More than a million young people are locked out of work, education or training – and a cross-party group of MPs says the government is partly to blame, pointing to rising employment costs that make hiring young staff prohibitively expensive.
The Work and Pensions Committee has urged the Treasury to slash employer National Insurance contributions for all under-25s, warning that the current system is fuelling a "travesty" of wasted potential. In a report published on Tuesday, the committee said it had heard "overwhelming evidence" that rising costs – including the hike in employer NI announced by the previous government – were reducing training and job vacancies, particularly for young people.
“MPs urge employer NI cut for all under-25s after 'overwhelming evidence' rising costs fuelling youth jobs crisis.”
Over one million 16- to 24-year-olds are not in education, employment, or training, known as Neet. The committee said cutting employer NI for all under-25s would directly tackle this crisis.
Under current rules, businesses pay no employer NI for employees under 21 or for apprentices under 25 – unless their salary exceeds £50,270. But for non-apprentices aged 21-24, employers pay 15% on annual earnings above £5,000. "This creates a gap between the government's employment strategy for under-21s and their strategy for under-25s," the committee said, undermining schemes to improve employment rates in that age group.
The previous government raised the employer NI rate from 13.8% to 15% in April last year and slashed the threshold at which the tax kicks in from £9,100 to £5,000 per year. At the time, ministers said the increase was necessary to fund public services. The employment allowance – the amount employers can reclaim from their NI bill – was also raised from £5,000 to £10,500.
The committee said the retail and hospitality sectors, which tend to employ young people, had been hit particularly hard by the NI rise. It also pointed to "policy contradictions" where benefit cuts for people in training undermine the government's own drive to encourage apprenticeships, describing the "lack of coherence" as "inexcusable".
Debbie Abrahams, the committee's chair, said the government needs a unified strategy on youth employment. "It'll improve policy coherence so no policy unintentionally pulls against attempts [to boost youth employment]," she said.
The government has said it is determined to create opportunities for young people, reform education and support people to stay and progress in work. In its 2024 election manifesto, Labour pledged not to raise taxes on "working people", specifically income tax, NI, or VAT. Critics have argued that the employer NI rise ultimately affects workers by limiting job opportunities.
Some employers have blamed higher minimum wages and increased taxes for making it harder to hire young people. But the Institute for Fiscal Studies found no clear evidence that higher minimum wages have been a "major driver" of young people becoming Neets.
With over a million young people now outside work, education or training, the committee's call for a targeted NI cut puts the onus on the government to reconcile its manifesto promise with the scale of the crisis.