What An Apprentice Really Costs

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What An Apprentice Really Costs

By Stephen Craven  Managing Director/Chief Executive Officer (Smart Employment Solutions)

BACKGROUND:

A quote was provided to a client for a first year apprentice electrician (who has graduated Yr 12 at High School). The client calculated that it would cost him $38,967.17 for 10 months based on our rates—but if he hired a “random young bloke” directly it would only cost him $24,838.32 over 10 months.

This highlights the danger of trying to compare apples with oranges, with little knowledge from the client of how to accurately calculate comparison costs. We can only assume that he has included travel allowance in this calculation. We’re still not sure how he calculated the $24,838.32 “over 10 months”—his cost if employed directly.

BEFORE WE START, LET’S TAKE IT APART:

Firstly, our charge of $21.65 per hour is for 41 weeks of the year, 38 hours per week and covers the full year—not just the 10 months as stated by the client. The apprentice is paid for the 52 weeks, but we charge the client for 41 weeks of the year, work time on the job (which includes annual leave, sick, college, public holidays etc.).

Oh, and while we’re at it, let’s take into account (which the client hasn’t) those statutory costs that must be paid regardless of who employs the apprentice—annual leave loading, workers compensation, tool allowances, uniform allowances and let’s not forget the big one—superannuation, amongst others. In addition, the travel allowance is payable regardless of who the employer is—looks like he has added it in our costs, but not into his.

To compare apples with apples, set out below is a comparison of the difference in amounts between what he would pay SES and what he would pay if employing the apprentice directly:

 

  • As SES only invoice client’s whilst the apprentice is at work (in this example that is 41 weeks) the invoicing rate to recoup the costs plus services is charged over 41 weeks. Travel & Fares are added to the invoice for each week that it is applicable.

A concern on behalf of the client is that he is making decisions regarding costs to his business that are inaccurate. If he employs directly, thinking that his cost is going to be $24,838.32 when it is actually $35,963.65 this can affect how his business runs—in particular if he is on-charging clients for work done by the apprentice, based on the incorrect much lower amount. He will not be recouping his costs or earning a margin. In fact he will be losing money in the process.

Also to really compare apples with apples, the client must assess just how much time he would need to perform all the functions that SES provides on his behalf, such as sourcing the employee (including advertising), candidate screening and aptitude testing, organising college attendance, payroll functions, liaising with external bodies regarding the apprenticeship—all at his earning rate per hour—this is the time that he would not be working on his business, and it is a real cost. SES provides these functions on your behalf for $1.52 per hour. What would be the cost to your business? We estimate it to be approx. $3.95 per hour real cost. For less than half the cost to employ an apprentice directly yourself, with the opportunity to return the apprentice when work slows (with 10 working days’ notice), this provides the ultimate flexibility for your business.

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