UK government rejects employer NI extension for under-25s ahead of Budget

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UK rejects NI break for under-25s

Highlights

UK government rejects expanding employer NI tax breaks for workers aged 21-25, emphasizing fiscal restraint ahead of the Budget amid growing youth unemployment concerns.
Employer groups urge raising the employer NI threshold from £5,000 to £6,000 and halting minimum wage increases, while Kemi Badenoch proposes halving employer NI for ages 21-24 at a £2.3 billion cost.
Future labour market support for youth and possible expansion of the Youth Guarantee scheme depend on an upcoming review led by Alan Milburn, set to report after the Budget.

Budget pressure over youth hiring costs

As reported by Financial Times, the government said in its response to the House of Commons work and pensions committee on Thursday that it does not accept a recommendation to widen the current tax break for employers' national insurance contributions to cover workers aged 21 to 25. It said fair and necessary decisions on tax, welfare and spending are needed to restore the public finances, protect economic stability and fund public services, and added that the 2024 changes to employer NI form part of that approach.

Youth unemployment is becoming a central issue in the run-up to the Budget, with businesses urging ministers to reduce the cost of employing younger and lower-paid staff. While the government does not rule out changes to employer NI contributions altogether, employer groups including the CBI and the British Retail Consortium are pressing for a narrower concession, calling for the employer NI earnings threshold to rise from £5,000 to £6,000.

Lobbyists are also urging ministers to limit next year's minimum wage increase and narrow the proposed scope of a new right to guaranteed hours. Conservative leader Kemi Badenoch sets out a smaller proposal than the select committee recommendation, pledging at her party's annual conference to halve employer NI on workers aged 21 to 24, at an estimated cost of £2.3 billion.

Labour market support tied to later review

The British Chambers of Commerce welcomed Badenoch's proposal as an encouraging signal, but director general Shevaun Haviland said a full employer NICs cut for young people is needed to address the continuing youth employment crisis. The Treasury does not immediately respond to a request for comment.

Chancellor John Healey has signalled that any major new funding for young people not in employment, education or training is likely to wait until after a review led by former minister Alan Milburn concludes, which is set to happen after the Budget. The government also says any further expansion of its Youth Guarantee scheme, which offers subsidised jobs to young benefit claimants, and wider welfare reforms will depend on Milburn's findings.

At the same time, ministers are increasing pressure on employers to create opportunities directly. The Department for Work and Pensions said on Wednesday it secured commitments from hospitality groups including Whitbread, McDonald's and Nando's to offer 100,000 paid jobs to young Neets over three years, after a similar pledge from retailers, while Kingfisher chief executive Thierry Garnier wrote in City AM that the group's existing work experience commitment at B&Q and Screwfix depends on what the chancellor decides in this Budget.

Our earlier coverage on early-career job-hopping highlighted research showing that switching jobs when young can be a major driver of wage growth and lead to better long-term job matches. The piece noted that frequent moves, often viewed negatively, are consistently linked in economic studies to stronger pay progression and improved career stability over time.

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