Questions and answers about the TE services reform 2024 

In its mid-term policy review in spring 2021, the Government decided to continue preparations for the transfer of employment and economic development services (TE services) to municipalities. The services will be transferred on the 1st of January 2025. The reform aims to create a service structure that will contribute to rapid employment of jobseekers and increase the productivity, availability, effectiveness and diversity of employment and business services. The reform will take into account equal access to services.

The transfer of services to municipalities brings them closer to customers. Transferring the responsibility for employment, municipal education and business services to one organiser promotes the objective of faster employment. Municipalities are in a good position to offer targeted and tailored services that meet the needs of customers and local labour markets.

An essential part of the reform is to create a funding model for municipalities that encourages them to develop and provide efficient services.

From the jobseeker’s perspective, the services will become more customer-oriented as they will be provided locally by municipalities. Municipalities can develop services based on the needs of the local residents and employers, which strengthens the vitality and competitiveness of the regions. Regional mobility will also be taken into account in the reform.

A key element of the TE services 2024 reform is an incentive funding model, which will be created in connection with the transfer. The model encourages municipalities to develop their activities to promote employment so that the reform will result in a total of 7,000–10,000 new jobs.

In addition to the transfer of TE services, the Government has prepared a number of other reforms to improve employment and services for jobseekers, including the new customer service model (the so-called Nordic labour market service model), which entered into force on 2 May 2022 as well as Työkanava Oy on 1 July 2022. Together, these reforms will have a positive impact on employment trends.

Read more about other reforms under the current projects of the Ministry of Economic Affairs and Employment 

The government proposal on the transfer of TE services is scheduled to be submitted to Parliament in autumn 2022. The responsibility for organising services would be transferred to municipalities on 1 January 2025. 

An incentive funding model is at the core of the reform.  A municipality will benefit financially when a resident of that municipality finds employment. 

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 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. 

The reform does not have a direct application on how the local government pilots on employment are carried out in 118 municipalities. The implementation of the local government pilots and the permanent service structures created as a result of the TE services reform will differ from each other. That is why the pilots cannot be considered permanent. For example, the incentive funding model is a new concept that does not apply to the ongoing local government pilots. The lessons on new service paths learned from the local government pilots will, however, be utilised in the TE services reform.

The local government pilots on employment aim to increase employment among unemployed jobseekers and to direct them to training and education more effectively. Another objective is to create new solutions to ensure availability of skilled labour. The objective of the pilot is to coordinate different services better and to help customers find effective services. 

Originally, the local government pilots were scheduled to end on 30 June 2023. The local government pilots on employment will be extended until the permanent transfer of services to municipalities.

Read more about the local government pilots on employment

The purpose of the municipal experiment was not to affect the solution on wellbeing services counties. In practice, local government pilots enable the creation of service interfaces together with the wellbeing services counties. Not all clients need health and social services to promote their employment.

Ministries, municipalities, TE services, ELY Centres, KEHA Centre and other stakeholders have been preparing the transfer of TE services together. 

Six preparatory working groups consisting of public officials are preparing the reform and the groundwork for the government proposal. The matters, which the groups are responsible for deciding during preparation, include:

1. Responsibility of municipalities to organise services: How to ensure that customers have equal access to services and that municipalities can perform the tasks?
2. Funding model: How are municipalities encouraged to improve the efficiency and impact of their activities in managing employment?
3. Services: Which services should residents receive from the municipality and which services should be centralised?
4. Guidance, central government tasks and knowledge-based management: What kinds of knowledge-based management and funding instruments will the central government use to guide municipalities in future?
5. Personnel and change management: How will personnel be supported in the reform and what kind of change management does it require?
6. Information systems and enterprise architecture: What future ICT solution will serve both different municipalities and the government’s centralised information management?

About 400 expert stakeholders will be available to train the public officials participating in the preparatory working groups. The sub-group on the service structure of labour market policy will discuss the proposals of the working groups, after which they will be submitted to a group consisting of permanent secretaries. The group will prepare the proposals and the Ministerial Working Group on Promoting Employment will formulate further policies based on them.

The government proposal on the transfer of TE services is scheduled to be submitted to Parliament in autumn 2022.

Ministerial Working Group on Promoting Employment

The working group decided that the services would be transferred to a municipality or a cooperation area consisting of several municipalities that have a labour force of at least 20,000 persons. This corresponds to the minimum size of the ongoing local government pilots on employment. This will ensure that sufficient resources are available for organising TE services and that the services are equally accessible to jobseekers throughout Finland. 

If a municipality does not fulfil the criteria for organising services alone, it should form a cooperation area with one or more municipalities. The cooperation areas should be functional in terms of the labour market and employment, and they should border each other. Municipalities required to cooperate could decide on the form of cooperation in accordance with the Local Government Act, for example, whether to set up a joint municipal authority or agree on a host municipality. Municipalities could also decide on the area in which cooperation is to take place, while considering the above criteria.

