Questions and answers about municipalities’ responsibility to organise services

An initial interview will be organised for jobseekers working part-time (working hours at least four hours a week), followed by a job search discussion every three months. The complementary job search discussions following the initial interview may be organised at the jobseeker’s request. In such a case, the number of supplementary job search discussions may be lower and they may be organised less frequently than every two weeks.

If the part-time job lasts less than two weeks, the jobseeker must, as a rule, apply for four job opportunities in a month. In this context, part-time work is considered work in which the regular working time does not exceed 80 per cent of the maximum working time of a full-time employee.

The employment plan of a jobseeker in part-time employment that lasts at least two weeks must include a three-month review period during which the jobseeker must apply for one job opportunity. The jobseeker can meet the obligation to apply for a job opportunity by asking their employer for more work.

The reform will also improve the efficiency of services for the long-term unemployed. In addition to interviews held every three months, jobseekers will take part in a more intensive service period every six months. The period will last for one month and will include two complementary job search discussions. These discussions aim to prevent prolonged unemployment, provide jobseekers with more in-depth support for their job search and employment, and direct them to necessary services.

Based on the service needs of the long-term unemployed, they can always be offered additional personal services and support in addition to the meetings included in the service process. 

A pay subsidy is an economic benefit granted by the Employment and Economic Development Office (TE Office) for promoting the employment of unemployed jobseekers, granted to employers for covering payroll costs. The employer can only receive a pay subsidy for hiring a person who has registered as an unemployed jobseeker.

With the help of the pay subsidy, a jobseeker can also get the kind of work for which their professional skills are not quite sufficient, or they have a disability or illness that affects the performance of tasks.

The purpose is to support unemployed jobseeker’s access to the labour market and help employers find a suitable employee.

The Government wants to simplify the rules on pay subsidy and thereby increase the use of pay subsidy especially in companies. The aim is to increase the effectiveness of the pay subsidy and raise the employment rate.

The reform’s goal is to reduce the bureaucracy related to pay subsidies by simplifying the pay subsidy system. Making the system more predictable and speeding up the granting and payment process would encourage employers, especially companies, to hire more unemployed jobseekers with a pay subsidy.

A new employment subsidy is proposed for people aged 55 or over.

The regulations concerning pay subsidy will be amended as required by the EU State aid rules, and the use of 100% pay subsidy will be restricted for employers engaged in large-scale economic activities. The reform will also bring new employers within the scope of the pay subsidy.

The long-term employment impact of the reform is estimated at 500–1,000 people.

The draft Government proposal on pay subsidy is being circulated for comments between 1 April and 27 May 2022. 

The Government proposal is scheduled to be submitted to Parliament in September 2022. The draft proposal is included in the 2023 budget proposal and will be discussed alongside it. The proposed acts are to enter into force on 1 January 2023.
 

The pay subsidy system would be simplified by restricting the pay subsidy to promote the employment of those unemployed jobseekers who are disadvantaged or disabled workers referred to in the EU State aid rules (General Block Exemption Regulation).  

In future, pay subsidy could be granted to promote the employment of 

• those aged 15 to 24 years 
• those aged 50 years or over 
• those with just a basic education 
• immigrants, and 
• those who have not been in paid employment for at least six months, as well as 
• those with reduced capacity for work. 

Pay subsidy could also be granted for the payroll costs of unemployed jobseekers who are in apprenticeship training.

Currently, the pay subsidy can, in principle, be granted for any unemployed person, but for groups of jobseekers not covered by the Block Exemption Regulation, the subsidy is granted as de minimis aid.

As a rule, the granting of pay subsidies would be based on the lack of professional skills, as before. In order for a person who has been without work for less than a year to be employed with pay subsidy would still require that, based on an assessment, unemployment would be prolonged without pay subsidy.

On the basis of a disability or illness, the subsidy would be granted for the first time on the grounds that a permanent disability or illness of the jobseeker makes it very difficult for them to access the open labour market. In future, the assessment would not consider the nature of the work tasks. However, the continuation of the subsidy in the same employment relationship would still be assessed on the basis of the work tasks.

The conditions for granting a pay subsidy to an employer would be amended so that there would be no impediment to granting a pay subsidy if the employer has hired an equivalent number of employees to replace the employees they have made redundant for production-related or financial reasons in the previous 12 months. In other words, the employer would not be required to recruit the same persons, but the same number of employees. 

The wellbeing services counties would be eligible for pay subsidies (no change to the current situation because, in municipalities, it has been possible to recruit employees to the same tasks).

In future, pay subsidies would no longer be granted to households.

