Pay subsidy

• Are you planning to hire new staff, but are having difficulties finding an employee with sufficient professional skills?
• Do you want to offer an opportunity to a currently unemployed person to update one's skills at work?
• Would you like to hire an enthusiastic employee for your company who will bring a share of their pay with them?

A pay subsidy is an economic benefit that a TE Office may grant an employer to cover pay costs of an unemployed jobseeker.

The purpose of pay subsidised through the pay subsidy is to advance the employment of jobseekers on the open labour market when they have shortcomings in their professional skills, or suffer from an injury or illness that affects the ability to cope at the work. Although a pay subsidy is granted and paid to the employer, the granting of the subsidy is always based on the unemployed jobseeker's need for the service.

The pay subsidy is a discretionary form of support that a TE Office can grant within the framework of available funding.

The employer must commit to paying a wage in accordance with an applicable collective agreement or, if no applicable collective agreement exists, a prevalent and reasonable wage for the job in question.

A pay subsidy may be granted:

• For open-ended or fixed-term employment and for apprenticeship training.
• It is also available for part-time employment if the granter of the subsidy feels that it is appropriate and that it promotes the possibilities of the jobseeker to find employment. 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. Pay subsidy card
4. Amount and duration of pay subsidy
5. 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.

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.

Pay subsidy card

The TE Office may grant a jobseeker a pay subsidy card to support their independent efforts to find work. If the jobseeker has a pay subsidy card it means 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.

A pay subsidy may be granted for those without a pay subsidy card if the possibility of subsidised employment is included in the employment plan of the unemployed jobseeker.

Read more about the pay subsidy card for jobseekers

Amount and duration of pay subsidy

The TE Office decides on the duration and amount of the subsidy on a case-by-case basis.  

• The length of the subsidy period depends on the duration of the individual's unemployment, the impact of the disability or illness on work performance, and on the employer.
• The pay subsidy can be up to 30%, 40%, or 50% of pay costs.
• The maximum pay subsidy is set in the state budget. In 2017 the maximum was € 1400 a month, in addition to which a percentage of holiday pay up to the level of the pay subsidy decision.

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. 

The pay subsidy for an employer enterprise is granted either as a subsidy defined by the General Block Exemption Regulations of EU State Aid or as a de minimis subsidy.

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.  

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. 

It is possible to receive a pay subsidy in spite of termination or temporary layoffs if, in accordance with the Employment Contracts Act,  

• the employer has, before submitting a pay subsidy application. offered work to employees who have been terminated or temporarily laid off for financial or production-related reasons, and to employees who work part time  
• the employer is not obliged to offer work to a terminated or temporarily laid-off employee.

Applying for a pay subsidy

The TE Office will check the criteria for granting a pay subsidy. A pay subsidy 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 in good time before the start of employment in the E-Services for companies and employers. You can also use this service to track the processing stages of your application.
  - To file an application for receiving payments on line you must sign in to the service with your Katso ID code.
• If you cannot apply electronically, submit an application form to the TE Office in whose jurisdiction the workplace is located, or where the person to be hired lives.
• No attachments are required to the application, as the TE Office will check the conditions for granting a pay subsidy and information connected with taxation and, if necessary, will ask for additional information before a decision is made.
  - 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 an application for an extension 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, apply for the payment of a Pay Subsidy from the development and administration centre for ELY Centres and TE Offices (the KEHA Centre).

Instruction for applying for payment of pay subsidy and contact information for KEHA Centres (in Finnish, pdf, 290 kt, keha-keskus.fi)

• 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. 
  - To submit a payment application on line you must sign into the service with a Katso ID code either as a Master User or funding service user.
• The employment contract or apprenticeship agreement required for the first payment application can be delivered electronically via Oma asiointi (My services).
• Additional information concerning electronic applications or a requests for additional information is available in the E-Services, so follow the processing of the application regularly.
• 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 are unable to submit an electronic application, please submit a payment application with relevant attachments to the KEHA Centre 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.