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Small businesses have a huge potential role in improving the youth unemployment landscape, but not without real support from policymakers
- There are problems for employers that small businesses are in the best position to fix, and there is real appetite from young people to make these employers their route into the labour market.
- Taking a human-led approach to recruitment would help to attract young people. Flexibility and one-to-one support from managers are also crucial.
- Government interventions are needed to enable small businesses to better support young candidates and employees.
The structural issues highlighted in June’s Milburn Review are serious and fixing them will require action on all sides. With secondary school exam results being released around the UK, issues around youth unemployment could resurface.
The conversation sparked by the Review in media and in Westminster focused primarily on policies to support young people into work and what large employers can do. However, the discussion has missed the significant role for smaller businesses that is inherent in the findings of the report. There are problems for employers that small businesses are in the best position to fix, and our research shows that there is real appetite from young people to make these employers their route into the labour market. In a survey of Gen Z workplace priorities, more than 40% told us they’d most like to work for SME businesses.
By seizing this opportunity, small businesses can tap into the rich vein of talent that our next generation represents, but they need real support from policymakers to handle record-high hiring costs. There is a route to a mutually beneficial outcome if priorities on both sides are understood and addressed.
Flexible and human recruitment
The process of getting a job is one of the key challenges. Young people feel isolated by complex recruitment processes, often involving AI interviews and AI CV screening, with PM Andy Burnham speaking out about the latter. Small businesses are in a better position than their larger counterparts to buck this trend, adding a crucial human touch to recruitment processes that not only makes the experience better for candidates but is also a fundamentally smarter approach for early-career hires.
Younger, less experienced candidates will naturally require a more human approach to uncover their talents, precisely because they can’t point towards evidence of it on a CV or application form. By establishing more detailed, conversational recruitment journeys, small businesses can tap into talent that will be missed by the rigid or automated systems used by large companies.
A more supportive team
This ability for smaller employers to be flexible extends beyond the hiring process. They’re able to adapt how people are managed and provide the tailored support that younger employees often need to develop and flourish in a new role. Gen Z employees in small- to medium-sized businesses rated the support they get from their manager most highly, with more than three quarters saying they get a good amount of support and guidance from their boss.
Upgrading support for new hires is something that employers can implement quickly without overhauling operations – regular 1–1 catch-ups with defined goals and useful performance feedback will make younger employees feel seen and supported. Set out what’s expected from new hires in detail and then proactively update them so they can see how they’re developing and address any issues.
Even outside of the manager–employee relationship, smaller businesses and teams naturally lend themselves to closer working relationships, more direct access to leadership, and faster feedback loops. Our research shows this will make a difference in retention of younger employees, who told us that being part of a team is the thing that they like most about working life. This is the difference-maker for small businesses that has been largely overlooked, one that could shift young people’s perception of the labour market away from something rigid and out of reach to something personable and accessible.
Proper policy support
It would be wrong to suggest that small businesses are simply neglecting the next generation or ignoring the macroeconomic and policy landscape that makes these changes much easier said than done. Small businesses are bearing the brunt of the biggest update to workers’ rights in a generation and, in many cases, employers that understand and value their role in providing a welcoming and supportive environment for early-career workers are having to focus instead on simply keeping their heads above water. Providing sufficient support for employees entering the workforce takes time – a resource that’s often in shorter supply for small businesses.
Forward-thinking policy support is undoubtedly needed if the opportunity for small businesses to make a meaningful impact on the youth unemployment crisis is to be realised. There are targeted interventions already in place to encourage businesses to take on younger workers, including National Insurance relief for apprentices under 25, but they are fragmented measures targeted at specific cohorts including apprentices and universal credit claimants.
The Milburn Review, and first-hand accounts from young people, make it clear that this crisis is anything but fragmented. Support for specific groups is hugely valuable, but needs to be paired with measures to make the cost of hiring early-career workers manageable across the board. This could be a significant quid pro quo for policymakers and employers that makes the most of small businesses’ ability to begin changing the narrative on youth unemployment, while giving them a little more breathing space to start hiring again.
The opportunity for small businesses is a genuine path forward in a seriously gloomy outlook for youth unemployment, a chance for this portion of the labour market to offer a more effective route into work. It’s only one part of a solution that should lead with structural change, but it’s an opportunity we need to take.
Gill McAteer is director of employment law at Citation.
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