Pay subsidy

As an employer you may be eligible for a pay subsidy when you hire an unemployed jobseeker who finds it difficult to get a job. The jobseekers’ unemployment is caused by lack of professional skills or they have a disability or an illness. 

A pay subsidy is always discretionary and based on the needs of the unemployed jobseeker. The TE Office will assess the extent to which work on a pay subsidy will improve the unemployed jobseeker's professional skills and how the jobseeker will find work in the open labour market. 

The TE Office will also make a decision on the amount of subsidy to be paid and the period over which it will be paid on a case-by-case basis.

A pay subsidy may be granted for an employment relationship that is valid until further notice or for a fixed term (including apprenticeship training).  A pay subsidy may also be granted to part-time employment if the TE Office considers  the part-time work to be appropriate and promoting the person's chances of gaining entrance to the labour market. This may be justifiable, for example, in case of a person with partial working ability finding employment. Pay subsidy will no longer be granted for hiring job alternation leave substitutes.

When reporting a vacancy to the TE Office, include information whether you are also willing to hire a person needing more support at the beginning of their employment relationship than what the average employee would receive. 

Upon agreement, the TE Office may also offer work for persons whose recruitment may make the employer eligible for a pay subsidy.

Page contents

1. Employers eligible for pay subsidy
2. Pay subsidy usage possibilities
3. Duuni card and Sanssi card
4. Amount and duration of pay subsidy
5. Other restrictions for granting of pay subsidies
6. Applying for a pay subsidy
7. Applying for the payment of pay subsidy

Employers eligible for pay subsidy are

• companies
• other communities, such as associations, foundations, congregations and registered religious communities
• municipalities and joint municipal authorities
• households

No pay subsidies are available for central government offices or agencies. This type of employers can, however, be granted an appropriation for job creation in order to hire an unemployed jobseeker.

The employer must pay the employee the salary indicated in the collective agreement that applies to the employment relationship. If no such collective agreement exists, the pay must be the typical and reasonable remuneration paid for the work in question.

A pay subsidy is income subject to a tax for all employers with the exception of private households.

Pay subsidy usage possibilities

Work supported by pay subsidy may be joined with other TE services.

• Labour market training can be followed by pay subsidy supported work or a supported working period may include labour market training.
• Pay subsidy may be granted after a work trial or the TE office may appoint a job coach to support the jobseeker and the employer.

Joining the services appropriately supports the jobseeker’s access to the labour market and helps the employer to find a suitable employee.

Pay subsidy may also be used to help find opportunities on the open labour market for an employee benefiting from the subsidy. The employee may, for example, be transferred to an enterprise to help the employer to estimate the employee’s applicability to the available assignments without taking risks. The transfer is always based on the transferred person’s needs.

The actual employer, who applies for/gains pay subsidy, pays the transferred employee’s salaries. The division of responsibility between the actual employer and the user enterprise is determined in the Employment Contracts Act.

The transfer requires that the user enterprise does not have unpaid taxes or other statutory charges and that it has not neglected the duty to pay salaries.

If an employee's contract has been terminated by the user enterprise or if the enterprise has laid-off an employee for financial or production-related reasons, and the notice period for these has come to an end during the 12 months prior to applying for pay subsidies, an employee supported with pay subsidies can be transferred if the employee has rehired the employee.

The employee’s consent for the transfer and the possibility to notify the TE office of the transfer with the form TEM3.23 prior to enacting it are prerequisites of transferring an employee hired with pay subsidy to a user enterprise.

Duuni card and Sanssi card

The TE Office may grant a jobseeker a Duuni card or a Sanssi card to support their independent efforts to find work. The cards indicate that the employer is eligible for a pay subsidy towards the card holder's payroll costs if employer and employment relationship criteria for granting the subsidy are met.

The card is not a prerequisite for granting a pay subsidy.

Amount and duration of pay subsidy

If a pay subsidy is granted due to shortcomings in the professional skills of the jobseeker, the amount and duration of the subsidy are determined by the length of the unemployment period of person hired for the job.   The longer a person has been unemployed before receiving the pay subsidy, the higher the amount  and longer the duration of the subsidy. In 2017, the maximum amount of pay subsidy is EUR 1,400/month, and an additional holiday pay will be paid that is at maximum the percentage determined in the pay subsidy decision.

