CHAPTER 6 Employment option

This option involves working for an employer who will be paid a subsidy for up to 26 weeks for taking you on. You will also receive the equivalent of one day a week’s training towards a recognised qualification for the 26 weeks. The employer is given £750 towards your training costs in addition to the subsidy.

Entry to the option

You will normally become eligible for the Employment option after 2 months in the Gateway (although there is some flexibility about this). At this stage you will be issued with a voucher which confirms that, if an employer takes you on, that employer may be paid a subsidy.

There is no guarantee that you will be offered a job through the Employment option. You are likely to be referred to relevant vacancies by the ES and/or other Gateway providers (New Deal jobs may not appear on the vacancy boards), but it will still be up to employers themselves to select employees. You may be given self-marketing materials and encouraged to market yourself to potential employers.

If you do not succeed in getting a job through the Employment option you will have to take up a place on one of the other options.

Which jobs qualify for the subsidy?

Wage levels

Minimum wage legislation does not apply to people on most Government-funded schemes. If you are on the Employment option (or receive a wage on the Voluntary Sector option or the Environment Task Force) you are covered and your gross wage must not be less than the statutory minimum. The rate is £3.20 either because you are aged 18–21 (the £3.20 rate applies for this age group from June 2000) or because you will be in the first 6 months of a new job and receiving accredited training. These rates mean that you and your employer will pay National Insurance contributions (Hansard WA, col 443, 26/3/99). What is more, the Employer Agreement states that ministers expect "payments to be based on the going rate for the job" (NDPG (18-24), Ch 5, Appen 2A, para 10).


The majority of New Deal Employment option vacancies are expected to be permanent. Under no circumstances can the ES accept New Deal vacancies which will last for less than 6 months (NDPG (18-24), Ch 5, para 70). If a job will only last for 6 months, this duration must be agreed in advance with the ES. It can be authorised only if "the employer has an additional job where the quality of training provided is clearly going to enhance the employee’s long term employability" (NDPG (18-24), Ch 5, para 71). There may be some unexpected circumstances where a firm might no longer be able to provide work due to a downturn in business. However, the guidance states that an employer must not use business uncertainties as an excuse for avoiding the commitments in the Employer Agreement (NDPG (18-24), Ch 5, Appen 6, para 7). If an employer says that the vacancy will be permanent, but then dismisses the New Deal employee after 6 months, the employer cannot replace him/her with another New Deal employee (NDPG (18-24), Ch 5, para 73).

Hours of work and training

Employment option jobs can be full-time or part-time.

Other requirements

Employment agencies

Employment agencies can take people on through the Employment option. The agency must sign the Employer Agreement and the rules about duration and part-time hours are the same as for other employers (NDPG (18-24), Ch 5, para 87). You may find yourself working for more than one employer and in different locations over the 6 months. This "is acceptable as long as continuity in terms of hours, wages, and most importantly the training element (as agreed in the Individual Training Plan), are maintained" (NDPG (18-24), Ch 5, para 88).

The Employer Agreement

An employer who takes you on and receives a subsidy must guarantee to supply you with "high quality training" which is normally expected to lead to an S/NVQ. However the ES guidance states that some employers offer their own in-house training which may be acceptable under New Deal if it provides at least a 50% match against the national industry standards (which form the framework of S/NVQs) ((NDPG (18-24), Ch 5, Appen 1a, para 11). These employers are expected to agree to register New Deal employees for appropriate S/NVQs and arrange for assessment and accreditation to be carried out. However this is not a manadatory requirement.

The employer signs an agreement confirming that (NDPG (18-24), Ch 5, Appen 2):

The employer must not (NDPG (18-24), Ch 5, para 259):

All Employer Agreements conform to this standard model. Many large employers will have signed national agreements that cover their many different workplaces. But other employers must sign the agreement when the vacancy is accepted by the ES or after a jobseeker has been offered a date to start this New Deal option (NDPG (18-24), Ch 5, para 30).

Other ES programmes

As part of the process of being referred to a subsidised job vacancy under the Employment option you may be encouraged to take part in other ES programmes such as Work Trials or Access to Work. For full details of these programmes, see the Unemployment and Training Rights Handbook – details on page *.

