As a small business owner, you are likely feeling the squeeze of rising employment costs. A new report from the Work and Pensions Committee has acknowledged this burden, noting that recent increases in National Insurance (NI) have forced many businesses to scale back on hiring and training for young people.
To help employers like you, MPs are now calling for a significant change: a cut in employer’s National Insurance contributions for all workers under 25. Full details can be found in the House of Common Committee report.
The Current Hiring Penalty
Right now, the tax system creates a frustrating gap if you want to hire young adults. While you will pay no employer NI for employees under 21 or apprentices under 25 (unless their salary exceeds £50,270), the rules change sharply for standard employees aged 21 to 24.
For these non-apprentice workers, you must pay a 15% contribution on annual earnings above just £5,000. MPs have recognised that this undermines youth employment schemes and effectively penalises businesses for hiring from this age group, particularly in sectors like retail and hospitality, which traditionally rely on young talent.
How the Proposed Changes Could Help You
The Committee is urging the government to extend the higher NI threshold to all workers under 25. If implemented, this would offer several direct benefits to businesses:
- Reduced overheads: Lowering the tax burden makes it much more affordable to take on new, entry-level staff.
- Room to invest in talent: The money saved on NI contributions can be reinvested into training, allowing you to mould young staff to suit your specific business needs.
- A wider talent pool: With over 1 million young people currently not in education, employment, or training (NEET), removing this financial barrier allows you to take a chance on eager candidates without being penalised by the tax system.
A Push for Long-Term Certainty
Beyond the NI cuts, the report also advocates for policies that provide businesses with more stability. MPs are calling for the government’s Youth Guarantee, which offers work placements to young people, to be funded for at least the next decade, rather than ending in 2029.
This shift from short-term fixes to long-term strategies is designed to give employers the confidence to engage with youth employment programmes without worrying about sudden policy changes.
Removing Red Tape for Your Future Apprentices
Finally, the Committee is pushing to fix contradictory benefit rules that currently deter young people from applying for your entry-level roles or apprenticeships. For example, 16 to 18-year-olds currently risk losing family benefits if they pursue an apprenticeship, and young carers risk losing their allowance if they study for more than 21 hours a week.
Fixing these issues will remove the disincentives for young jobseekers, creating a smoother and more reliable recruitment pipeline for businesses.
