Government proposes central government contributions to financing of earnings-related allowances paid during layoff
The Government wants to secure the financing of unemployment benefits under the emergency conditions caused by the coronavirus (COVID-19) epidemic.
The Government proposes that the Act on Financing of Unemployment Benefits and the Act on Unemployment Funds be temporarily amended.
The number of layoffs and applications for earnings-related allowances has increased considerably due to the coronavirus epidemic. Earnings-related allowances paid on the grounds of layoffs are financed from the Employment Fund contributions (94.5%) and the membership fees of unemployment funds (5.5%).
The central government does not normally contribute to the financing of earnings-related allowances paid during layoff. Because of this, there has been an unexpected spike in the Employment Fund’s expenses in particular. At the same time, the falling employment rate leads to a decrease in the revenue from unemployment insurance contributions.
According to the proposal, the central government would temporarily contribute to the financing of earnings-related allowances paid during layoff. The central government would fund the portion of earnings-related unemployment allowance in a layoff period that corresponds to basic unemployment allowance. This funding would be allocated to unemployment funds as central government transfers.
Central government transfers would be allocated for all earnings-related allowances paid between 1 April 2020 and 31 December 2020.
The change would apply to employees and those family members of entrepreneurs who are considered to be entrepreneurs covered by unemployment security. Both of these groups may, under certain conditions, receive unemployment benefit during layoff or suspension of work.
The amendments are scheduled to enter into force as soon as possible, and they would remain in force until the end of 2020.
The proposal is related to the fourth supplementary budget proposal for 2020.
Joni Rehunen, Senior Specialist, tel. + 358 29 516 3435