Upfront Skills Shortage Subsidy

Some employers involved in the Employment option can benefit from the "Upfront Skills Shortage Subsidy". Where an employer offers a job lasting at least a year and good quality training that improves a person’s employability, the firm can receive three-quarters of the training and job subsidy payments at the start of a job. This comes to £1,730 for full-time 18-24 year olds and £1,460 for full-time employees aged 25+ (ND USSS, paras 1-7).

Despite the name of the subsidy, to qualify for the subsidy the employers do not have to show that the job is in a skills shortage occupation or prove they face upfront training costs. They must offer "significantly" more training than that required under normal circumstances and what they offer must be clearly set out in the Individual Training Plan.

The idea is to encourage employers to commit themselves to a significant amount of training towards the beginning of the Employment option placement. They must provide at least 15 days in the first 8 weeks of employment and a minimum of 26 days (or equivalent hours) during the first 26 weeks. The remainder of the subsidy and training payments is payable after 26 weeks, on achievement of the agreed training objectives.

There will be a greater scrutiny of employers who apply for the subsidy. Employers may be regarded as less likely to be suitable if:

Employers in the above list who apply for the Upfront Skills Shortage Subsidy will be visited by the ES (NDPG (18-24), ND USSS, paras 27-28).

Starting the job: financial help

When you start the job you should claim Extended Payments of Housing and Council Tax Benefit. These payments are available to people who have been unemployed for over 6 months and are moving into full-time work. For the first 4 weeks of the job, you will continue to receive Housing and Council Tax Benefit at the level at which you were receiving them when out of work. Note that Extended Payments are not awarded automatically. To claim the payments you must complete and return a claim form within 8 days of your last day of entitlement to JSA. (See the Unemployment and Training Rights Handbook.)

You may also be eligible for in-work benefits and tax credits on an on-going basis if the job is low paid. These include:

For details of all these, see the Unemployment and Training Rights Handbook.

Lone parents

If you are a lone parent you may qualify for the Lone Parent’s Benefit Run-On which will allow you to receive benefit for an extra 2 weeks after starting work or increasing your hours. The earnings (and WFTC) paid during these 2 weeks are ignored. To qualify you must:

If the job ends before 5 weeks you may not be able claim benefit for the first two weeks after finishing work.

If you claim the Lone Parent’s Benefit Run-On you will automatically continue to be paid HB and CTB for the 2 week run-on period. You will not have to fill out a separate form.

Back to Work Bonus

If you have been declaring part-time earnings while claiming JSA or Income Support then you may have built up a Back to Work Bonus which you will receive on moving into work. You can receive your Back to Work Bonus if you take a place on the New Deal Employment option.

Jobmatch Allowance

If the job is for at least 16 but less than 30 hours per week you may be able to claim a Jobmatch Allowance. Under Jobmatch you will be paid £50 a week in addition to your wages for 6 months so long as you keep working for at least 16 hours per week.

Jobseeker’s Grant

The New Deal has been enhanced to include the Jobseeker’s Grant, which is meant to help meet certain costs associated with starting a new job. Award of the Jobseeker’s Grant is discretionary and can be used to encourage young people to apply for jobs and help them overcome barriers to interviews and employment (NDPG (18-24), C8, paras 286-287).

A Jobseeker’s Grant can only be awarded by ES New Deal personal advisers (including disability employment advisers) after an in-depth interview as part of the New Deal Gateway period and follow-through. Where the New Deal is being led by a private sector organisation you will have to be referred to your ES New Deal personal adviser. Payments are normally for up to £200. The average assumed grant is £80 per person. The grant can be used to pay for:

ES New Deal personal advisers can use their discretion for other items.

"Linking" rules

On joining the Employment option you leave JSA and become an employee. This means that, if you do not stay in work at the end of your 6 month subsidy period but return to JSA instead, there are no "linking rules" that let you re-instate your previous benefit entitlement. So, you will have to serve 3 "waiting days" before reclaiming JSA. And, as the guidance for the 25+ New Deal employer subsidy stresses, you may have to wait 9 months to requalify for any help with interest payments if you are a home owner with a mortgage (NDPG (25+), Ch 4, para 69).


Employees can take out unemployment protection insurance to provide some income if they become unemployed. If you have such a policy, insurance payments will be suspended while you are on the subsidised job option, at the insurer’s discretion. The claim for unemployment insurance will be closed if during, or at the end of, the option you take up permanent unsubsidised employment. But if you return to JSA either during or after completing the option, the insurer will decide if the insurance payments should be reinstated. If you leave the option voluntarily or through misconduct, the insurer may not meet the claim (NDPG (18-24), Ch 5, paras 118-119).

