Pay subsidy is granted for employing unemployed persons

Pay subsidy is a discretionary subsidy aimed at promoting the employment of unemployed jobseekers. An employer hiring an unemployed jobseeker may receive financial assistance in the form of pay subsidy that covers 30, 40 or 50% of the payroll costs.

The aim is to promote employment on the open labour market for unemployed jobseekers who have gaps in their professional skills or an injury or illness that affects their abilities to perform their work duties. Although the pay subsidy is granted and paid to the employer, it is always dependent on the service needs of the unemployed jobseeker. The purpose of the subsidy is to compensate for the employee’s lower productivity. The pay subsidy is also a compensation for the fact that the employer uses more time for guiding the employee.

Which employers are eligible for pay subsidy?

All employers, except for central government agencies, are eligible for pay subsidy. The employment relationship may only start after the decision on granting the subsidy has been made. The requirements are that

  • the pay subsidy does not distort competition;
  • the employer is committed to paying a wage laid down in collective agreements, 
  • the employer has performed its statutory obligations.

How can an employer apply for pay subsidy?

The employer must apply for the pay subsidy before the employment relationship starts. The application can be submitted via the Employment and Economic Development Office’s electronic service for employers or by using a form available online for printing. Submitting the application online speeds up the application process.

Pay subsidy reform

The Government Programme includes a number of policies concerning the development of pay subsidies. The aim is to implement an overall reform that takes into account the objectives included in the Government Programme. The current pay subsidy regulation and the related reform needs will be evaluated during the preparation process.

The goal is to significantly increase the use of pay subsidies in companies and to simplify them by reducing employer bureaucracy. In addition, the Government aims to increase the maximum pay subsidy for people with impaired capacity to work, persons with disabilities, the long-term unemployed and immigrants who are hard to employ.

The intention is to reform the pay subsidy in the third sector as part of the package. The aim is that strong individual support, review of work capacity and other services are linked to the third sector’s present pay subsidy so that the model will become a new support for moving to the open labour market. The prospects for introducing subjective pay subsidies for ageing or long-term unemployed people will be investigated as part of the preparation.

The pay subsidy reform was sent out for comments from 1 April to 27 May 2022.

The Government proposal regarding the pay subsidy reform was submitted to Parliament on 19 September 2022. The reform is scheduled to enter into force in 2023.

Read more about the pay subsidy reform

Progress of the pay subsidy reform (plan):  Draft proposal sent out for comments from 1 April to 27 May 2022. Government proposal submitted to Parliament on 19 September 2022. Parliamentary debate and adoption of law in October–December 2022. Law to enter into force on 1 January 2023. Graphic information from 19 September 2022.

 

Inquiries: Ville Heinonen, ville.m.heinonen(at)gov.fi