Government programme promises tightening of income security

Topics

• Income security
• Law change
• YTK

Improving employment and balancing public finances has been the theme of government negotiations. Balancing has been accompanied by many ideas of spending cuts. One of the targets for spending cuts has been income security.

Timetable of proposed changes

Although the government programme has been published, this does not mean that the law will change immediately. So the proposals in the negotiations document do not directly change anything.

The changes set out in the government programme require careful drafting and it is not certain that all of them will be implemented as they stand. We will monitor the situation and help the legislator to ensure that the implementation of the proposed changes does not increase the bureaucracy experienced by applicants.

The amendments will be applied in accordance with rules to be specified after their entry into force. The changes will not apply retroactively to the daily allowances that have already been granted and are waiting to be paid.

Government programme on income security

1. The working period will be extended from the current 26 calendar weeks to 12 months
   
   To qualify for the earnings-related daily allowance, you must have been in stable employment before becoming unemployed. The current requirement is 26 calendar weeks of work. Under the government programme, this requirement would be increased to 12 months, which in practice is achieved by a requirement of 52 calendar weeks. The change is therefore an extension of the work requirement by half a year to a year.
2. The working condition will no longer accrue from pay subsidized work
   
   The Labour Market Authority may, on a discretionary basis, grant wage subsidies for hiring an unemployed jobseeker. For such work, the condition of employment will accrue at a rate of 75%. This means that, in order to meet the 26 calendar week condition, at least 35 calendar weeks of paid work must be completed. In future, under the government programme, no working time can be accumulated at all in paid employment.
3. The condition regarding employment will linked to euros earned instead of hours worked
   
   At present, the hours worked is used to accumulate the condition regarding employment. The government programme provides that in future, the employment condition will be calculated on the basis of the wages paid. This is a complex and major change in the law, the details of which will become clear during the legislative process.
4. The amount of the daily allowance will be staggered
   
   At present, the amount of the daily allowance is calculated when the condition of employment is met and is paid for the entire maximum period of payment or until the daily allowance is recalculated. According to the government programme, the amount of earnings-related daily allowance would be reduced to 80% of the full amount after 8 weeks of unemployment. The daily allowance would further decrease to 75% of full after 34 weeks of unemployment.
5. Restoration of periodizing the holiday compensation
   
   On termination of employment, holiday compensation is paid for untaken holidays. At present, holiday compensation is disregarded. More than ten years ago, holiday compensation was periodized. This means that the holiday compensation prevents the payment of unemployment benefit for the period for which the holiday compensation corresponds to the salary. Now this is being reinstated. So if you are paid, for example, a month’s holiday compensation at the end of your employment, we can only pay unemployment benefit for that month after you become unemployed.
6. The number of waiting days will be increased from five to seven
   
   There is a waiting period at the start of unemployment. Unemployment benefit will only start to be paid after this period. Currently, the waiting period is the equivalent of 5 full working days. In future, this would be 7 days. The waiting period has been changed several times in the past. The current 5 days is linked to the active model. When the active model was introduced, the number of days of waiting was reduced from 7 to 5. When the active scheme was abolished, the number of days was not reverted back to 7 days.​​​​​​​
7. Age-related exemptions from unemployment benefit rules to be abolished
   
   There are a few exceptions to the unemployment benefit rules, where the age of the applicant is the determining factor. The most important of these is probably the maximum payment period of 500 days of earnings-related daily allowance for applicants who have reached the working age of 58 and who, at the time of reaching the working age, have worked for at least five years in the last 20 years. Under the government programme, these will be abolished altogether. This would mean, for example, that the maximum duration of the earnings-related daily allowance for older people would be the same as for others, i.e. 300 or 400 days.
8. Child increase to be abolished
   
   If you have a dependent child under the age of 18, we can pay you the daily allowance plus a child increase. The child increase is 7.01 € per day for one child, 10.29 € for two children and 13.29 € in total for three or more children. Under the government programme, these will be abolished altogether.
9. Exempt amount will be abolished
   
   If you work part-time in a small-scale job with a salary of up to 300 € per month, this will not affect the amount of the daily allowance. This has encouraged unemployed people to work even small jobs. The government programme is based on the idea that the unemployed should be given more incentive to take up full-time work, and so the exempt amount is now to be abolished altogether.
   The exempt amount of the enforcement scheme will be maintained at its current level until further action is decided.
10. Requirement to apply for a full-time job
    
    In the future, recipients of adjusted unemployment benefit may always be required to apply for a full-time job or to participate in TE services alongside part-time work.
11. Report on the development of income support
    
    The government programme includes a commitment to examine the development of income security by the middle of the government term.  The programme states: “By mid-term, the government will examine a universal earnings-related model and a linear model for the duration of unemployment benefit in relation to the working condition.” We do not yet know exactly what this means.
12. Clarification on combined insurance
    
    The government will prepare a model for a combined insurance scheme by mid-March to improve social security for people who are self-employed and employees at the same time.​​​​​​​

Other changes

1. Changes to labour market support
   
   If you have not fulfilled the employment condition or have been unemployed for a longer period of time, you can apply for labour market subsidy from Kela. The government programme also contains a few entries on the development of labour market subsidies, the most controversial being the linking of the amount of labour market subsidy to the applicant’s Finnish language skills.
2. Abandoning the system of job alternation leave
   
   Longer careers have offered the possibility of taking alternation leave. Studies have shown that this has not been successful in achieving its objectives. It has not increased employment or job retention. Over the years, the conditions for alternation leave have been tightened and now the government programme includes a proposal to abolish the alternation leave system altogether. ​​​​​​​

Unemployment funds involved in supporting employment

We have proposed that unemployment funds could also help their members to find work. We have been heard and the government programme includes the possibility for unemployment funds to provide employment services to their customers.

How are the changes progressing?

Once the government is formed, the ministries will make their legislative plans and the legislative work will begin. We provide assistance to the legislator. We want to make sure that changes that bring cuts to unemployment benefits do not increase bureaucracy.

Typically, changes to unemployment benefits come into force at the turn of the year. We expect the first changes to be effective from 1.1.2024. Some of the changes may require longer preparation and on the other hand there are many changes, so some changes may take longer.

We will provide regular updates.