What happens on the option?

When you take up a place on the Employment option you sign off JSA and become an employee. This means that issues such as health and safety and terms and conditions will all be handled by the employer "in accordance with [their] established procedures for all employees" (NDPG (18-24), Ch 5, para 5). You will be covered by relevant employment law.

The ES is required to monitor your option placement. You should continue to have contact with your ES personal adviser who should assess your progress and ensure that the commitments contained in the Employer Agreement and your Individual Training Plan are being fulfilled (NDPG (18-24), Ch 5, paras 264-266). The ES should indicate to you and the employer what the frequency and content of monitoring visits is likely to be. Monitoring visits are meant to ensure general compliance and identify any problems.

If you have problems at work or if you feel that the employer is not fulfilling the obligations set out in the Employer Agreement then you should contact your ES personal adviser or phone the confidential "hotline" number: 0800 163 339 or textline number: 0113 285 8654.

If you, ES monitoring staff or the employer identify a problem, then ES staff should try to resolve it through discussion with the employer. If you want to leave the placement or if the employer is dissatisfied with your performance, ES officials are instructed to "discuss the issues with the employer/employee with a view to resolving them" (NDPG (18-24), Ch 5, para 269).

If the ES identifies non-compliance by the employer and cannot resolve the problem, then the ES can "terminate the Employer Agreement and stop payments of both the subsidy and training money". However, ES staff are told that this "should only be done as a last resort, and [you] should be told/consulted about any possible implications before the Agreement is terminated" (NDPG (18-24), Ch 5, para 270).

Training on the Employment option

During your first 6 months in the job, you are entitled to at least one day of training for each week (no matter how few hours you work in total). The training must be off-the-job and must lead towards an "approved qualification" (NDPG (18-24), Ch 5, Appen 1, para 1) This training may be delivered by the employer or by an outside organisation. In either case, whoever provides the training can claim up to £750.

Off-the-job training

The guidance says that "off the job training is defined as training towards a qualification … which would normally take place away from an employee’s usual paid duties". However, "on the job training in support of an NVQ is also acceptable". The document offers this clarification: "off the job training may include work to support NVQ assessment, job shadowing or familiarisation, computer-based training, supervised open learning, training in a company training centre or modules delivered by an education and training provider". In addition, "some jobs already contain a significant training element and this can be defined as the [off the] job element if it leads to an approved qualification" (NDPG (18-24), Ch 5, Appen 1, para 2).

Minimum training time

You must be given at least 26 days training over the 6 months of the subsidy. A day consists of at least 6 hours training for those on day release (NDPG (18-24), Ch 5, Appen 5, para 6). The training need not occur on one day in each week: it can be delivered "either as blocks or on a day release basis, and … can be front loaded". What is "not acceptable" is for employers to "put all the training at the end of the 6 month period" (NDPG (18-24), Ch 5, Appen 1, para 4).


You should be working towards either an NVQ/SVQ or an alternative approved qualification. The list of approved qualifications is that in Schedule 2 to the Further and Higher Education Act 1992 plus Welsh and Scottish equivalents (see page *). Academic qualifications are included in this list, but you will be allowed to study for these only "if they have clear employment relevance" (NDPG (18-24), Ch 5, Appen 1, para 5).

Since you are unlikely to achieve a qualification in 26 days, the guidance states that "realistic and achievable goals should be set" for the 26 weeks and "where possible, this training should be the foundation for continued training and development" (NDPG (18-24), Ch 5, Appen 1, para 7).

Individual Training Plan

As part of the learning element of your New Deal option, you "must be given an agreed Individual Training Plan". This should be completed within 4 weeks of starting on the option and both the employer and you should sign it (NDPG (18-24), Ch 5, para 36). The Plan "must be customised to the needs of the individual and will build on the Gateway Action Plan". It must contain at least (NDPG (18-24), Ch 5, Appen 1, para 8):

You should normally receive training that leads to a qualification that meets a recognised national standard – NVQ or SVQ. However, in some circumstances employers are unable to offer training towards a recognised NVQ/SVQ or are unwilling to do so because they believe their existing training meets New Deal requirements (NDPG (18-24), Ch 5, Appen 1a para 1).

