TE services reform 2024
Ministerial working group decides on funding of services transferring to municipalities and on central government’s tasks

The Ministerial Working Group on Promoting Employment decided on 2 December 2021 on the funding model for the TE services reform 2024 as an incentive for municipalities to develop and offer efficient employment services. The ministerial working group also refined its previous outlines on tasks that are centralised nationally and tasks that are transferring to the municipalities.

“The TE services reform offers a lot of leeway for municipalities to organise services for jobseekers and employers in the best possible way. With power always comes responsibility. The basis for funding as an incentive is that the municipality benefits financially from well-managed employment services,” Minister of Employment and chair of the ministerial working group Tuula Haatainen says.  

Incentive funding model supports employment, labour needs of businesses, and municipal vitality

The objectives of the TE services reform are better targeted, customer-oriented services that meet the needs of local labour markets. A key part of the reform is to create for municipalities a funding model that acts as an incentive for municipalities to develop and offer efficient services. A municipality that reduces periods of unemployment would benefit more financially than at present when a local resident finds work. 

In addition to the labour market subsidy, in future, the municipality’s responsibility for the funding of unemployment benefits would also apply to the basic allowance and a share of the earnings-related unemployment allowance corresponding to the basic component. The municipality’s funding responsibility would be determined on the basis of the jobseeker’s accumulated number of days of unemployment benefit. In accordance with the incentive funding model, the activation of an unemployed person alone, i.e. referring them to the services, would not have an impact on the municipality’s funding responsibility concerning unemployment security. The basis for further preparation is a model where the municipality’s responsibility for the funding of unemployment security would start earlier than at present and increase incrementally.

The transfer of the financial responsibility of unemployment security would be implemented in the relationship between municipalities and central government in a cost-neutral way. 

TE services to be taken over by the municipalities would be funded in full with central government transfers to municipalities

The ministerial working group now made decisions that act as a basis for the preparation of the funding for services. Seventy per cent of central government transfers to municipalities would be allocated to municipalities on the basis of the working-age population and 30 per cent based on the concept of extensive unemployment. Extensive unemployment means the total number of unemployed persons and persons in services, in which case persons in services will also be taken into account in the allocation criterion for central government transfers to municipalities.

The imputed funding based on the central government transfers would be introduced incrementally over the course of two years to ensure that the changes in the municipalities would stay at a reasonable level.

Central government would be responsible for the functioning and management of employment services

According to the ministerial working group, the central government would be responsible for the guidance of the service system and, together with the municipalities, for the assessment of the functioning of the system as a whole. For the purpose of further preparation, the ministerial working group made the following decisions on the guidance of employment management:

• During each government term, the Government would adopt policy recommendations on the targets of employment management as a basis for guidance and dialogue.
• The Government would set up a council for a four-year term in connection with the Ministry of Economic Affairs and Employment. The task of the council would be to monitor and asses the implementation of employment management and to support the nationwide guidance of employment management. The ministries and municipalities would be represented in the council. 
• If a municipality or local government joint services area is unable to organise the services referred to in the law or the government policy, the ministry could decide on launching an assessment procedure concerning the implementation of the organisation responsibility. 
• During the assessment procedure, the municipality or the local government joint services area would draw up an action plan together with the central government in order to safeguard sufficient services in its area. The preconditions and process of starting the assessment procedure would be prescribed separately. 

The ministerial working group stated that a decentralised service system requires a “one-stop shop” for all customer services, as well as a functioning entity of client data systems. On a national basis, it would also be appropriate to maintain a common data repository, which would enable knowledge management and guidance at the same time.

The Government submitted to Parliament a legislative proposal on the reform of digital TE services on 25 November 2021. The objective would be to deploy the Jobmarket service platform for the use of the TE services in May 2022. The Jobmarket would also continue as a national service platform for jobseekers and employers after the municipalities have taken over the services. 

In addition, the ministerial working group outlined that, as a result of the reform, the role of the ELY Centres and the Development and Administration centre for ELY Centres and TE Offices (the KEHA Centre) would be strengthened in the implementation of guidance for the national service system for employment management. The tasks of the KEHA Centre would be organised so that it will be able to support the transition of services in 2024.

Central government would continue to manage demanding expert statements regarding unemployment security tasks and pay security tasks 

The ministerial working group specified the roles of central government and municipalities in terms of services.

The ministerial working group outlined that, in the reform, demanding expert statements and pay security tasks would be the central government's responsibility. 

The ministerial working group also outlined that the responsibility for services in payment matters related to TE services would be transferred to the municipalities. The advisory and customer service tasks of the TE Customer Service Centre would be transferred to the municipalities with regard to the services that will be taken over by the municipalities.

The preparation of the Government proposal will continue on the basis of the ministerial working group’s outlines. The proposal is due to be submitted to Parliament in autumn 2022.

Inquiries: 

Iiris Niinikoski, Special Adviser to the Minister of Employment, tel. +358 295 047372
Jan Hjelt, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment, tel. +358 295 048940