Impacts of new Government Programme on unemployment security

The new Government Programme published on 16 June 2023 includes several changes to unemployment security. The planned changes to legislation will not be adopted immediately and still require preparation before they enter into force. The schedule and details will be specified as the legislative drafting progresses.

We will notify members about legislative changes as soon as we receive more information about them.

Amount of earnings-related allowance to decrease in stages

According to the Government Programme, the amount of earnings-related unemployment allowance would decrease

• to 80% of the full amount after about two months of unemployment, and
• to 75% of the full amount after about eight months of unemployment.

Currently, unemployment allowance is not staggered and the amount is the same throughout the maximum period of the allowance.

Child supplements to be abolished

Currently, a child support supplement is paid for children under the age of 18. The amount of child support supplement is €7.01 per day for one child, €10.29 per day for two children and €13.29 per day for three or more children.

According to the Government Programme, no child support supplements would be paid in the future. Monthly effect if child supplements are abolished:

• One child: €7.01/day, 21 x 7.01= €147.21/month
• Two children: €10.29/day, 21 x €10.29 = €216.09/month
• Three or more children: €13.26/day, 21 x 13.26 = €278.46/month

National pensions index increases to be frozen

The new Government Programme agrees on suspending increases of the national pensions index. This means that benefits will not increase with rising consumer prices. The significance of the freeze depends on how much prices rise. In 2022, the national pensions index rose by a total of 8% due to increases in consumer prices.

Freezing the national pensions index will affect all recipients of earnings-related allowance.

Employment requirement to be extended to 12 months

The length of the employment requirement will be doubled. Currently, earnings-related allowance can be received after 26 calendar weeks, or approximately six months of employment. In the future, 52 weeks, or about a year, of employment would be required.

Employment requirement to be no longer earned from pay-subsidised work

Current, pay-subsidised work generally counts towards the employment requirement at a rate of 75% of normal employment. In other words, 35 weeks of pay-subsidised work is required to meet the employment requirement of 26 weeks. This is now planned to be abolished, and pay-subsidised work would no longer count towards the employment requirement.

The change concerning the pay-subsidised work will particularly affect people who are unemployed long term.

Employment requirement to be based on pay instead of hours worked

Currently, the employment requirement is earned based on hours worked. According to the Government Programme, the employment requirement will be changed to be based on the employee’s pay. In the model drafted during the previous government, the minimum pay to count towards the employment requirement was about 860 euros a month.

However, the details of how the employment requirement will be changed to be based on pay are not yet clear, so we do not yet know what kind of effects the change would have.

Personal liability period to be extended to seven days

Payment of earnings-related unemployment allowance can begin after the unemployed jobseeker has waited the number of days of the personal liability period. The personal liability period is currently five days. In the future, the period will be extended to seven days.

Holiday compensation to postpone the payment of allowance

In the future, holiday compensation for unused days of holiday paid at the end of an employment relationship will postpone your entitlement to earning-related unemployment allowance.  Holiday compensation equal to one month’s pay postpones the start of your entitlement to earnings-related allowance by about one month. Currently, holiday compensation does not affect the start of entitlement to earnings-related allowance.

The postponement due to paid holiday compensation and the personal liability period will not overlap. The personal liability period begins after the postponement due to possible holiday compensation received.

The effect of the postponement depends on the number of unused days of holiday. At the average level of earnings-related unemployment allowance, one month of unused holidays would reduce gross income by about 1,600 euros.

Exempt amount for part-time employees to be removed

Exempt amount means the amount you can earn without affecting your earnings-related allowance. Currently, the exempt amount is 300 euros for recipients whose application period is one month. Earnings-related allowance is adjusted by deducting 50% of the part of income that exceeds the exempt amount. In other words, the change will reduce earnings-related allowance by up to 150 euros a month for persons with earnings.

Age-related exceptions in unemployment security to be removed

It is also agreed in the Government Programme that age-related exceptions will be abolished. The recipient’s age currently affects many aspects of unemployment security:

• In certain situations, persons aged 58 or over may be paid earnings-related unemployment allowance for 500 days instead of 400 days.
• Persons aged 57 or over may be covered by an employment obligation that guarantees them a job.
• The level of earnings-related unemployment allowance for persons aged 58 or over is protected. The protection applies when the person is in low-paid work and becomes unemployed again, causing the level of earnings-related unemployment allowance to be recalculated.
• Persons aged 60 or over can accrue the employment requirement of earnings-related unemployment allowance by attending services promoting employment.

In addition, persons aged 55 or over may, in certain situations, receive access to education and financial compensation, among other services. This transition security model was created during the previous government to replace the previous model of additional days of earning-related allowance before retirement.

The Government has not provided further details on whether the removal of age-related exceptions applies to all the exceptions listed above.

Job alternation leave system to be abolished

Job alternation leave means that a person takes leave from work for a maximum of six months, and the employer hires an unemployed person for the same period. During job alternation leave, the employee on leave is not paid a salary but a job alternation allowance. Job alternation leave has enabled a break from working life and, on other hand, offered unemployed jobseekers the opportunity to find employment for the duration of the leave.

According to the Government Programme, the job alternation leave system will be abolished.

Possibility for unemployment funds to provide employment services

It is agreed in the Government Programme that unemployment funds could receive the ability to offer employment services to their customers. At present, unemployment funds cannot take any actions to promote or support employment.

Possible introduction of a combination insurance

The Government is preparing a model for combined insurance to improve social security for people who are self-employed and receive earned income at the same time.

Investigation on adopting an universal earnings-related security model

The Government will investigate the possibility of adopting a universal earnings-related security model. Universal earnings-related security is a model in which all wage and salary earners are entitled to earnings-related allowance, regardless of whether they are a member of an unemployment fund.

Entry into force of legal amendments

Not all of the plans announced in the Government Programme will necessarily be implemented in their current form. The changes are likely to enter into force at the start of 2024 at the earliest.