State to pay more pension contributions under Kickstart Scheme

James Phillips reports

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.

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.