If the employer receives a further monetary compensation in addition to the pay subsidy or gets training compensation for the course of an apprenticeship training, the total amount of compensations may not exceed the amount of payroll costs.

When you are considering hiring a jobseeker, you can anticipate the amount and duration of the pay subsidy according to the length of the jobseeker's unemployment:

• Unemployment of less than a year
  - the subsidy covers a maximum of 30% of payroll costs
  - the subsidy period may not exceed 6 months
• Unemployment  of at least one year (12 months within a 14-month period)
  - the subsidy covers a maximum of 40 % of payroll costs
  - the subsidy period may not exceed 12 months
• Unemployment of at least 2 years (24 months within a 28-month period)
  - the subsidy covers a maximum of 50% of the payroll costs 
  - the subsidy period may not exceed 12 months

If the pay subsidy has been granted on the grounds that a disability or an illness of the jobseeker significantly and permanently effects the jobseeker's work performance in the job you offer, the subsidy may cover up to 50% of the payroll costs. The subsidy period may not exceed 24 months at a time.

If the pay subsidy is granted to a person who is 60 years or older and has been unemployed for a minimum of 12 months immediately before the granting of the pay subsidy, the subsidy period may not exceed 24 months at a time.  Based on the length of unemployment, the amount of the subsidy is a maximum of 40 or 50% of payroll costs for the initial 12-month-period  and, subsequently, a maximum of 30% of the payroll costs.

Pay subsidy for apprenticeship training

A pay subsidy may be granted for the entire duration of apprenticeship training. If the amount of subsidy is based on the length of unemployment, it covers a maximum of 30%, 40% or 50% of the payroll costs for a period not exceeding 12 months.  The subsidy for the rest of the course of the training is a maximum of 30% of payroll costs. 

If the subsidy is granted based on a disability or an illness of the jobseeker, it will cover 50% of payroll costs throughout the entire training period.

Associations, foundations and registered religious communities

When an association or a foundation that does not pursue business practices hires a person who has been unemployed for a minimum of two years, the subsidy period may not exceed 24 months.

The pay subsidy for the initial 12 months is 100% for work time of up to 65%. The maximum amount of compensation is EUR 1,800 per month. For the following 12 months, the subsidy covers 30% of payroll costs.

Social enterprises

Social enterprises may be granted a pay subsidy differently from other businesses in the following situations:

• The jobseeker has an illness or a disability significantly and permanently hindering the jobseeker's ability to cope with work
  - the amount of subsidy is a maximum of 50% of payroll costs for a maximum of 36 months at a time
• The person has been an unemployed jobseeker for the consecutive period of 12 months or a corresponding situation
  - the amount of subsidy is a maximum of 50% of payroll costs, however, it may not exceed EUR 1,300/month or 40% of payroll costs without a maximum amount (advantage comparison) for a period not exceeding 12 months.
• The person has been granted 500 days of unemployment benefit on the basis of unemployment
  - the subsidy covers a maximum of 50% of the payroll costs for a period not exceeding 24 months

Work organised by municipalities due to an obligation

When a municipality hires a person for whom they are obligated to offer work, the subsidy covers a maximum of 50% of payroll costs for a period not exceeding  six months.  

Other restrictions for granting of pay subsidies

A pay subsidy may not be granted to an employer in the following circumstances

• if the salary of the person hired with the subsidy is solely based on the outcome of their work: for example, the wage consists of a selling commission that includes no basic salary
• if the work supported by a pay subsidy results in, or could result in, the employer terminating and laying off other employees or changing their contracts to part-time employment.
• if the subsidy distorts competition compared to others offering the same products or services.
• if the employer has substantially neglected the duty to pay salaries, tax payments or statutory charges.
• If the employment relationship for which the subsidy is intended started before the decision on granting the subsidy was made. With the exception of granting a new subsidy period when the new period begins immediately after the previous period ends. An ongoing employment relationship is not an obstacle when an employee hired with subsidy is transferred to the employment of another employer in connection with transfer of business or a similar situation.
• if the employer conducting business practices is a company in trouble referred to by the General Block Exemption Regulations of EU State Aid or if the European Commission has issued a negative Recovery Order against the employer, which declares the subsidy as illegal or unsuitable for the internal market.
• if the employer conducting business practices has laid off an employee for financial or production-related reasons, and the notice period has come to an end during the 12 months prior to applying for pay subsidies. Pay subsidy can be granted if the employer has rehired the employee.

