Businesses given £3k grant to hire young people

Jacob Grattage, Reporter, Business & Accountancy Daily. Croner-i

To combat rising youth unemployment, government to give employers £3,000 grants to encourage job creation for youngsters, part of a £1bn package.

The move comes as youth unemployment reaches 16.1% and the amount of young people not in education, employment or training (NEET) edges close to the one million mark.

The scheme will go live this June and grants will be paid directly to business owners from nominated third parties, the Department for Work and Pensions (DWP) confirmed.

Pat McFadden, minister for work and pensions launched the ‘new deal’ for young people, called the Youth Jobs Grant, where businesses will receive £3,000 for every young person they hire aged 18-24 who has been on benefits and looking for work for six months, starting in June 2026.

The £3,000 grant will be paid through delivery partners, including specialist employment support organisations, charities, non-profits, social enterprises, local authorities and mayoral strategic authorities.

‘We are determined to tackle the rise in youth unemployment by expanding practical routes into work, boosting apprenticeships, and giving employers the clarity they need,’ Sir Keir Starmer said, backing up the launch plan.

The move was welcomed by employment bodies, but with the caveat that the cost of hiring young people has risen rapidly due to the employers’ national insurance hikes which hit this part of the population really hard.

Lizzie Crowley, skills adviser for the CIPD said: ‘Rebuilding clear pathways into work must be a priority. However, different incentive schemes have been tried in the past with varying degrees of success. It is important that meaningful jobs are created which also support skills development, and that the process for claiming the incentives are simple and clearly communicated.’

The government also plans to expand the Jobs Guarantee scheme from autumn 2026 by increasing the age limit from 21 to 24 year olds.  It is currently limited to 18-21 year olds, so will be open to more graduates in future.

These individuals will receive 25 hours a week of fully subsidised paid work over six months, paid at the relevant minimum wage.

Neil Carberry, chief executive for the Recruitment and Employment Confederation (REC) said: ‘This is a sensible package of measures to support young people, who should be the focus of apprenticeship systems. If hiring subsidies are well-designed, they can help firms to support those young people who take a little longer to get up to speed after a period out of work.

‘Government programmes like these do help, but it is employers who create jobs. So, government must also show it backs businesses to create the jobs we need. The youth unemployment crisis is being exacerbated by a cost of employment crisis the government has left untackled for too long.’

The government’s Apprenticeship Incentive has been expanded to cover hospitality and retail roles from this April, from the current limit to manufacturing and engineering focus. This scheme gives employers £2,000 for each employee aged 16-24 hired.

Leading groups in the retail sector have been warning the government for some time about the risks of the new day one rights coming into force from April, which will raise costs for businesses.

Helen Dickinson, chief executive of the British Retail Consortium said: ‘The Employment Rights Act must work with, not against opportunities for young people. Without a joined-up approach, well-intentioned initiatives will lose their impact.’

The programme will be rolled out quickly in a bid to stop youth unemployment rising above the current 957,000.

McFadden said: ‘These measures will give life-changing opportunities to young people and significantly reverse the increase we inherited in those not in education, employment or training.’