From this week onwards, employers can apply for the Government’s £3,000 Youth Jobs Grant incentive to hire young people who have been out of work for at least six months.
Officially launched on Tuesday 30 June, Prime Minister Keir Starmer and Work and Pensions Secretary Pat McFadden marked the occasion on Monday with a roundtable setting out the Government’s strategy for tackling youth unemployment, with major hospitality businesses in attendance.
The grant is part of a broader £2.5 billion Youth Guarantee, which includes a Jobs Guarantee for those furthest from work. It aims to support up to 60,000 young people into employment over the next three years. Employers across Great Britain can apply to hire workers aged 18–24 who have been claiming Universal Credit for at least six months, into roles of at least 25 hours a week lasting a minimum of 16 weeks.
On paper, the scheme offers welcome assistance for the numerous small and medium-sized businesses currently facing hiring constraints. But whether it’ll be a sticking plaster or a longer-term solution is up in the air.
What Employers Are Seeing on the Ground
It’s a question Deborah Clark, the owner of Southernhay House, a boutique hotel in South West England, has been mulling over since she first learned of the grant.
“For employers who are actively considering recruitment, a £3,000 offset is not unwelcome. But it begs the question of our appetite – specifically for people coming off UC with no or limited relevant experience,” she says, stressing that while “fresh energy” is welcome, “a £3,000 bung doesn’t move the cost-benefit dial”.
Data backs up her concerns, with numerous sources showing employment costs have moved sharply against hiring in recent months. According to Employment Hero’s platform data, which tracks business expansion among UK SMEs, employment growth within the retail and hospitality sector has slowed significantly since May 2025, following April’s increase in employer National Insurance Contributions and the introduction of the Employment Rights Act.
For SMEs in the hospitality sector growth has slowed considerably. According to Employment Hero data surveying 16,700 SMEs in the sector, year-on-year employment growth sits at 0.4% compared to 10.1% this time last year. Employment Hero’s recent research with YouGov found that employing someone full-time costs 9.6% more than it did 12 months ago. First party data reflects this too: the median annual salary for employees in hospitality and retail is up 5.8% year-on-year in May.
As Kevin Fitzgerald, UK Managing Director at Employment Hero, points out: “Employing someone full-time now costs nearly 10% more than it did 12 months ago. Against that backdrop, a one-off incentive, while welcome, will not be enough to offset the sustained increase in employment costs these businesses are facing.”
Who’s Backing the Scheme
The grant launch comes alongside two further measures. From Monday 29 June, expanded jobcentre support began rolling out to every jobcentre in Great Britain. A Jobs Guarantee pilot, offering a fully subsidised six-month job for young people out of work for at least 18 months, has also been running since April 2026 across six areas including Greater Manchester and Central and East Scotland.
Major employers have already lined up behind the wider Youth Guarantee. Merlin Entertainments has committed to creating 300 jobs for young people, health tech company Cera has pledged more than 1,000 care roles for 18-to-24-year-olds over the next 12 months, and the Federation of Small Businesses has backed the grant, with policy chair Tina McKenzie MBE noting that nearly half of small employers say financial incentives would encourage them to hire someone who’s unemployed.
Analysis from the Resolution Foundation, however, estimates the grant’s cost per job created at £37,000 – a figure that frames a central question hanging over the scheme: whether a one-off payment can do meaningful work against a rate of youth unemployment that has been rising since 2023.
Calum Blois, tax and business manager at Blick Rothenberg, isn’t quite convinced: “The policy is only expected to create an additional 2,800 jobs, at a time where there are currently more than one million young people in the UK classed as NEET. The £37,000 cost-per-job shows that the policy is not enough to move the dial on youth unemployment.
Whether the Scheme Is Well Designed
Pointing out that “a one-off grant cannot compensate for a permanent increase in employment taxes and costs”, Calum highlights another drawback within the scheme: the six-month cliff edge.
“The six-month threshold creates a perverse incentive where a person can become more financially attractive to recruit after six months of unemployment than before,” he says.
“This is most likely to impact the hiring decisions of SMEs and risks employers deferring hiring until after the threshold is reached – undermining the core objective of getting people into work more quickly.”
His preferred fix would be a tapered system, where support increases the longer someone has been out of work, incentivising employers to hire earlier rather than wait. He also makes the argument that the scheme fails to target the businesses most likely to change their behaviour in response to financial support and suggests a tiered approach instead: grants of up to £5,000 for SMEs, with £3,000 retained for larger employers.
The Legislative Backdrop
For Southernhay House owner Deborah, the wave of legislative changes that have driven up employment costs is a major concern too.
