Employers get £500m per year break to hire under-21s

Tim Wallace
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FIRMS hiring young workers will not have to pay national insurance contributions, the chancellor said yesterday, cutting the cost of taking on the employees.

The charge, which can be up to 13.8 per cent, will be cancelled for employees below the age of 21 and earning below the higher threshold of £813 per week.

It will come in from April 2015, and George Osborne said it will cover 1.5m jobs.

The tax break will be worth £465m in its first year, the Office for Budget Responsibility (OBR) estimated, before rising to £495m in 2016-17, £520m in 2017-18 and £530m in 2018-19.

“We’re not going to leave young people behind as the economy grows,” Osborne said.

“We are going to have a responsible recovery for all. The cost for a business of employing a young person on a salary of £12,000 will fall by over £500.”

Business groups welcomed the announcement and said it will help target one of the country’s most troubled groups.

“Abolishing a jobs tax on employing young people under 21 will make a real difference and help tackle the scourge of youth unemployment,” said the CBI’s John Cridland.

Labour-intensive sectors should benefit the most, analysts said.

“The biggest beneficiaries are likely to be the hospitality and retail industry who typically are large employers of young people,” said EY employment tax partner Graham Farquhar.

“It will be interesting to see if this measure will encourage employers to increasingly target A-level school leavers, rather than graduates.”

However, the OBR said the measure has not made an impact on its labour market forecasts, as it believes the impact is too small to easily measure.

And there are concerns the tax break for the youngest will make other workers comparatively less attractive to employers.

“This could see a hit to the graduating population,” warned Toby Ryland from accountancy firm HW Fisher and Company. “Students leaving university at 21 may find things a little tougher, as employees look to save on staff costs.”