Businesses to get £3,000 state bonus for hiring unemployed young people

Businesses will be given a £3,000 government bonus for hiring a young person who has been out of work for six months.

Work and Pensions Secretary Pat McFadden said the government wants to "back Britain's young people" after youth unemployment hit its highest levels for 11 years.

Politics latest: Starmer to offer 'targeted' energy support

The latest government statistics show there were 729,000 people aged 16-24 not in a job from September to November 2025 - 15.9% of young people, up from 14.4% in the year before - meaning 103,000 more not in work this year.

There were 946,000 young people not in employment, education or training (12.7% of all 16 to 24-year-olds), the latest data from July to September 2025 shows.

But Mr McFadden insisted to Mornings with Ridge and Frost that youth unemployment was not because of Labour's policies, as it is a "long-term problem" and not enough has been done about it for the past 15 years.

He announced:

• A £3,000 bonus for firms that hire a young person who has been out of work for six months
• Small and medium-sized businesses will get a £2,000 bonus if they take on a young apprentice
• Jobs with training subsidised by the state to be expanded to 22 to 24-year-olds.

Mr McFadden said: "They're in a difficult labour market, it's been a difficult labour market for them for some time.

"But with these actions, we want to tell young people and to the businesses thinking of hiring them, that we've got to create a better future for young people.

"We cannot have a million young people not in education, employment or training. It's not good for them. It's not good for the country either."

Many businesses have blamed the government for rising youth unemployment after Chancellor Rachel Reeves increased employers' national insurance contributions and gave a substantial increase in the minimum wage and living wage to young people.

In February, Huw Pill, the Bank of England's chief economist, told MPs Labour's tax policies and minimum wage hikes were driving up youth unemployment.

But Mr McFadden said employers are exempt from paying any national insurance contributions for workers under the age of 21.

He also defended raising the minimum wage, saying it is "important that people are paid decently for the job that they do", and said the Low Pay Commission decides the rate.

He did not mention that it is up to the government to decide whether to accept that rate, although they almost always do due to the potential political backlash.

"I think it's a longer-term issue," Mr McFadden added.

"I think we're dealing with a generation of young people who need hope and who need better prospects.

"And the problem up until now, in the many years of the challenging labour market that they faced, is there haven't been programmes in place to help them. I want to change that."