The pay subsidy system would be simplified by harmonising the amount of the pay subsidy. The amount of pay subsidy granted on the basis of the lack of professional skills would be 50% of the payroll costs. Currently, the amount of the subsidy varies depending on the duration of the unemployment of the person to be employed, being either 30%, 40% or 50% of the payroll costs.

However, the amount of the pay subsidy would be 70% of the payroll costs if the opportunities of the unemployed jobseeker to obtain suitable work have been significantly reduced due to a duly diagnosed physical or psychological disability or illness. Currently, the amount of pay subsidy granted on the basis of disability or illness is 50% of the payroll costs. 

Non-wage labour costs or holiday bonuses payable by the employer could no longer be covered by pay subsidy. In addition, other changes would be made to the eligible costs so that the national income register could be used more efficiently in the payment of pay subsidies.

The definition of eligible costs would be specified in such a way that as eligible costs would be considered the wage paid to the employee on the basis of working hours or performance of the contract before the withholding of statutory insurance premiums and taxes. The pay supplements related to regular working hours and working conditions would also be included.

Eligible costs would not include

• non-wage labour costs payable by the employer
• holiday bonuses
• employee benefits
• tax-free or taxable compensations
• additional work or overtime pay or cash compensation from the working time account
• the percentage of the pay that is determined on the basis of the work performance of the person employed on the subsidy or is based on the employer's result
• pay for the period during which the employer is entitled to sickness allowance or some other benefits

The pay subsidy would be applied for payment by pay period. The maximum amount of the subsidy would be determined according to the length of the pay period and laid down by decree. Currently, the pay subsidy is applied for payment in payment periods of one, two or three months.

Depending on the duration of the unemployment preceding the pay subsidy, the pay subsidy would be granted for five or ten months. A 10-month subsidy period would require that the jobseeker has been unemployed for at least 12 months in the previous 14 months or that the subsidy is granted on the basis of disability or illness. If the employment relationship is shorter than five or ten months, the subsidy is granted for the duration of the employment relationship. The TE Office would no longer have any discretion in determining the duration of the pay subsidy period. 

If a disability or illness significantly lowers the employee's productivity permanently or in a permanent manner, after 10 months, the pay subsidy period could be extended by a maximum of 24 months at a time. 

Even in future, a new pay subsidy could be granted for unemployed persons 60 years of age or over for the same employment relationship for a minimum of 12 months in periods of up to 24 months.

Similarly, the subsidy for apprenticeship training could be granted for the entire duration of the training, in the same way as now. 

It would be possible to grant a pay subsidy again to promote the employment of the same person without a certain period of unemployment, provided that the person still belongs to one of the target groups for the pay subsidy and that the conditions for granting the subsidy are otherwise met. However, the subsidy could not be granted again to an employer who has previously been granted a pay subsidy for the payroll costs of the same person. 

At present, after the maximum duration of the pay subsidy period, the person must be unemployed for at least 10 months before they can be re-employed with a pay subsidy. If the maximum duration has not been reached in the previous work supported by a pay subsidy, the calculation of the maximum duration starts again after 24 months have passed since the end of the previous pay subsidy period. Currently, legislation does not restrict the same employer repeatedly employing the same persons on a pay subsidy.

The Act on Social Enterprises would be repealed and, consequently, also the relevant exceptions related to the amount and duration of a pay subsidy.

The beneficiary of the pay subsidy could transfer an employee employed with the subsidy to perform work tasks for another employer (user company). Instead of the current notification procedure, in future, the transfer should be applied for, and the TE Office would make a decision on the transfer. The purpose of the procedure is to ensure that the user company would be subject to the same conditions concerning the employer as if they were applying for the pay subsidy themselves. In addition, this would prevent distortions of competition and ensure that the tasks in the user company are appropriate from the perspective of paying the pay subsidy. 

Distortion of competition would be prevented by requiring the user company to pay a market price compensation for the transferred person, taking into account that the actual employer receives a pay subsidy for the person. In addition, the amount of pay subsidy would be reduced further for the duration of the transfer if the user company were entitled to a lower pay subsidy than the actual employer. However, the amount of the subsidy would not be increased for the duration of the transfer if the user company could receive a higher subsidy than the actual employer if they were to apply for the pay subsidy themselves.

EU State aid rules would apply when the aid measure fulfils all the criteria for State aid:

1. public funds are channelled to companies, or economic activities (the legal form of the unit is irrelevant for the assessment)
2. the advantage is selective, or only targeted at certain undertakings
3. the measure distorts or threatens to distort competition by favouring certain undertak-ings 
4. the measure affects trade between Member States.

