Wage subsidies Toolkit resources

Jump to section Close

Wage subsidies

The benefits of wage subsidies for youth employment outcomes tend to outweigh the costs, particularly for 18- to 24-year-olds and those facing the biggest barriers.

Last updated: 26 August 2026

Education

Employment

Training

3 more young people in work per 100

For every 100 young people who are NEET and take part in wage subsidies as a component of a targeted youth employment intervention, around 3 additional young people are in employment 12 to 24 months later compared to similar young people who did not take part. This component could increase recent employment by around 3 percentage points.

Key findings

Headline insights about this component based on current high-quality evidence

Subgroup analysis

Groups who benefit

Evidence indicates wage subsidies are particularly effective for 18- to 24-year-olds and those facing the biggest barriers, although this finding should be treated with caution because of the extent of the available data.

The evaluation of the Kickstart Scheme showed the biggest gains were for Young people without Level 2 qualifications, who have a higher risk of becoming NEET. Unsubsidised employment rates were 17% higher two years after the start of the intervention, compared to just a 3% uplift for graduates.

Reducing barriers

Wage subsidies focus on reducing the perceived hiring risks of taking on a young person, especially someone with limited work experience and/or qualifications

UK case study

Future Jobs Fund

The evaluation found substantial financial benefits of the programme for participants, employers, and the Exchequer.

What are wage subsidies?

Financial incentives for employers to hire disadvantaged young jobseekers who might otherwise struggle to access the labour market.

Typically wage subsidies

can be used to cover vacancies that arise within the workplace, or to create new vacancies

are designed to support the immediate employment of young jobseeker who are furthest from the labour market

take the form of direct payments, tax breaks, reduced payroll taxes, reduced social security contributions, or tax credits

Who are wage subsidies for?

Wage subsidies are offered to employers and are designed to encourage them to employ people from specific target groups, such as:

first-time job seekers
low-skilled and/or long-term unemployed young people.

Who can offer wage subsidies?

Wage subsidies are offered by government.

Any UK organisation may receive wage subsidies, provided it meets legal requirements such as:

providing a safe working environment
complying with working-time rules for young people

How long are wage subsidies?

Wage subsidy programmes can last between 6 -12 months. Duration may reflect the economic context in which they are introduced.

Subsidies are often implemented during periods of high unemployment, when young people face strong competition from older or more qualified or experienced workers.

How are wage subsidies funded?

Wage subsidy programmes are typically provided by governments through public employment services, and cover some or all of the costs of employing a young person.

Subsidies can take the form of:

direct payments
tax breaks
reduced payroll taxes
reduced social security contributions
tax credits

Employers generally receive the full subsidy only when certain conditions are met, such as retaining the young people in employment for the full subsidy period, or taking them on as a longer-term employee at the end of the intervention.

What are the delivery settings?

Workplaces of participating employers

UK examples

Benefits for young people

By providing workplace experience, wage subsidy programmes may help young people:

acquire skills and experience
build employability
access career paths
re-engage with education
show their potential

Benefits for employers

Wage subsidies can support employers to:

recruit and retain a wider pool of talent, building a pipeline
boost capacity at a reduced cost
get to know the young person better and learn how they might fit in the role or organisation longer term

The cost rating for wage subsidies is highhigh

Calculations are based on insights from available high-quality studies on the complexity of delivery requirements and estimated associated costs.

Outreach and recruitment activity

Tailored and varied with associated staffing, materials, scheduling and administrative costs. Delivery to young people with complex needs or vulnerabilities may require a more targeted approach to recruitment.

Delivery intensity

Most programmes last 6-12 months

Delivery partners

Employers co-ordinating with governments, potential for additional providers of wraparound support

Delivery expertise

None

Wages, financial assistance or incentives

Costs depend on amount of subsidy offered, available funding, typical wage levels, the costs of employing particular groups of young people, and whether training or other support must be funded in addition to work placements.

Delivery settings

Integrated in to existing workplaces, but additional costs for establishing and administering the programme

Outreach and recruitment activity	Tailored and varied with associated staffing, materials, scheduling and administrative costs. Delivery to young people with complex needs or vulnerabilities may require a more targeted approach to recruitment.
Delivery intensity	Most programmes last 6-12 months
Delivery partners	Employers co-ordinating with governments, potential for additional providers of wraparound support
Delivery expertise	None
Wages, financial assistance or incentives	Costs depend on amount of subsidy offered, available funding, typical wage levels, the costs of employing particular groups of young people, and whether training or other support must be funded in addition to work placements.
Delivery settings	Integrated in to existing workplaces, but additional costs for establishing and administering the programme

Considerations for decision makers

Based on existing evidence, we’ve identified some common features that support the commissioning, design and delivery of effective youth employment programmes:

Ensure outreach and awareness activities are effective and targeted to reach those most likely to benefit

Read more about Ensure outreach and awareness activities are effective and targeted to reach those most likely to benefit

Design, fund and deliver outreach and recruitment activities that raise young people’s awareness, with targeted initiatives to reach under-represented group who are most likely to benefit.

This might include:

Young people who have been out of work and/or learning for longer periods.
Young people without Level 2 qualifications.
Young people whose life experiences put them at higher risk of marginalisation in the labour market, for example those with experience of the care system and/or with special educational needs.

Discover more about risk factors associated with being NEET.

Also consider how best to identify and engage the most suitable partners and employers for a programme. Engagement should be timely and clear, in ways that raise awareness and facilitate recruitment, enrolment, and sustained engagement.

Effective programmes may use direct community outreach activities for engaging under-served groups, alongside up-to-date local and administrative data, working with public employment services, or advertising vacancies along with eligibility criteria.

Prioritise wraparound employability and skills training

Read more about Prioritise wraparound employability and skills training

Design, fund and deliver programmes that embed wage subsidies within a package of wider support to build skills and prepare young people for sustained employment.

Ensure programme duration is sufficient

Read more about Ensure programme duration is sufficient

Design, fund and deliver programmes where placements last six months or longer. This gives employers enough time to see a young person’s potential, supports meaningful skill development, and increases the chance of conversion to a permanent role.

Take a joined-up, collaborative approach

Read more about Take a joined-up, collaborative approach

A strong relationship between policymakers, learning providers, employers, community organisations and local skills delivery organisations including Mayoral Strategic Authorities and Local Skills Improvement Plan areas supports effective wage subsidy programmes.

Design, fund and deliver programmes that foster collaboration.

Encourage systematic monitoring and evaluation to help build and strengthen the evidence base

Read more about Encourage systematic monitoring and evaluation to help build and strengthen the evidence base

Support providers and delivery organisations to accurately and systematically capture and communicate data and milestones and track programme outcomes. This may include structured and standardised tracking forms, or developing realistic programme-specific performance frameworks.

For funders and commissioners – ensure recorded data, reporting and assessment captures a full range of appropriate and relevant youth employment and related outcomes to help rich understanding to ensure rich picture of what programmes do.

Encouraging reporting commonly recognised metrics allows evaluation to be easily comparable and included in the growing evidence base.

About the evidence

What’s included in the analysis?

Read more about What’s included in the analysis?

Included studies	17
Location(s)	High-income countries
Outcome	Labour force status, earnings, employment duration, hours worked, and education & skills
Comparator	'Services as usual' / Business as usual

The Youth Employment Toolkit brings together evidence from robust studies in high-income countries that:

measured the intervention’s impact against what would have happened without it
defined wage subsidies as a component of a targeted intervention to support youth employment outcomes

Find details of individual studies, as well as other systematic reviews of youth employment evaluations, in the Youth Employment Evidence and Gap Map.

More information about included studies can be found in page 55-60 of the full CNMA report. The specific evidence profile for wage subsidies can be found on page 212.

The evidence strength ratings for Wage subsidies reflect the number of studies included in the meta-analysis. Studies were scored on reported design, sample size, approach to attrition, and definitions of interventions and outcome measures. More detail can be found in the technical guide.

Implications for evaluators and commissioners

Read more about Implications for evaluators and commissioners

Very few studies evaluate the impact of wage subsidies on training outcomes, highlighting the need for further evaluations.

The current evidence can be strengthened by taking a consistent approach to incorporating standardised metrics for education, employment and training outcomes as well as outcomes that indicate work quality.

Wage subsidies