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Oikopolut

Government Programme reforms to unemployment security

Oikopolut

New Government Programme

Programme of Prime Minister Petteri Orpo’s Government was published on 16 June 2023 and as expected, it also included many changes to earnings-related security. The law will not change immediately, and the amendments will need to undergo legislative drafting before entering into force. Not all the stated policies will necessarily be implemented as entered in the Government Programme.

The Parliament has approved the first of two sets of legislative amendments concerning unemployment insurance, which cut the amount of unemployment insurance and limit the right to benefits. Some of the changes will take effect on January 1, 2024, and some later in the year.

The government's second presentation on changes to unemployment insurance is scheduled to be issued in February of next year. The subsequent set of legal amendments includes the staggering of the earnings-related daily allowance and abolishing the age-related exemption rules.

The first changes will enter into force on January 1, 2024. We will update the information below as soon as the content and effective dates of the legal changes are confirmed.

 

According to the Government Programme, the amount of earnings-related unemployment allowance would fall to 80% after 2 months (8 weeks) of unemployment. The amount would fall to 75% after 8 months (34 weeks) of unemployment.​​​​​​​​​​​​​

Effect per month: If the monthly salary is € 2,500 

Monthly salary Earnings-related allowance ⇒ 2 months Earnings-related allowance 2-8 months Earnings-related allowance 8 months ⇒
€ 2,500/month € 1,515/month € 1,212/month € 1,136/month
€ -303/month € -379/month

 

Effect per month: If the monthly salary is € 3,000 

Monthly salary Earnings-related allowance ⇒ 2 months Earnings-related allowance 2-8 months Earnings-related allowance 8 months ⇒
€ 3,000/month € 1,730/month € 1,384/month € 1,298/month
€ -346/month €-432/month

According to current information, it will enter into force in September 2024.

 

2. Child increments will be abolished

At present, the child increment is paid for children under the age of 18. The child increment is EUR 7.01 per day for one child, EUR 10.29 for two children and a total of EUR 13.29 for three or more children.

In 2023, an additional increase was made to the child increment of the unemployment security, which will be removed at the beginning of 2024. Due to the removal of the increment the child increment will decrease by 25–48 euros per month, depending on the number of children.

Parliament is also considering two amendments to the law that affect child increments. The government has proposed freezing index increases for the years 2024–2027. As a result, the usual index increase for the child increment would not be made at the turn of the year.

According to the Government Programme, no child increment would be paid at all in the future.

The law change has been approved, will enter into force on April 1, 2024.

  • Transition provision: Applies when paying unemployment benefit from 1 April 2024.

Effect per month:

Child increment according to the number of children in 2023
The increase is omitted, impact/month
One child: 7,01 €/day -150.71 €/month
Two children: 10,29 €/day -221.23 €/month
Three children:  13,26 €/day -285.09 €/month

 

3. The employment condition will be extended to 12 months

Currently, 26 calendar weeks,(half a year) of employment entitles you to earnings-related daily allowance, whereas in the Government Programme, the requirement would be 12 months.

The law change has been approved, will enter into force in September 2024.

  • Transition provision: Applies from September 2, 2024, when one full or half month of employment can be included in the working condition. From the period before September 2, 2024, the calendar weeks taken into account in the working condition will be changed to working condition months.

4. The employment condition will be linked to euros earned

Currently, the employment condition accrues on the basis of working hours. According to the Government Programme, the employment condition would in future accrue on the basis of wages paid. However, the details of this are not yet clear, so we cannot currently say what the impact of the change will be on our members.

The law change has been approved, will enter into force in September 2024.

  • Transition provision: Applies to wages earned and paid on or after September 2, 2024.

5. The qualifying period will increase to seven days

Unemployment benefits are only paid after the qualifying period, which is currently five working days. In future, the qualifying period would be increased to seven days.

The law change has been approved, will enter into force on January 1, 2024.

  • Transition provision: Applies if the deductible period starts on or after January 1, 2024.

Effect per month: approx. € 150 (2 x the amount of your daily allowance)

 

6. Periodisation of holiday compensation will be reintroduced

In future, annual holidays not taken by the end of the employment relationship will postpone the start of earnings-related unemployment allowance payments by as many days as the holiday compensation paid corresponds to the average salary for the number of working days.

The periodisation applies to full-time employment that has lasted more than two weeks and has ended. Holiday compensation paid for part-time employment are not periodised but are adjusted when the daily allowance is paid.

The periodisation of holiday compensation does not affect lay-offs, because then the employment relationship does not end completely.

The law change has been approved, will enter into force on January 1, 2024.

  • Transition provision: Applies to annual holiday compensation that is paid on the basis of an employment relationship that ended on or after 1 January 2024.

For example, if you are paid a holiday compensation equivalent to a month’s wages when your employment ends, it is possible to start accruing the waiting period and pay the unemployment benefit only when this paid period ends, in this case, after about a month.

Example of periodization:

The person's full-time employment, which lasted more than two weeks, has ended on January 31, 2024. At the end of his employment, he has been paid 1,500 euros in holiday compensation for annual leave that he has not taken.