The granting of pay subsidies is channelling of public funds, which means that the assessment of State aid rules is relevant in the case of pay subsidies. 

Currently, when granting pay subsidies, joint procurement of labour market training, subsidies for arranging working conditions or employment policy project support, State aid rules are not applied to activities other than those considered business activities. There are challenges related to interpreting the definition of activities currently considered business activities, and the application does not comply with the assessment subject to State aid rules. In connection with the reform, national regulation would be made more consistent with EU State aid rules. 

As regards joint procurement training and subsidies for arranging working conditions, State aid rules would apply in future when the training or support is targeted to an employer engaged in economic activities. As concerns employment policy subsidies and 100% pay subsidy, State aid rules would not apply if the activities of the aid or support beneficiary were assessed not to affect the trade between EU Member States. Further provisions on the evaluation criteria would be laid down by a Government decree.

A 100% pay subsidy could be granted to an association, foundation or registered religious
community (organisation) for hiring a person who has been unemployed for at least 24 months in the past 28 months to cover up to 65% of the maximum working time in the sector. In this respect, the proposed model corresponds to the current situation.

A 100% pay subsidy could be granted as support other than State aid to an organisation whose activities, according to an estimate made by the granting body, do not affect the trade between EU Member States (effect on trade). The following criteria would apply to the assessment:

• The value of goods and services sold is less than EUR 100,000 per year.
• It is not possible to order goods and services online or use them online, excluding situations where marketing takes place online, but the goods must be picked up from a specific location or the service consumed in a specific location.
• Almost all or all customers are persons living in Finland or organisations registered in Finland.
• The provision of goods and services takes place only in the area of one or a few municipalities bordering on each other. More than 90% of the natural persons who are customers live and other legal persons who are customers are domiciled in the above-mentioned area of activity, or if the activity takes place in the area of one municipality only, more than 90% of the natural persons who are customers live and other legal persons who are customers are domiciled in the area of this municipality and its neighbouring municipalities.

If the organisation carries out activities with an effect on trade, the 100% aid would be granted as de minimis aid:

• All associations, foundations and registered religious communities can be granted a 100% pay subsidy.
• In this respect, the maximum amount of aid granted under the de minimis regulation (in most cases EUR 200 000 over three fiscal years to one beneficiary) limits the number of persons employed with the 100% aid. At average price level, the sum corresponds to employing approximately 14 people with a 100% pay subsidy for 10 months.
• Any other de minimis aid granted to the beneficiary would also limit the eligibility for 100% aid.

The reform proposes to introduce an employment subsidy for those aged 55 or over. The aid would be granted without consideration of expediency as long as the conditions laid down in the Act were met. 

The subsidy would be granted if:

• the person to be employed has reached the age of 55 and been unemployed for at least 24 months in the last 28 months; and
• the person hired on the subsidy works for the beneficiary under an employment contract for at least 25 hours per week or at least 65% of the maximum working time in the sector; and
• the employer agrees to pay at least a salary indicated by the collective agreement applicable to the employment relationship, or, if there is no applicable collective agreement, the usual and reasonable pay for the work in question.

Contrary to the above, no aid would be granted if:

• the conditions concerning the employer laid down in the provisions on pay subsidy are not met; or
• the wages of the person to be employed on the subsidy would be determined solely on the basis of their work performance or they would be hired as a substitute for the duration of a job alternation leave.

The conditions for granting the subsidy related to the employer would largely be the same as in the case of a pay subsidy, but the TE Office would not have discretionary powers when it comes to, for example, tax debts. Instead, tax debts would prevent the granting of the subsidy. In the case of a pay subsidy, following consideration, the employer could be granted a pay subsidy regardless of tax debts, for example, in a situation where the employer can present a payment plan and the amount of the debts is small. 

The subsidy would cover 70% of the eligible payroll costs for 10 months, but no longer than for the duration of the employment relationship. The same rules on eligible payroll costs as for pay subsidy would apply for this form of support. 

The support period could be interrupted if the payment of wages is interrupted for at least one month, due to lay-offs, for example. The support period would be extended by the duration of the interruption, provided that the conditions concerning the employer and the employment relationship are still met. The provisions on obstacles to the payment of pay subsidies and pay subsidies in situations involving business transfers would also apply to the employment subsidy.

It is estimated that, somewhat more than before, the focus of employment measures would be on people with partial work ability, integrating immigrants, young people, the elderly and those who have only completed basic education. In addition, a higher number of employers would be entitled to pay subsidies.