Many larger employers have substantial in-house training which, although it does not formally match an NVQ/SVQ standard, might be more useful. However, the guidance says that your long-term employability and your ability to compete for jobs in the open market must be enhanced by this sort of training. Unless the skills are portable, they could be too specific to the company and be irrelevant to another employer. So a complicated "mapping" and accreditation system has been designed which has two aspects:

For smaller employers who do not have in-house training, the learning element of the option is more likely to be delivered by an external provider such as a college or vocational training organisation.

Jobsearch assistance

If the job is not going to be permanent then "access to jobsearch training and advice should be facilitated" as part of the training element (NDPG (18-24), Ch 5, Appen 1, para 9).

Leaving the job or being sacked for misconduct

If you choose to leave your Employment option job or if you lose the job due to misconduct and then try to claim JSA again, you may have your benefit cut. For full details, see Chapter 9, page *.


The self-employment route aims to help you to find independent self-employment or unsubsidised employment. This will be done through good quality advice and training and, where appropriate, the opportunity to undertake a period of "test trading" which should help you to experience the realities of self-employment whilst receiving help and support from a provider (NDPG (18-24), Ch 11, paras 1-3).

The self-employment route will provide:


You will be able to set up in a business with other people if they are eligible for the New Deal (NDPG (18-24), Ch 11, paras 4-11). This may prove difficult in practice, as they will need to be going through the New Deal at the same time as you. Co-operatives are allowed where you and others wishing to set up a co-operative are at the same stage in the New Deal. You and your partners will have your own business plans and Individual Training Plans. You must also keep profits in an "escrow" account. If you set up in partnership you are likely to have the same New Deal personal adviser. If this is not the case, the personal advisers involved must work closely. You will not be able to start trading independently whilst your partner(s) continue on the New Deal. If this happens, the partnership must be dissolved, test trading terminated and profits divided equally.

You will not be able to employ other people whilst on the self-employment part of the Employment option because, if you are making enough money to employ someone, then you should not be in test trading. Rather you should move into independent self-employment as soon as possible.

You will not be allowed to start self-employment with an established business or partnership as you have to keep profits in an "escrow" account and it would be difficult to keep that money separate from your partners’ profits. In these circumstances you would be expected to start independent self-employment rather than test trading. The guidance suggests that it may be better for the existing business to take you on as an employee.

You can buy a franchise, but your ES personal adviser will suggest you take independent legal financial advice, for example from a bank manager.

Three stages

The self-employment route falls into three stages (NDPG (18-24), Ch 11, para 15):

Stage One (within Gateway)

Stage Two (within Gateway)

Stage Three (part of the Employment option)

Although these are three distinct stages, you will leave the route as soon as you are able to take up independent self-employment or an unsubsidised job.

Availability and actively seeking work

During the Gateway (Stages two and three of the self-employment route) you must continue to be available for work (NDPG (18-24), Ch 11, paras 12-14). For a maximum of 8 weeks, you will be treated as actively seeking work in any week during which you are taking active steps to establish yourself in self-employment. However, you can be treated as actively seeking only if you have been offered a conditional place on Stage Three (test trading).

In practice, the "actively seeking" 8 week period will normally start with the short course/counselling (Stage Two). At this point it may not be clear whether you will enter Stage Three, so it may be inappropriate to specify a start date on Stage Three. In order that the actively seeking rule can be applied, the New Deal personal adviser should verbally offer you a conditional place in test trading subject to a business plan being approved by a provider.

People with a health condition or disability

The ES New Deal personal adviser may consult the disability employment adviser about people with a health condition or disability to ensure that available help and financial support can be considered (NDPG (18-24), Ch 11, para 17).

End of Stage Two

If you are moving into an unsubsidised job you will leave JSA in the normal way. But if you are moving to independent self-employment, you will leave JSA, but will need support to facilitate this, e.g. arranging banking/funding facilities (NDPG (18-24), Ch 11, para 43). Your ES personal adviser can provide advice and support as necessary. If you have shown potential but are not ready to move into independent self-employment immediately you can chose to enter test trading (Stage Three). If you need training that is fundamental to setting up and running your own business, the Further education & training option may be appropriate, although the guidance states that this option will be appropriate only in exceptional circumstances.

