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 in 2024. 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 new funding model that offers incentives to municipalities is a central element of the reform in the whole country. 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 is also preparing a number of other reforms to improve the services of jobseekers and promote employment. These include the Nordic labour market service model and the digital reform of TE services. 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 September 2022. The act is due to come into force during 2024.
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 future, activating the unemployed, i.e. directing the unemployed to services, would not affect the municipality’s responsibility to fund unemployment security. In addition, the municipality’s responsibility for funding unemployment security would begin earlier than now. Bringing forward the responsibility for funding would encourage municipalities to develop more efficient services and to direct customers to services that best help them become employed.
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.
Ministries, TE services, ELY Centres, KEHA Centre, municipalities and other stakeholders are currently 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:
- Responsibility of municipalities to organise services: How to ensure that customers have equal access to services and that municipalities can perform the tasks?
- Funding model: How are municipalities encouraged to improve the efficiency and impact of their activities in managing employment?
- Services: Which services should residents receive from the municipality and which services should be centralised?
- 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?
- Personnel and change management: How will personnel be supported in the reform and what kind of change management does it require?
- Information systems and enterprise architecture: What future ICT solution will serve both different municipalities and the government’s centralised information management?
The group consisting of permanent secretaries handles proposals arising from the preparation by public officials, after which they will be submitted to the Ministerial Working Group on Promoting Employment for decision-making.
The government proposal on the transfer of TE services is scheduled to be submitted to Parliament in September 2022.
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.
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.