Changes related to the target group and discretion may affect the number of people employed on the subsidy, but, for the most part, it is impossible to assess this in numerical terms.

The proposed changes to the eligible costs reduce the amount of support paid to municipalities for fulfilling their employment obligation. Observations on the combined effect of the subsidy rate and eligible costs as regards other pay subsidies:

• The amount of pay subsidy would increase from the current level in slightly less than half of the pay subsidy periods.
• It is estimated that the amount of support would remain roughly the same in approximately one quarter of the pay subsidy periods.
• In less than one third of the periods, the amount of support is estimated to be lower than it currently is.
• Higher support increases the demand for work supported by a pay subsidy and lower support reduces the demand. 

The simplification of the conditions of support and changes in payment are aimed at
making the pay subsidy an attractive product from the employer's point of view and thus increasing the number of people employed with a pay subsidy. It is not possible to assess any numerical impacts of this.

The reform consists of several different elements, the combined effects of which are uncertain. Some of the changes are likely to reduce the number of people employed on a pay subsidy and others to increase it. The elements that increase the number of people employed are particularly targeted to companies where, according to studies, work supported by a pay subsidy has the greatest positive employment impact. As a result, in the long term, the number of those employed after the support period is expected to increase by some 500–1,000 people.

The number of persons in subsidised work may decrease if the elements that decrease demand are realised more strongly than those that increase demand. On the other hand, there are more elements that increase demand. Changes in the duration of support periods may also lead to a reduction or increase in the number of persons employed on average. It is estimated that the number of people employed on pay subsidy may decrease by approximately 1,000 person-years or increase by approximately 3,500 person-years at most. It is unlikely that either of the extremes would be realised. It is estimated that the impacts are likely to settle somewhere halfway between the two extremes, which would result in a moderate increase in the number of people employed on the subsidy.

The estimated number of people employed on a 100% pay subsidy would be approximately 60–70% of the current volume of those employed on a 100% subsidy.

Some employers would probably also employ people at lower subsidy rates, so the change
in the total volume may not be this big. The volume is estimated to fall by 900 people, whereas 500 people would be employed at lower support rates.

All current employers receiving 100% support could receive 100% support in future as well.
In addition, there would be a slight increase in the number of eligible employers. In most situations, the change would not have impact on employers employing
fewer than five employees per year. The change would affect employers bigger than this with extensive economic activities in such a way that, on average, it would limit the number of people employed with 100% support to approximately five persons per year. However, if the economic activity is limited, this restriction would not apply. The change will not affect the possibility of providing employment at lower subsidy rates.

The aim of the reform of digital TE services is to provide jobseekers and employers with digital services that will meet their needs far better than before and make the services more user friendly. As part of the overall reform, a new service platform will be created that will improve the matching of jobs with employees and will enhance job search and employment services.

The new digital TE services will gradually replace the digital services for customers and specialists and the customer information system used by TE Offices (te-palvelut.fi). From now on, the services for personal customers, businesses and specialists will be available on the Job Market service platform. Various information services will also be transferred to Job Market.

The reform will also clarify and update the regulation on the processing of customer data in public employment and business services.

Job Market Finland is a new, joint, open and free employment service and meeting place for jobseekers, employers, employment agencies and authorities. 

The new Job Market platform will replace the digital TE services for customers and specialists and the TE Offices’ customer information system. Job Market will be introduced in stages. The national te-palvelut.fi website is no longer available after 2 May 2022, and its content and e-services are transferred to the Job Market platform.

The new information system services of the TE Administration will be entirely functional by the end of 2023.

Job market

Jobseeking today requires efficient and modern digital services. The functions and technology provided for jobseekers and employers by the former digital TE services were outdated and do not meet customers’ varied service needs in the best way. 

The TE Offices’ current customer information system (URA system) will reach the end of its useful life at the end of 2023 and the system will be replaced with a new customer information system.

The laws concerning the reform entered into force on 23 May 2022. The new digital services will be introduced in stages. 

• Job Market Finland was launched in May 2022.
• The updated information system services will be fully implemented by the end of 2023.

Initially, the reform will be visible as a change in online services as electronic services and data content are transferred to the Job Market. Customers of TE services (te-palvelut.fi website) have been directed to use Job market from 2 May 2022. The Job Market enables jobseekers to create and publish a job search profile, which helps both jobseekers and employers to find each other better than before.

The key parts of the reform will be completed at the end of 2023, when the new customer relationship management system (Specialists’ Job Market Finland) will be made available to the officials at the TE Offices and local government pilots on employment.