Pay subsidy may not impair the position of the employer’s other employees. 

Applying for a pay subsidy

The TE Office will check the criteria for granting a pay subsidy. A Duuni or Sanssi card presented by the jobseeker does not on its own suffice for granting the subsidy, and the employer must also fill out a pay subsidy application

• Apply for a pay subsidy electronically using the Online services for employers. You can also use this service to track the processing stages of your application.
• To use this online service, you must log in using your Katso ID maintained by the Tax Administration. You can fill out the application via the Katso service either in the Master User role or in the funding service user role of the Ministry of Employment and the Economy's ELY Centres.
• Application by submitting a form: The form TEM320 is used for applying for the pay subsidy. Submit your application to the TE Office closest to your workplace location or to the TE Office whose jobseekers you intend to employ with the pay subsidy.
• No attachments are required to the application, as the TE Office will check all necessary information.
  There is an exception for associations or foundations conducting business practices, who are required to attach copies of their most recent periodic tax return form, latest decision on business income tax and decision on tax exemption if available.
• The employment relationship can start as soon as the pay subsidy has been granted by the TE Office.
• If you are applying for an extension for a pay subsidy, submit the extension application to the TE Office before the end of the subsidy period.  The employment relationship must continue immediately after the previous pay subsidy period has ended.
• If  an employee hired with subsidy is transferred to the employment of another employer in connection with transfer of business or a similar situation, the receiving community must deliver a pay subsidy application to the TE Office within a month of transferring the employee to the service of the recipient of a business transfer or the receiving community.

Applying for the payment of pay subsidy

After the pay subsidy period, you may apply for the payment of the pay subsidy from the development and administration centre for ELY Centres and TE Offices (the KEHA Centre).  The KEHA Centre has six payment districts.

• Apply for payment within two months after the end of the calendar month when the payment period has concluded.
• Apply for payment according to the payment period set in the pay subsidy decision - for a period of one, two or three months.  Adhere to the set payment period throughout the entire subsidy period.
• A month can be defined either as a calendar month (e.g., 1 Jan – 31 Jan 2016) or any other month-long period (e.g., 15 Jan – 14 Feb 2016) if it can be justified, e.g., due to a salary payment period.
• If the support period begins or ends while the calendar month of salary payment period is in progress, the first and last period may be shorter than that specified in the decision.

Attach a copy of the employment contract to the first payment application or enclose an apprenticeship training agreement to your application if a subsidy has been granted for apprenticeship training.

Electronic payment application

• Apply for a pay subsidy electronically using the E-Services for employers. 
• The employment contract or apprenticeship agreement required for the first payment application can be delivered electronically via Oma asiointi (My services).
• The additional information or supplementary request connected with the payment application is delivered via the Oma asiointi service, so it is advisable to check the processing status of the electronic payment application regularly.
• Filling out the payment application online requires you to log in to the service with the Katso ID, either in the Master User role or in the funding service user role.
• If you have applied for a pay subsidy using the printable form, you can apply for payment electronically by arranging the matter with the TE Office where the pay subsidy decision has been made.

Payment application in paper format

• If you apply for payment using an application in paper format, send the payment application including the relevant attachments to your payment district by post.
• If the TE Office has granted a pay subsidy on 01/01/2015 or after, please use the following forms:
  - Form TEM321, municipalities and joint municipal authorities
  - Form TEM322, all employers other than municipalities and joint municipal authorities
• If the TE Office has granted a pay subsidy before 2015, please use the following forms:
  - Form TEM349, municipalities and joint municipal authorities
  - Form TEM353, all employers other than municipalities and joint municipal authorities 

Pay subsidy cannot be paid if:

• the employer does not comply with the terms of the pay subsidy decision
• it is discovered after granting the subsidy that the prerequisites for the pay subsidy are not fulfilled
• pay subsidy has been granted erroneously, in excessive amounts or without justification.

If you have questions, please contact your Local TE Office (The Local TE Services web pages only in Finnish and Swedish)