours equivalents”.

According to Enterprise NI’s (ENI) most recent Skills Barometer, that’s the majority of businesses here. Three–fifths (61%) of businesses expect to grow over the coming year. How will they do so when they are being taxed more per employee?
There are alternative hiring pathways that make sense for accessing talent as well as being cost–effective. Apprenticeships are such a pathway.

A cost-effective hiring option
Firstly, consider the compelling financial argument. Choosing an apprentice over a graduate can save a business over £40,000 in direct employment costs over three years. These savings are driven by several factors.

Starting salaries for apprentices are typically lower than for graduates. While graduates command an average starting salary of £30,000, apprentices begin at £21,000 (typical starting salary for degree level apprentice). Second, the government has introduced a significant incentive. From April 2025, employers will pay zero NICs for apprentices, compared to the 15% rate for other employees. This policy alone creates a substantial cost advantage.

Better retention 
Apprenticeships deliver long–term value and are known for their loyalty— 95% remain with their employers (according to Workplus apprentice figures) after three years, compared to only 70% of graduates. This retention translates to reduced recruitment and onboarding costs, as well as improved return on investment – crucial factors for businesses striving to grow sustainably.

Addressing the skills gap
Apprenticeships also help address industry–specific skill gaps. In sectors ranging from technology to healthcare, the demand for highly specialised skills is growing. These offer a direct pathway to train employees in the technical, professional, or trade skills required for these roles.

But this route does have a perception problem. That same ENI skills barometer found 51% of businesses would consider taking on an apprentice – but less than 10% are actively doing so at the moment.

Not just for school leavers 
The popular view is that apprenticeships are for young people entering the workforce for the first time. But the reality is very different. At Workplus we are seeing people of all ages and backgrounds seeking alternatives to traditional educational pathways into work. From career changers and women returners, to those looking to upskill, apprenticeships provide a flexible and inclusive route into industries as diverse as software engineering, marketing, FinTech and advanced manufacturing.

Breadth of apprenticeship pathways 
Another barrier to wider adoption of apprenticeships is the lingering perception that they are limited to young people entering trades. This outdated view fails to recognise the evolving nature of apprenticeship programmes and the direction of the economy generally. 
Today, apprenticeships are as much about equipping candidates with technical and professional skills as they are about fostering trade expertise.
For businesses operating in the knowledge economy, this shift is particularly important. Apprenticeships can prepare individuals for roles in data analytics, digital marketing, software development, and other high–demand fields. Employers can tap into a broader talent pool, including career switchers and mid–level professionals seeking new opportunities.

By embracing apprenticeships, businesses can also contribute to creating the “good jobs” the Department for Education (DfE) has emphasised in its recent campaigns. These are roles that provide stability, opportunities for growth, and fair pay. 
Apprenticeships align perfectly with this vision, offering structured career development and tangible skills that benefit both employers and employees.

In the context of rising costs and shrinking margins, businesses must be innovative in their approach to hiring and retention. For SMEs, they represent a lifeline, helping to sustain hiring plans without compromising on quality. For larger organisations, they offer a scalable solution to address skills shortages while building a more resilient workforce.

As businesses grapple with the implications of rising NICs, now is the time to reconsider hiring strategies. The benefits of apprenticeships are clear: reduced costs, higher retention, and a direct pipeline to the skills your organisation needs.
Apprenticeships are more than a solution to rising costs – they are a strategy for building a better, more sustainable future for businesses and employees alike.