His average monthly salary has been 3,000 euros and his daily salary 3,000 euros: 21.5 days = 139.53 euros/day.

The holiday compensation is divided by the average daily wage of 1,500 euros: 139.53 euros/day = 10 days.

10 payable days, i.e., two weeks from the end of the employment relationship, are used for the periodisation of holiday compensation.

Earnings-related daily allowance cannot be paid from 1 February to 14 February 2024. After the period, the waiting period is taken into account, which is seven days, i.e. starting on February 15, 2024 and lasting until February 25, 2024.

The payment of the earnings-related daily allowance can therefore start on 26 February 2024.

7. The protected part for part-time workers will be abolished

The protected part of earnings is the amount of money you can earn without affecting the amount of earnings-related daily allowance. At present, the protected part in part-time work is a maximum of EUR 300 per month, which means that this is how much you can earn without it reducing the amount of your earnings-related daily allowance.

The law change has been approved, will enter into force on January 1, 2024.

  • Transition provision: Applies when paying for application periods starting on or after April 1, 2024.

Effect per month:

2023 calculations

For an applicant with a monthly salary of €2,500, the full daily allowance is €70.48/day

Monthly salary € 2,500/month
Salary for part-time work € 1,400/month
Protected part of earnings € 300/month
Remaining salary € 1,100/month
50% of the remaining salary affects the daily allowance € 550/month
The remaining 50% is divided by the number of days worked during the application period 21.5 days/month
Sum deducted from applicant’s full daily allowance € 25.58/day

 

Full earnings-related allowance/day Adjusted earnings-related allowance/day Adjusted earnings-related allowance /month
€ 70.48/day € 44.90/day € 965.35/month

 

2024 calculations

For an applicant with a monthly salary of €2,500, the full daily allowance is €70.48/day

Monthly salary € 2,500/month
Salary for part-time work € 1,400/month
Protected part of earnings
Remaining salary
50% of the remaining salary affects the daily allowance € 700/month
The remaining 50% is divided by the number of days worked during the application period
Sum deducted from applicant’s full daily allowance € 32.55/day

 

Full earnings-related allowance/day Adjusted earnings-related allowance/day Adjusted earnings-related allowance /month
€ 70.48/day € 37.93/day € 815.49/month

 

Decrease in adjusted daily allowance following the law reform € -149.86/month

 

Under the Government Programme, age-related exceptions will be abolished. Age affects many aspects of unemployment security:

  1. Persons aged 57 or over may be within the scope of the employment obligation, which guarantees them a job.
  2. The daily allowance for persons aged 58 or over is protected. The protection applies to persons in low-paid jobs who become unemployed again so that the amount of their daily allowance would be recalculated.
  3. Persons aged 60 or over may fulfil the earnings-related employment condition when participating in a service promoting employment.
  4. Note: The Government has not provided further details on whether the entry applies to all age-related exemptions.

The government has not given details of which age-related exemptions might be affected by the changes.

 

According to current information, it will enter into force in September 2024.

 

9. Report on the development of income security

According to the Government Programme, the Government will examine a model for transitioning to universal earnings-related security.by the mid-term policy review. Universal earnings-related security means a model where all wage earners would be entitled to earnings-related daily allowance regardless of whether they belong to an unemployment fund.

We do not yet have details on this, but we will follow how this progresses.

 

10. The job alternation leave system will be abolished

Job alternation leave has enabled employees to take a break from work and, correspondingly, offered unemployed jobseekers an employment opportunity for the duration of the job alternation leave. This system would now be abolished altogether.

According to the government's draft proposal published on December 12, 2023, the abolition would take effect in such a way that the job alternation leave could still start on July 31, 2024. The job alternation leave that started in July could continue for the maximum number of 180 calendar days.

For the job alternation leave to be considered to have started by 31 July 2024, the job alternation agreement should be submitted to the TE Office and the start date of the employment contract replacing the alternation leave should be no later than 31 July 2024.

The purpose of the government's proposal on the abolishment of the Act on Job Alternation Leave is to be presented to the parliament in February.

The job alternation leave system is scheduled to be abolished on August 1, 2024.

 

11. Possible combined insurance

By the mid-term policy review, the Government will prepare a model for a combined insurance scheme for people who are self-employed and employees at the same time.

 

12. Unemployment funds will be allowed to offer employment services to their customers

The Government Programme sets out that unemployment funds can offer employment services to their customers. At present, funds cannot do anything to promote or support employment.

 

 

 

13. The employment condition accrue from pay subsidy work

In the current situation, the employment condition accrue from pay subsidy work 75 percent of the working condition, i.e. at least 35 calendar weeks of work have been needed to fulfill the 26 calendar week working condition. This would now go away and the working condition would not accumulate at all. A legislative proposal on the matter has not yet been issued.

According to current information, it will enter into force in September 2024.

 

Not all of the stated policies will necessarily be implemented as entered in the Government Programme. The amendments will enter into force in 2024 at the earliest, and we will provide details about them as soon as we receive more information.