In order to ensure that municipalities cooperate, legislation would lay down deadlines by which municipalities should decide on cooperation. If they failed to decide on the matter, the Government would decide on their behalf.

On 7 July, the ministerial working group decided that it would be possible to apply for an exception to the responsibility for organising services due to insularity, long distances and to secure linguistic and cultural rights as well as based on a few special factors relating to the organisation of, need for and costs of services.

All exceptions would be subject to the requirement that the municipality or employment area has allocated sufficient financial and human resources to the arrangement of employment services and that the level and standard of services would not drop due to the exception. A municipality or an employment area would have to apply for an exception to the government and include its plan for arranging employment services with the application. 

Unlike in health and social services, the customers of TE services mainly consist of working-age population. For this reason, the municipality’s labour force (or, active population) is considered a better criterion for the municipalities’ responsibility to organise services than the whole population. 

The labour force is the official definition of the employment statistics of Statistics Finland for persons aged between 15 and 74 who are actively available in the labour market. The labour force is divided into employed and unemployed people. Statistics Finland calculates and estimates the size of the labour force in each municipality and region annually. The data usually dates back one year. 

The municipality or cooperation area responsible for organising the services will be required to allocate sufficient resources to TE services in order to ensure the availability and equal access to services.

Under the Local Government Act, the municipality or joint municipal authority responsible for organising the services is responsible for ensuring equal availability of the services and other measures; for defining the need, quantity and quality of such services; for deciding how these services are provided; for supervising their provision; and for exercising powers assigned to the authority. 

The specific purpose of setting certain criteria for the body responsible for organising the services is to ensure the availability of equal services. The transfer of the responsibility for organising services will involve a transfer of human resources and a significant change in the financing system, which will ultimately safeguard the provision of equal services.

Bilingual municipalities or cooperation areas will be required, based on certain criteria, to agree on mutual cooperation and the division of labour concerning TE services offered in Swedish. This will ensure the availability of Swedish-language services that are essential for jobseekers.

The idea of the funding model is to give municipalities a financial incentive to advance the employment of all unemployed jobseekers in the municipality. It is irrelevant in which municipality the jobseeker will be employed. In other words, the municipality where the unemployed jobseeker is resident will receive the incentive even if the jobseeker finds employment in another municipality. In this way, the model could help expand commuting areas.

When TE services are transferred to municipalities, the personnel of TE Offices will also be transferred from central government to local government. The personnel of TE Offices will be transferred to municipalities applying the transfer-of-business principle in accordance with the Civil Servants Act. In connection with the transfer-of-business, the personnel will retain their current rights and obligations under the terms of their employment or public service relationships.

In the reform, most of the responsibilities of TE Offices for personal customer, employer and business services will be transferred to municipalities. Although the responsibility for organising services will be transferred, the central government will be responsible for the employment services system and its functioning at the national level. In addition to overall responsibility, the central government will have a national coordinating role in service packages that promote significant employment measures together with municipalities across the country. Such service packages include, for example, positive and negative structural change situations and international recruitment.

As a rule, the procurement tasks of the ELY Centres will follow the service solution. As a result, the changes will have a particular impact on tasks in the administrative branch of the Ministry of Economic Affairs and Employment that are the responsibility of ELY Centres in business and industry, workforce and skills.  In the reform, the central government’s role, processes and interfaces in employment management tasks will require reorganisation. At the same time, its role in regional development will be defined. ELY Centres will continue as regional state administrative authorities that respond to the changing needs of businesses, the labour market and rural areas.

The reform would strengthen the role of the KEHA Centre during the implementation of the steering of the national employment services system. The tasks of the KEHA Centre would be organised so that it would be able to support the implementation of the transfer of responsibility for organising services in 2023 and 2024.

In the reform, most of the responsibilities of TE Offices for personal customer, employer and business services will be transferred to municipalities. Although the responsibility for organising services will be transferred, the central government will be responsible for the employment services system and its functioning at the national level. In addition to overall responsibility, the central government will have a national coordinating role in service packages that promote significant employment measures together with municipalities across the country. Such service packages include, for example, positive and negative structural change situations and international recruitment.

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

The ministerial working group has 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.

For the time being, applications for residence permits of employed persons are processed in two stages. First, the TE Office makes a partial decision based on overall consideration, and then the Finnish Immigration Service makes a final decision following other permit consideration. The partial decision concerns the availability of labour (labour market test) and the assessment of the terms of employment and employer’s qualifications.

The Ministerial Working Group on Promoting Employment has outlined that the task of making a partial decision would be transferred from TE Offices to the Finnish Immigration Service. As a result, the Finnish Immigration Service would be fully responsible for the tasks related to work permits after the reform.  

