A government programme incentivising employers to hire young unemployed people is to be expanded, the government has announced.

The Youth Contract – introduced this April – offers businesses a £2,275 wage subsidy for hiring an 18- to 24-year-old who has been receiving unemployment benefits for more than nine months, but this will be reduced to a six-month qualifying period.

The grant is designed to cover half the cost of the national minimum wage for six months.

The scheme also offers work experience placements to young people and
payments worth £1,500 for small businesses taking on a 16- to 24-year-old apprentice for the first time.

The extension of the Youth Contract – which comes into force on 17 December – was broadly welcomed by business groups, although there were some reservations about employer awareness of the scheme.

“The government has learnt the lessons of the past by striving for a standard national package that is easy for employers to understand and to access,” said Adam Marshall, director of policy and external affairs at the British Chambers of Commerce.

“Unfortunately, despite their desire to help young people, too few employers know about the Youth Contract and its opportunities. The government should show its willingness to invest in young people by extending its regional marketing campaign pilot to the rest of the country.”

Mark Beatson, CIPD chief economist, added: “The incentive is a useful way to overcome some of the financial concerns around taking on a young person, particularly for SMEs.

“However, the Youth Contract only goes so far; to make sustainable progress on tackling youth unemployment we need a mind-set change among employers so that they recognise the long-term business benefits of investing in young people.”

Yesterday’s unemployment figures revealed that after rising steadily over the past five years, the number of unemployed 16- to 24- year-olds fell by 72,000 to 945,000 – although this was partly due to more young people moving into full-time education.