Test trading

You may be referred to test trading if you have the potential to enter independent self-employment, but not immediately. Test trading can last for up to 26 weeks (NDPG (18-24), Ch 11, para 54). It will offer a paid allowance and enable you to experience the realities of self-employment whilst receiving support and guidance from a provider. During test trading you will be required to undertake training leading to an approved qualification. This should help you increase your general employability as well as enhance your self-employment prospects (NDPG (18-24), Ch 11, para 46).

You will normally enter test trading after 3 months in the Gateway and you will still only be allowed a maximum of 4 months in the Gateway.

You must have a business plan which is approved by the test trading provider. A personal adviser/mentor will be appointed by the provider to support you while you are test trading and for up to 2 years afterwards while you are trading independently. Your ES personal adviser will continue to monitor your progress and lend any necessary support while you are in test trading. You will agree a start date with the provider which may be several weeks after the short course or counselling (NDPG (18-24), Ch 11, paras 48-54).

Allowance payments and status

Whilst in test trading young people are paid an allowance by the ES (NDPG (18-24), Ch 11, para 55). This allowance is equal to the previous benefit entitlement plus a £400 grant spread over the 26 weeks. The £400 is disregarded as income and capital. Whilst on the self-employment part of the New Deal option you have "unemployed" status.

Childcare costs

You may be able to get support with childcare costs from the Discretionary Fund (see page *). They are claimed through the training provider. You may get this support if:


Whilst in test trading you cannot draw down wages or use profit for personal use (NDPG (18-24), Ch 11, paras 56-57). Any profits made during test trading will be held in an account and released only when you leave the New Deal. You are obliged to declare money in the account to the Benefits Agency. You can receive any profits immediately after test trading if you:

If you return to JSA immediately after test trading, the provider will continue as joint signatory for any profits for up to a further 13 weeks. This is to ensure that the money is not assessed in determining your entitlement to JSA. After 13 weeks the provider will stop acting as joint signatory and if you continue to claim JSA you must declare the money on your JSA claim form issued to you by the Jobcentre

Hours of work

It is expected that most participants will need to work at least 30 hours a week. While you are in test trading, you must work a minimum of 16 hours a week, excluding training. If you have an agreed restriction on your Jobseeker’s Agreement (e.g. because of a health condition or caring responsibilities) you may limit your hours accordingly (NDPG (18-24), Ch 11, paras 59-60).


You are allowed up to 10 working days certificated or 6 working days self-certificated sickness at any time and still remain within test trading. If you are sick due to a disability you should be allowed additional time. You may have 5 days cumulative unauthorised absence. Once this has been reached you will be deemed to have terminated the option (NDPG (18-24), Ch 11 paras 128-135).

Referral process

The test trading provider must approve your business plan and agree a start date.

If you have completed Stages one and two of the New Deal self-employment route your move into test trading will have to be agreed by your New Deal personal adviser (NDPG (18-24), Ch 11, paras 76-77). The short course/counselling provider will arrange a start date with you or arrange an interview with the test trading provider if a different provider is used.

If you have not completed Stages one and two of the self-employment route you must see the test trading provider who will consider your business plan and decide the most appropriate course of action. The provider will discuss your business plan and decide whether test trading is the most appropriate way forward for you. The provider will give you information on support organisations and possible funding sources, e.g. loans, grants and ESF funding.

If test trading is the most appropriate way forward for you then the provider will agree a start date. If it is not seen as the best option either by you or by the provider, your New Deal personal adviser will arrange to discuss the alternative steps with you.

Individual Training Plan

You must receive your Individual Training Plan within 2 weeks of starting test trading. This must be signed by you and the provider. It will include the qualification aim or will list the accreditation of key skills. The provider may engage a local training provider to carry out the training. The New Deal personal adviser must agree the Plan (NDPG (18-24), Ch 11, para 88).

Dismissal from test trading

You can be dismissed from test trading if you are not making sufficient progress or are not working/training when you should be. The New Deal personal adviser will refer you to adjudication for a decision in cases of misconduct and may consider whether a return to test trading is appropriate (NDPG (18-24), Ch 11, para 91).

The New Deal for Musicians

The New Deal for Musicians is intended to help young musicians who are eligible for the New Deal for 18-24 year olds into a sustainable career within the music industry, either as artists under contract or as self-employed musicians within the industry (NDPG (18-24), Ch 15, para 2).

The New Deal for Musicians provides three additional elements to New Deal provision: