Rising employment costs threaten youth job opportunities in Scotland

More than three-quarters (76%) of organisations in Scotland have seen their employment costs increase due to rises in employer National Insurance contributions (NICs), according to the CIPD’s latest Labour Market Outlook survey. The impact is being felt most acutely in the hospitality and care sectors, and among organisations that employ a higher proportion of young people.  

The quarterly survey of more than 2,000 UK employers found that nearly four in 10 (37%) UK employers that hire under 21s report that changes in NICs have increased their employment costs to a large extent, compared with 23% of employers that don’t hire young people. This is despite employees under the age of 21 being exempt from employer NICs. 

In response, the CIPD is urging the UK and Scottish governments to work together to support youth employment and training and ensure that proposed changes in the Employment Rights Bill don’t create further barriers to recruitment or discourage employers from hiring young people.

The latest Labour Market Outlook report also reveals other multiple cost pressures weighing heavily on employers in Scotland and the impact on key sectors: 

• Over half of employers in Scotland (54%) say the increase in the National Minimum/Living Wage rates in April 2025 has increased their wage bill. 
• Half (50%) of UK employers in the care and hospitality industries say NICs changes have increased their employment costs to a large extent. 
• When asked about which cost increase had the biggest financial impact on their business in the past year, 27% of employers in Scotland said it was the rise in NICs, 20% said energy costs and 10% cited raw materials.

Marek Zemanik, senior public policy advisor for the UK nations at the CIPD, said:

“Business confidence is weakening under the weight of rising employment costs, particularly in sectors like hospitality and care that provide crucial entry points for young people. 

“Some of the proposed measures in the Employment Rights Bill risk adding further cost and complexity to employing people in Scotland.  This is why it’s crucial that planned measures, such as the introduction of a new statutory probationary period and plans to change rules for dismissing new staff, are carefully consulted on to ensure they work in practice. If new employment laws increase the risk of recruiting new staff, employers are less likely to take a chance on young workers with limited experience and more development needs.”

Looking ahead at recruitment intentions, the Labour Market Outlook found that: 

• Overall, 58% of employers in Scotland plan to recruit in the next three months.  
• Over a quarter (27%) of employers in Scotland have hard-to-fill vacancies and 43% anticipate problems filling vacancies over the next six months. 
• Twelve percent of employers in Scotland plan to make redundancies over the next three months.

Zemanik continued:

“It’s crucial that employers aren’t forced to scale back on their recruitment and investment in apprenticeships and other forms of training for young people as their costs rise. Providing employment opportunities and developing the skills of young people is key to building sustainable talent pipelines and meeting future skills needs that support long-term business growth.  

“We simply cannot afford for businesses to lose confidence in employing people if the government’s Get Britain Working agenda is to be successful and the economy is to grow. 

“Where many employers aren’t expecting to grow their workforces in the coming months, they should monitor workloads and support staff with their wellbeing, particularly where vacancies remain unfilled. Investment in reskilling and upskilling opportunities will be crucial to keeping employees engaged and meeting business objectives.”

Read the full Labour Market Outlook report