The Conservatives said Tuesday they want to slice in half what companies pay in employer National Insurance for staff in their early 20s, setting the main rate for 21 to 24 year olds at 7.5%. For those in that age band earning above £50,270, the employer rate would still be 15%, they said. Most under 21s do not attract employer NI at all, apart from the very highest earners.
The party costed the move at £2.3 billion per year, which it also expressed as $3.1 billion, and said the average employer would save £1,545 for every young person on the payroll. They promised to explain the funding plan on Wednesday.
Kemi Badenoch framed the cut as a response to a worsening youth labor market. "We need to do this because youth unemployment has skyrocketed," she told BBC TV, adding, "There's a graduate recruitment crisis, and if young people don't get a job early, that impacts their lifetime earnings."
The backdrop is rough: youth unemployment has climbed to the highest level since 2014 and, for the first time, sits higher than the EU average. In the second quarter of 2026, about 981,000 people aged 16 to 24 fell into the NEET category, underscoring the scale of the problem. In July, Parliament's cross-party Work and Pensions Committee said there was "overwhelming evidence" that higher employment costs, including from Labour's NI rise, were cutting job opportunities, with young people hit hardest. It urged an NI reduction to tackle what it called the "travesty" of youth unemployment.
Payroll tax changes reach hiring decisions faster than most policies. Market Briefs covers employment policy free every weekday.
The proposal draws a bright line with Labour, which in April 2025 lifted the headline employer NI rate to 15% from 13.8%, a change first unveiled in October 2024. Businesses have also pushed back on Labour's higher youth minimum wage and on the Employment Rights Act, which expanded worker protections and tightened rules around dismissals.
The government has asked former cabinet minister Alan Milburn to review NEETs, with findings expected soon. Bloomberg reported last month that ministers are weighing whether to scale back scheduled youth minimum wage increases over worries about employment, a step Milburn has signaled he might recommend.
Badenoch said she would like to cut NI for everyone but is prioritizing younger workers based on the savings identified. "If I could afford to cut it for everybody, I promise you that I would," she told the BBC. In a round of interviews, she also suggested she could announce getting rid of inheritance tax during her party conference speech tomorrow; she told Sky, "Why don't we wait tomorrow and let people hear what I think about it." She described keeping the pension triple lock as a Conservative position, while telling ITV there are "very respectable arguments on both sides" of the debate.
Beyond taxes, she told GB News she worries the US "think that we're not a serious country," after it moved B-1 bombers out of RAF Fairford. And she pressed Prime Minister Andy Burnham to release documents on his interactions with Manchester City Football Club and the United Arab Emirates, following the club's guilty finding in a financial investigation. "I was very surprised at the way he waded in on this subject," she told the BBC, adding that government should avoid meddling in football: "Let the fans and the clubs run themselves properly."
If enacted, the cut would trim hiring costs for 21 to 24 year olds by an average of £1,545, which could influence how businesses staff entry level roles. The Conservatives say how they would fund the £2.3 billion annual cost will come a day after the announcement. With just under three years until the last possible date for the next general election, the policy sits alongside other signals on deregulation and tax that could shift what UK employers pay in the years ahead.
Cutting the cost of a young worker changes who gets hired. Join Market Briefs free and follow the proposal.