Pointing to day-one statutory sick pay, in force since April, and the planned reduction in the qualifying period for unfair dismissal claims – which under the Employment Rights Act will fall from two years to six months from January 2027, with compensation no longer capped – she says:
“Recent legislation didn’t just push wages and tax to levels that put brakes on expansion from the ground up; it also shifted the risk calculus of hiring someone new. Simply, if you can train, promote or enhance the skills of existing staff, even short term, you’re in a safer place with a known quantity.”
Whether New Businesses Can Benefit
Josh Bate, owner of Oriels, a new cocktail bar and venue in Exeter that opened in November 2025, is acutely aware of the Government’s scheme.
“We support the Youth Jobs Grant and do believe that it will provide a genuine incentive for some venues to increase their recruitment of young workers,” he says.
But he’s not convinced the scheme is a one-size-fits-all solution.
“My impression is that the largest beneficiary of this grant will be corporate businesses that have both the time and HR mechanism to facilitate this. As an independent business, where all business functions are handled personally by the owners and hiring process overseen by junior management, the application and administration of this grant feels like a further step in an already difficult recruitment process.”
“The majority of staff hired are already transient within the hospitality industry and applications from a candidate that has been unemployed for a continuous six-month period are rare. With the recent changes to employment law, we have to be certain that a new hire will be suitable and remain with us long-term.”
On whether £3,000 is adequate for businesses like his, Josh says: “Put simply, no. It’s simple supply and demand – in order to hire more staff there needs to be more incentive for customers to leave the house and spend in venues, and a £3k grant to hire that person, with the view to providing long-term employment, currently, cannot off-set the reduced turnover and ever-increasing overheads.”
What he does want to see, however, is structural support: “A reduction in VAT to 10% for hospitality businesses, review or suspension of business rates, an energy price cap for small businesses and further local authority and governmental spending in the evening and late night economy would all provide the breathing space required for businesses like ours to focus less on labour costs and more on improving guest experience, driving visitor rates and ultimately growing our teams.”
The Job-Readiness Gap
The Jobs Foundation – a charity that champions business as a route out of poverty for young people – identifies two barriers standing between young people and sustainable employment in its Ladders of Opportunity report. As highlighted by its Chief Executive, Georgiana Bristol, the grant only addresses only one of them.
“The first is risk and cost – a smaller firm taking a chance on a young person carries real exposure, and the grant eases that,” she says.
“The second it doesn’t touch [is] the job-readiness gap. Many young people who need a first chance arrive without the soft skills that make a hire stick, and the businesses that succeed are those that bridge it – through structured pathways and employer-led training programmes.”
Georgiana also questions whether the scheme will reach the right businesses. “The firms with capacity to work the scheme tend to be larger ones already hiring at volume,” she says. “To reach the small and growing businesses that create [the] most first jobs, it has to be simple to access.”
What Needs to Change
To make meaningful change, Georgiana believes being more proactive about redressing the costs and legal risks the Employment Rights Act and “rises in the minimum wage and employer National Insurance Contributions” have loaded “onto every hire” could provide some relief for SMEs.
The appetite, she argues, is already there. “Business is a force for good, and the best thing a business does is create a job. Most businesses – especially local and family ones – take real pride in building ladders of opportunity in their communities. This isn’t something they need talking into. The problem is when taxation or regulation makes it harder and costlier for them to do what they already want to do. A subsidy is a help, but not loading costs onto them in the first place would be a far bigger one.”
For Josh, the deeper issue is cultural. He argues that the hospitality sector has long been viewed as second-tier employment, despite being Britain’s third largest employer and contributing £96bn to the economy.
“It should be considered tantamount to national infrastructure and given the same support, attention and cultural significance as other major employment sectors. The education structure places a major focus on STEM and yet dedicates very little to teaching the skills required to work in this hugely important sector to our national identity and financial resilience.”
How to Apply for the Youth Jobs Grant
Employers of any size can apply via the Government’s Find a Grant service – applications take around 20 minutes, with DWP confirmation within 10 working days. You must be trading in Great Britain for at least six months, registered with HMRC, have an active PAYE scheme, and hold a D-U-N-S number.
Young people aged 18-24 claiming Universal Credit for at least six months are eligible. All recruitment goes through DWP – you cannot nominate candidates independently. Roles must be genuine paid work: minimum 25 hours per week, 16 weeks duration, paying at least National Minimum Wage, with no displacement of existing staff or more than 50% online training.
The £3,000 grant is paid in two instalments: £1,800 at week 6 (once 50 hours worked is confirmed via RTI), and £1,200 at week 18 (once 300 hours worked is confirmed). The grant can be spent on wages, National Insurance, pension contributions, recruitment, administration or training, and can be combined with apprenticeship incentive payments.
For full guidance, visit the Youth Jobs Grant page on GOV.UK.