Discontinuing the two-stage process would support the Government’s objective of speeding up the work permit procedure to a maximum processing time of 30 days on average. As part of the transfer of tasks, resources and expertise of TE Offices would also move to the Finnish Immigration Service.

The central government is responsible for the functioning of the employment services system at the national level.  The central government would be responsible for directing the service system and, in cooperation with the municipalities, for assessing the overall functionality of the service system. 

During each term, the government would outline its employment management objectives, which form the basis for guidance and dialogue. The Government would appoint an advisory board under the auspices of the Ministry of Economic Affairs and Employment for a four-year term. Its task would be to monitor and assess the fulfilment of employment objectives and support the national guidance and direction of employment management. Ministries and municipalities would be represented in the advisory board.

If a municipality or a local government co-management area is unable to provide the services laid down in legislation or government policy, the ministry could decide to begin a procedure to evaluate how the responsibility for organising services has been fulfilled. 

During the evaluation, the municipality or a local government co-management area would prepare an action plan together with the central government to ensure adequate services in its area. Separate provisions would be laid down on the preconditions and process for starting an evaluation procedure. 

A decentralised service system requires a “one-stop-shop” that combines services for customers and a functioning system of customer information. At the national level, it would also be appropriate to maintain a common information resource that would also enable knowledge-based management and guidance. Municipalities would be obligated to use the central government’s customer information system. This would ensure that the practices of entering customer information remain uniform, reduce the data security and protection risk relating to the processing of customer information, avoid challenges arising from procurement legislation and mitigate the financial effects of developing and maintaining data systems and, thus, of the change.

Job Market Finland would remain a national service platform for jobseekers and employers even after the services have been transferred to municipalities.
 

The employment services that will be transferred to municipalities under the TE services reform 2024 will become a new central government transfer function for municipalities. This will be financed through the system of central government transfers to local government for basic public services. New central government transfer functions will be fully funded (100%) nationally by central government transfers. 

The funding of TE services that are transferred to the municipalities would be incorporated into the system of central government transfers using the following criteria:

• 50% of the funding would be allocated based on the working age population, and 
• 50% would be allocated based on the number of unemployed, in accordance with the concept of broad unemployment. 

Broad unemployment refers to the total number of unemployed persons and persons in employment services. Therefore, the persons in employment services will also be taken into account in the allocation criteria for central government transfers to local government. The purpose of the criteria is to allocate funding to municipalities according to service needs without weakening the impact of the incentive funding model to a significant degree.

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

However, the funding of integration training for others than refugees will be allocated to municipalities on the basis of the number of foreign-language speakers through the system of central government transfers to local government. For refugees, integration training would continue to be financed as imputed state compensation. The compensation would be paid directly to the municipality to which the refugee moves.
 

In the future, municipalities will receive central government transfers for the TE services that will be transferred to them. The central government transfer is universal revenue for municipalities, which decide on its use independently, taking into account the statutory requirements for organising services. 

An incentive funding model guides municipalities to promote employment through cost-effective services. This means that a municipality that can organise its services effectively can use the remainder of the central government transfer it received for employment management for other purposes.

Wellbeing services counties will be responsible for providing health and social services for the unemployed and for integrating services into packages. If cooperation obligations are laid down for the authorities, the wellbeing services counties will participate as regards their duties.

Anyone can register as a jobseeker and receive employment support services. Participation in work may also be part-time and tasks can be adjusted according to the customer’s work ability.

The Act on Multisectoral Joint Services Promoting Employment will be reformed as part of the legislation on transferring the responsibility for organising TE services. The updated Act will ensure that future employment service organisers, such as municipalities, wellbeing services counties and the Social Insurance Institution of Finland (Kela), will be able to work together for those customers who need multi-sectoral support in finding employment. Practical cooperation takes place in regions, however. The Act provides the framework and authority, but municipalities and wellbeing services counties can decide on the implementation in the best possible way.

TYP is not an organisation but a network-based operating model laid down in the Act on Multisectoral Joint Services Promoting Employment. A network-like operating model similar to TYP will also be possible in the future. 

The key idea of the current Act is to provide services to a certain customer group as an integrated whole. The coordination of services with customer needs will continue to be essential.

The Act will only provide the framework for operations. Municipalities, Kela and the wellbeing services counties would negotiate on the composition and activities of the network in a given area. The geographic area of the network is currently linked to the area of the TE Office. In future, it will most likely be the area of employment management. 

The objective of the legislative reform is to create a clear framework for the division of labour between organisations, while giving regions the opportunity to agree on implementation and consider the special characteristics and needs of the regions. The regions are therefore responsible for clarifying the division of labour while legislation provides the structure for it.