For employers and employees alike, solutions for the ongoing hiring crisis can’t come fast enough.
Between climbing levels of unemployment among young people, increasing hiring costs for small and medium-sized businesses (SMEs) and a slew of Employment Rights Act-related compliance obligations to contend with, the Youth Guarantee scheme and the launch of a £3,000 Youth Jobs Grant for businesses are highly anticipated.
But for SMEs, understanding how they work, how to benefit from them and any legal parameters for engaging with them, is key.
What Is the UK Youth Guarantee?
On 29 May, the Department for Work and Pensions confirmed the expansion of its Youth Guarantee (the Government’s overarching commitment to ensure every young person has the chance to earn or learn), adding 300,000 new work experience and training placements across sectors including some of the worst-hit sectors for unemployment: construction, health and social care, and hospitality.
The placements include Sector-based Work Academy Programmes (SWAPs): short, government-funded placements for jobseekers on benefits, combining training, hands-on workplace experience, and a guaranteed job interview by the end of the process.
The Government claims that around 40% of SWAP participants move into sustained employment within six months, earning an average of £1,400 per month. For employers in sectors struggling to recruit entry-level talent, it represents a potential pipeline towards more employment opportunities, and is available all year round.
What Is the Youth Jobs Grant?
Alongside the placements expansion sits the Youth Jobs Grant: a £3,000 payment to employers who hire a young person aged 18-24 who has been claiming Universal Credit and actively seeking work for six months or more. An additional incentive for SMEs includes a separate payment of £2,000 on top of the grant for hiring an apprentice aged 16-24.
It forms part of the same £2.5 billion youth employment package and is expected to launch in June 2026 (At the time of writing, the DWP hasn’t yet opened the application portal or confirmed the exact start date).
The grant aims to support around 60,000 young people into employment over three years. Over 957,000 16-24 year olds in the UK are currently classified as NEET (not in education, employment, or training), according to Alan Milburn’s interim report into young people and work.
The Legal View on offering SWAP Placements
Elissa Thursfield, a specialist employment solicitor with extensive experience supporting businesses with employment law, legal strategy, says the legal position for businesses taking on SWAP participants is more nuanced than some may realise.
Speaking to Employment Hero, she stresses that “a SWAP placement is a training and opportunity programme – not free labour.”
“If the SME treats the participant as a free pair of hands – with set hours, an expectation of attendance, and tasks of value to the business – the relationship can be characterised as a contract personally to do work. That loses the NMW exemption and exposes the business to back-pay liability of up to six years, holiday accrual, and discrimination claims.”
She reminds employers that health and safety provisions are essential for SMEs thinking of adopting the scheme.
“The business owes the participant a full legal duty – risk assessments, induction, PPE, supervision and safe systems of work, all on the employee standard. Employers’ liability insurance is required for these participants. Treat the placement participant as if they were an employee for safety, equality, and welfare, and as a trainee for everything else.”
Youth Jobs Grant Eligibility: Which UK Employers Qualify?
On the employer side, all UK businesses can apply. There’s no size threshold and no sector restriction.
On the employee side, the eligible hire must be:
- Aged 18-24 at the time of hiring
- Currently claiming Universal Credit
- Have been actively seeking work for at least six months
How to Apply for the Youth Jobs Grant
The process will run through existing DWP employer channels, with guidance on how to approach the scheme issued by the Government, although the portal hasn’t been opened at the time of writing.
While some SMEs without a dedicated HR function may fret about navigating the process, Employment solicitor Elissa highlights that there’s no need to be put off.
“The good news is that eligibility verification is generally done by the DWP or the Jobcentre work coach, not by the employer. What the business needs is written confirmation from the referring agency – typically a referral letter or grant claim form signed off by the work coach. Get that in writing, keep it on file, and do not sign claim declarations you are not comfortable standing behind.”
On the risk of getting it wrong, she says: “Legal exposure is limited if reasonable steps have been taken. If the criteria later turn out not to have been met but the employer relied in good faith on DWP confirmation, the realistic risk is recovery of the grant rather than penalty action. The risks escalate sharply if the SME knew or ought to have known eligibility was not met.”
Unfair Dismissal From 2027: What the Six-Month Rule Means for SMEs
The bigger picture of impending Employment Rights Act measures is worth considering too. From January 2027, the qualifying period for unfair dismissal protection drops from two years to six months. That means anyone hired from 1 July 2026 onwards will already have six months’ service by the time that change takes effect.
Elissa says this makes getting probation right more urgent than ever before. “Probation was previously a soft concept because the qualifying period was two years. From 2027, it will become the SME’s main protected window for assessing fit. It needs to be real and documented.”
In practice, that means providing a clear written probation period of three to six months, with documented performance criteria from day one. “Satisfactory performance means nothing in a tribunal. The probation letter should set out specific responsibilities, outputs, behaviours, and milestones expected,” she says.
“Regular structured reviews, each documented with a clear position on whether the employee is on track, what is going well, where the concerns are, and what support is being offered – the aim is to evidence genuine performance management, not to run the clock down.”
That’s not to say hiring should be avoided, however. Rather, it’s a chance for small businesses to hire carefully and deliberately, with the right processes in place from day one.
What UK Employers Must Know Before Hiring Under the Youth Guarantee
One question that has come up with some employers is whether the Youth Jobs Grant should be referenced in employment contracts at all.
On this, Elissa is clear that the answer is no.
She explains: “The grant is an employer-side funding arrangement that does not belong in the employment contract. By the time a young person is hired under the Youth Jobs Grant, they are an employee like any other. The right place for the grant to live is in the HR or payroll record. The contract should look identical to the contract for any other employee at the same level.”
She also flags a less obvious risk: “Putting it into the contract can stigmatise the employee, and there is a risk of accidentally creating contractual conditions that cause more problems than they solve.”
Why 2026 Is the Right Moment for UK SMEs to Hire Young Workers
As the Office for National Statistics highlighted in May, job vacancies across the UK have fallen to 705,000, the lowest level since 2021. NEETs represent a significant untapped talent pool. Having better infrastructure to access and develop them, through SWAPs, apprenticeships, and the coming grant, may prove to be useful interim solutions.
But that doesn’t mean the hiring crisis will ease significantly as a result. In fact, in Elissa’s view, the Youth Guarantee package “helps, but it does not change the underlying calculation unless there is genuine business need for the role.
“SMEs that hire purely because the grants make the maths work are likely to end up with a poorly supported hire, an underperforming role, and a difficult dismissal process. The legal environment from 2027 onwards makes that scenario more expensive than it was even two years ago.”
Her advice?
“Used alongside business need, structured probation, and engagement with the mentoring support these schemes provide, the package is a sensible support. Used as the reason to hire, it is likely to cause disappointment.”
For background on when the Youth Jobs Grant was first announced, see our March 2026 coverage here.
