The UK government is introducing new financial incentives for businesses to hire unemployed young people, offering employers £3,000 for each jobless person aged 18 to 24 they bring into work.
The initiative forms part of a broader effort by ministers to tackle rising youth unemployment, with official figures showing that more than 950,000 people aged between 16 and 24 are currently not in education, employment or training (NEET), roughly one in eight young people across the UK.
Under the new policy, companies will receive the grant when they recruit young people who have been claiming benefits and searching for work for at least six months. The scheme, described by ministers as “youth jobs grants”, is expected to help around 60,000 young people into employment over the next three years, although the government has yet to confirm the full eligibility criteria for businesses wishing to participate.
The announcement comes as the government faces growing pressure to address a worsening employment outlook for younger workers. Analysts and policymakers have warned that youth joblessness risks becoming entrenched if more opportunities are not created in entry-level sectors.
Pat McFadden said the initiative would provide young people with a crucial opportunity to gain workplace experience and begin building careers.
“Young people need a vital first step on the career ladder,” he said, arguing that the increase in youth unemployment reflected long-term structural changes in the economy rather than short-term economic disruption.
According to ministers, industries that traditionally employed large numbers of younger workers, particularly retail and hospitality, have been undergoing major transformations for more than a decade due to automation, online shopping and shifting consumer habits.
As part of the wider package, the government will also expand an existing employment support scheme later this year. That programme currently subsidises six-month jobs for people who have been unemployed for at least 18 months, paying employers the equivalent of the national minimum wage for the role.
At present the programme is restricted to younger claimants, but from the autumn it will be widened to include jobseekers aged up to 24 rather than the current limit of 21.
Ministers are also extending so-called foundation apprenticeships, entry-level training roles designed to help young people develop workplace skills. Employers taking on foundation apprentices currently receive up to £2,000 in instalments, and from April the scheme will expand into sectors such as hospitality and retail.
Together, the measures represent a shift in government employment support towards a slightly older cohort of young people than previously targeted.
The plan also sits alongside existing tax incentives for hiring younger workers. Employers are not required to pay National Insurance contributions on employees under the age of 21 unless they earn more than £50,270 a year.
However, the government’s broader employment policies have faced criticism from business groups and opposition politicians, particularly following last year’s increase in employer National Insurance contributions. Critics argue that higher employment taxes could discourage hiring at precisely the moment the government is trying to stimulate job creation.
Despite those concerns, ministers say the new grant scheme will reduce risk for businesses considering taking on younger workers, particularly those who have struggled to secure employment after leaving education.
Meanwhile, a wider government review into youth unemployment is underway, led by former Labour minister Alan Milburn. The review will examine the causes of rising economic inactivity among younger people and recommend further policy changes to improve access to jobs and training.
Its conclusions are expected to be published later this year.
The government is also considering adjustments to future wage policy after some employers warned that plans to equalise the minimum wage across age groups could make it more expensive to hire younger workers. Officials have indicated that while the timetable for implementing equal wages may be reconsidered, the policy itself is unlikely to be abandoned entirely.
With youth unemployment now at its highest level in more than a decade, ministers say the priority is ensuring young people can access their first job and gain the experience needed to progress in the labour market.
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Government offers £3,000 incentive for firms to hire unemployed young people