National Insurance Contributions to be abolished for under 21’s

George Osbourne announced in the 2015 Budget that from 6th April 2015 National Insurance Contributions for employees under the age of 21 will be abolished, with the exception of those earning more than £42,285 a year. It is estimated that employers will save £500 per year for an employee under the age of 21 who earns £12,000, and over £1,000 if the employee earns £16,000.

The changes are adopted with the view to tackle youth unemployment, which was 16.2% in January 2014. However, these changes may lead to increased discrimination claims where a candidate claims that they have been discriminated against during the recruitment process in the favour of a “cheaper” candidate who is under the age of 21. It has to be remembered that a recruiter should not ask a candidate for their age during the recruitment process, to avoid discrimination claims.

Additional concern is that there are currently no provisions which specifically prohibit employers from hiring employees under the age of 21 to benefit from the National Insurance savings, and then letting them go once those savings are no longer available, due to the candidate reaching 21.

The abolishment of National Insurance should not impose a great administrative burden on employers, however, employers should update their systems to ensure that the correct National Insurance letter is applied for employees under the age of 21.