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What does the jobs plan for young people mean for businesses?

16 Jul 2020 By Tim Stovold

Tim Stovold explains the government’s new measures aimed at boosting employment among the under-25s

Although the announced measures represent a missed opportunity to reform the apprenticeship levy, they do provide funding for employers that are able to take on or train young people:

Traineeships

The traineeships scheme currently provides government support for work placements and training for 16 to 24-year-olds. The aim of the scheme is to provide people with the opportunity and support to get their first job after leaving school. In its ‘plan for jobs’, the government announced that it will provide sufficient additional funding for traineeships to triple the number on offer in England. This will cost £111m. 

As part of a package of improvements to the scheme that will come into effect from September 2020, £1,000 will be paid to employers for each employee receiving work experience. Under the current scheme’s rules, at least 100 hours of work experience must be offered. The Treasury statement indicates that this requirement will be relaxed, with a minimum of 60-90 hours of ‘high-quality work placement’ required. 

Apprenticeships

Under the apprenticeship scheme, apprentices must be employed to carry out work and study for a formal qualification. There are many apprenticeships available with qualifications up to degree level.

As part of a package of improvements to the scheme, employers will receive payments for taking on new apprentices in England from 1 August 2020 until 31 January 2021. They will be paid £2,500 for each new apprentice hired under the age of 25 and £1,500 for each apprentice aged 25 and over. These payments are made on top of the £1,000 already paid to businesses for apprentices aged 16-18 and to those with an education, health and care plan. There are no employers’ national insurance contributions on apprenticeship scheme salaries of up to £43,000 a year.

As with all workers, apprenticeships must be paid at least the national minimum wage, at the rate determined by factors including their age and type of work. 

The government has faced criticism of its reform of the funding of apprenticeships after the introduction of the apprenticeship levy in May 2017. In a report released in March, the Department for Education revealed a fall in apprenticeship starts of 17 per cent in the first half of 2018-19 relative to 2016-17, before the levy came into force. It remains to be seen whether the recent announcements will be sufficient to overcome the adverse impact of the apprenticeship levy.

Kickstart scheme

The ‘kickstart’ scheme is a new £2bn fund that will provide six-month work placements for young people aged 16-24 on universal credit who are at particular risk of long-term unemployment. 

The scheme will provide funding for each job of 100 per cent of the relevant amount of national minimum wage for up to 25 hours a week. Employers’ national insurance and contributions under auto-enrolment will also be funded.

While any funding to help businesses provide opportunities for young people is welcome, the payments of up to £2,500 for traineeships and apprenticeships are unlikely to feature heavily in boardroom discussions as businesses are forced to go cold turkey from the furlough scheme. The kickstart scheme is more generous but the restricted scope of those who qualify means it has limited appeal. 

Tim Stovold is head of tax at Moore Kingston Smith

Deputy Director of People, Culture & Transformation

Deputy Director of People, Culture & Transformation

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Great Ormond Street Hospital Children's Charity

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Human Resources Business Partner

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Head of Organisational Development & Learning

Aberystwyth, Ceredigion (Sir Ceredigion)

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