What the Youth Contract could do for UK SMEs

Small businesses should look into what the Youth Contract could do for them.

Last November, Nick Clegg launched the Youth Contract, which will give businesses access to free cash in the form of a wage subsidy of £2,275. The programme, which will come into play in April and is worth £1 billion, is the government’s latest approach to tackle youth unemployment and businesses will get their hands on the money if they hire an 18- to 24-year-old unemployed person.

More details of the scheme have now emerged after the deputy prime minister sent letters to thousands of companies across the country in February urging them to play a part in getting young people earning.

The wage subsidy is open to all businesses and payment for the majority of companies will be made after the young person has been employed for 26 weeks. However, smaller businesses can access part of the payment earlier, in recognition of their particular cash flow needs.

Temporary benefit

Ketan Mokwana, co-founder and director of skills development agency Enterprise Lab, worries that the initiative is throwing money at a problem and there is no longer view being taken. He asks, ‘After the 26 weeks is complete and companies have received the money, how many business owners will keep the people on?’ He adds, ‘Business owners will have to look carefully at it and ask themselves what it can do for them.’ He points out that if employers use the programme in the right way they can use it as a ‘six-month bench test’ in which they can train and mould the young employees.

One larger company that has welcomed the Youth Contract, and one that already runs many youth apprentice and intern schemes, is Microsoft. Head of skills Stephen Uden says, ‘We have been focused on employing young people for some time and while this is very welcome it does not change what we do very much. Where it can make a huge difference is with SMEs that don’t have the capabilities to have big graduate or apprentice schemes in place.’

Owner of conference call business Powwownow Andrew Pearce is also hopeful about the scheme. ‘I think this will encourage larger numbers of SMEs to hire young staff,’ he remarks, though he does worry that the cash incentive will not necessarily guarantee people long-term jobs. ‘It is important to stress to new members of staff that, although they have been employed due to such a measure, it does not ensure any longevity in that role.’

The wage incentive will also be available for part-time positions, with a rate of £1,137.50 if someone is employed between 16 and 29 hours. The programme will also include 20,000 extra incentive payments worth £1,500 for employers to take on young apprentices, bolstering the government’s existing apprenticeships policy.

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