London, March 17, 2025 – A stark picture of declining youth employment has emerged as businesses grapple with rising payroll costs, according to newly released data. HR services firm Employment Hero’s latest findings reveal a significant downturn in hiring, particularly affecting young workers aged 16-24.
The report, tracking 105,000 employees across 1,500 small and medium-sized enterprises (SMEs), indicates a 0.4% overall drop in SME employment in February, effectively reversing the modest 0.2% growth seen at the start of the year. However, the most alarming statistic is the 1.8% contraction in employment among 16-24-year-olds within the same month.
This sharp decline coincides with impending financial pressures on businesses, including the upcoming hike in employers’ national insurance and the application of the £12.25 national living wage to all workers over 21, eliminating the previous lower wage band for 21-23 year olds. Employers are estimated to face an average increase of £900 per employee in payroll costs.
“Smaller firms are being forced to absorb workloads themselves rather than hire or retain younger staff, who often require additional training and support,” explained Kevin Fitzgerald, managing director at Employment Hero. “The financial burden is simply too great for many SMEs.”
The timing of this downturn is particularly concerning, as the number of young people aged 16-24 not in education, employment, or training (NEETs) has reached an 11-year high of 987,000. This demographic, predominantly young men, faces the risk of missing out on crucial early-career experiences, potentially leading to long-term professional instability. Compounding the issue are rising mental health challenges, with over a third of young people reporting “common” mental health issues.
The government’s response, including the “youth guarantee” for 18-21-year-olds in England, offering pathways to employment, training, or further education, is being viewed with skepticism. Critics argue that these measures may prove insufficient if the broader job market continues to tighten.
Despite the bleak outlook for young job seekers, there are glimmers of hope in broader employment figures. The Recruitment and Employment Confederation (REC) reported a slight 0.1% increase in UK job openings in February, reaching 1.55 million. The construction sector saw a significant surge, with vacancies jumping by 13.2% in a single month.
“Businesses are ready to hire again, despite wage increases, global political shifts, and uncertainty about worker’s rights reforms,” stated Neil Carberry, chief executive of the REC.
However, the immediate impact of rising payroll costs is being acutely felt by Britain’s young workforce. Policymakers and employers are now under pressure to find effective solutions to ensure that opportunities remain accessible to those embarking on their careers. The challenge is to balance the need for fair wages with the economic realities faced by businesses, particularly SMEs, to prevent a generation of young people from being left behind.
