The jobs market for under-25s is facing a perfect storm: skyrocketing employer National Insurance (NI) contributions are crippling training provisions and job opportunities, especially in sectors that rely heavily on young workers. A staggering one million teenagers and twenty-somethings are currently not in education, employment, or training (NEET), a "travesty" that has prompted a cross-party group of MPs to call for urgent action. The Work and Pensions Committee argues that slashing employer NI contributions for this age demographic would be a vital step towards tackling the crisis.
The committee highlighted the worrying increase in employer NI contributions from 13.8% to 15% in April last year, coupled with the decrease in the threshold at which employers begin paying this tax from £9,100 to £5,000 per year. While the employment allowance has risen to £10,500, allowing employers to reclaim a portion of their NI bill, the committee asserts that the overall impact has been detrimental, particularly affecting sectors like retail and hospitality.
The MPs also pointed out a perceived "gap" in government policy, noting the disparity between initiatives for under-21s and those for under-25s. Currently, businesses pay no employer NI contributions for employees under 21 or for apprentices under 25 (unless their salary exceeds £50,270). However, for non-apprentices aged 21-24, employers pay 15% on annual earnings above £5,000. This inconsistency undermines government efforts to boost employment rates within this age group.
The committee also flagged "policy contradictions," such as benefit cuts for individuals in training, which hinder the government's attempts to promote apprenticeships. Debbie Abrahams, chair of the committee, stressed the need for a unified government strategy on youth employment to address these inconsistencies and improve policy coherence. She stated that this would prevent policies from unintentionally undermining efforts to help more young people into work.
An interim report published in May by Alan Milburn's review estimated that NEETs cost the UK approximately £125 billion annually, a figure derived from a combination of benefit payments and lost economic output. The report warned that without intervention, one in six young people could become NEETs in the next five years, an increase from the current one in eight. It cited multiple factors contributing to the crisis, including the Covid-19 pandemic, the impact of smartphones, health issues, and a significant decline in employment opportunities.