Cut employer’s National Insurance contributions for all under-25s, say MPs

Employer National Insurance (NI) contributions should be cut for all workers under 25 to boost employment among the more than 1 million young people not in education, employment or training (NEET), MPs have said.

In a new report, the Work and Pensions Committee welcoming early steps taken to prioritise work and training opportunities for 18 to 24-year-olds, while saying the government must go further and faster to tackle the travesty of so many young people being NEET.

Raising employer's National Insurance contribution threshold

The Committee heard overwhelming evidence from businesses that rising employment costs, partly driven by NI contribution increases, were reducing training and job opportunities with young people disproportionately impacted. This was particularly the case in retail and hospitality, traditionally big employers of young people.

It identified a gap between the Government's efforts to boost youth employment and its approach to employer National Insurance. While businesses pay no employer NI contributions for employees under 21 or for apprentices under 25 unless their salary is above the £50,270 threshold they pay 15% on annual earnings above £5,000 for non-apprentices aged 21-24, undermining government schemes to improve employment rates in this age group.

The report calls for the higher NI contribution threshold to be extended to all workers under 25 arguing this would boost vacancies, particularly entry-level roles, and better align the government's policy with its strategic aims. 

Policy contradictions undermining youth employment

The Committee labelled the lack of policy coherence across policy areas impacting youth employment as inexcusable after highlighting other examples of policies that contradict the drive to boost youth employment, including benefit eligibility rules.

For example, 16 to 18-year-old would-be apprentices from families on benefits will put those benefits at risk if they pursue training this disincentive goes against the government's drive to get more young people into apprenticeships. Similarly, young adult carers risk losing their carer's allowance if they study for more than 21 hours a week. This rule creates a stark choice between pursuing education and shoring up tight household incomes. The report recommends easy fixes to these harmful rules.

It also reiterated earlier calls by the Committee for the government to drop plans to scrap the health element of Universal Credit for under-22s that will impact 150,000 young people.

Extend Youth Guarantee

The Committee warns that the Youth Guarantee must not become a here-today-gone-tomorrow scheme given the UK's history of time-limited, crisis-bound past offerings to tackle youth employment. To end this, it recommends announcing funding for it for the next decade at least. Funding has only been announced until 2029.

The temporary nature of past policies has damaged confidence, and causes long-term uncertainty for employers and potential young employees alike, sometimes discouraging both from engaging.

Part of the Guarantee aims to ensure young people claiming Universal Credit who have been out of work for 18 months are offered a six month work placement is welcomed as a good offer. However, MPs said the government should develop options for people outside those claiming benefits after they heard that almost half (44%) of NEETs are not even claimants.

The Committee also recommended a Youth Employment Strategy be developed.

Work and Pensions Committee Chair, Debbie Abrahams said, During our inquiry, we heard from young people demoralised by the experience of unemployment. We heard how they want to work but end up feeling like leeches on their family. This situation is not only unfair to them, it is also harmful. Even a short spell as NEET in one's formative years can damage mental health, impact future career opportunities and reduce lifetime earnings. Young people face an uphill struggle in current conditions to get that critical work experience.

While the Youth Guarantee is a good start, the contradictions between the Government's strategic aims and the rules of various schemes mean we desperately need a Youth Employment Strategy. It'll improve policy coherence so no policy unintentionally pulls against attempts to help more young people into work.

But, efforts to give young people the best chance to live independently will be in vain if there are too few jobs to go to. In a challenging environment, businesses need help to meet rising employment costs. Reducing employer's National Insurance contributions for under 25s will enable them to take a chance on talented young people.

ENDS

Notes to editors

• When published, the report will appear online on this link:https://publications.parliament.uk/pa/cm5902/cmselect/cmworpen/180/report.html
• There were 1.01 million NEETs January March 2026. This equates to 13.5% of 1624-year-olds, or more than one in eight.
• The direct cost of 1 million young people being NEET is an estimated £47 billion.
• The Committee heard that reducing the NEET rate to 5% could increase the UK's GDP by £69 billion.