Government plans to create jobs for 16-to-24-year-olds will see the state paying employer pension contributions, it is expected.
In his Summer Statement today (8 July), chancellor Rishi Sunak announced the launch of a Kickstart Scheme to "give hundreds of thousands of young people the best possible chance of getting on and getting a job".
The scheme will pay to create jobs for any 16-to-24-year old "at risk of long-term unemployment" with initial government funding of £2bn, but no cap has been set.
It will be available to any employer of any size, with applications opening next month and the first young people set to begin in their jobs in the autumn.
The jobs must be "decent jobs" granting employees a minimum of 25 hours of work per week, paid at the National Minimum Wage, set at £4.55 for those aged under 18, £6.45 for those aged between 18 to 20, and £8.20 for those aged between 21 and 24. The government will also pay employer overhead costs, expected to include pension contributions.
Combined with auto-enrolment (AE) legislation, it means, when calculated as an annual salary of £10,660, the government is therefore expected to pay for employer contributions for employees aged over the age of 22 in the scheme.
The costs will be met by the government for six months. Due to the lower level of qualifying earnings of £6,240, this amounts to around £66.30 per employee at the basic minimum under the scheme. By paying the wages of staff, it will effectively also pay £110.50 of employee contributions.
The chancellor said the programme formed part of the second phase of the government's economic response to the coronavirus pandemic, a "plan for jobs" which will also see employers bringing back furloughed staff and employing them until at least the end of January 2021 paid a £1,000 bonus per employee.
The third phase of the response is expected in autumn with a budget and spending review.
Commenting on the announcement, Aegon pensions director Steven Cameron said: "It's great to see the Chancellor again support auto-enrolment by allowing employers who take on new employees under the Kickstart scheme claim not just earnings costs but also their NI contributions and employer minimum AE contributions. While it is only those aged 22 and over who an employer needs to auto-enrol, this is a great way of kickstarting not just employment but saving for retirement."
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