Many Finns are not aware that the Employment Fund’s annual budget has a direct impact on their life. Unemployment insurance contributions make up a significant part of next year’s budget. Each and every employed Finn can see the impact of these contributions from their payslips.
The unemployment insurance contributions paid by employers and employees are estimated to yield well over EUR 2 billion next year. This money goes directly to Finnish citizens by supporting unemployed persons, adult students, and future retirees in their daily lives.
Most funding for unemployment insurance and occupational pensions
According to the budget, the Employment Fund will pay almost EUR 958 million into unemployment funds next year. In addition, the Employment Fund will pay a state-funded contribution of some EUR 740 million into employment funds. From early 2020, Finland will have 25 unemployment funds paying out earnings-related unemployment insurance to their members.
The Employment Fund pays KELA a share of the income from unemployment insurance contributions that has accrued from non-member salary earners. This share will fund the basic daily allowance component of unemployment insurance. Next year, the Employment Fund will pay KELA a total contribution of about EUR 207 million for non-fund members.
The third largest item in the Employment Fund budget goes to financing occupational pensions. The occupational pension accrues from earnings-related pension periods, adult education allowance, and work leave, and this benefit is funded by income from unemployment insurance contributions. To this end, the Employment Fund is set to pay a total of around EUR 632 million to the Finnish Centre for Pensions and the State Pension Fund of Finland next year.
A total of EUR 195 million in Employment Fund contributions has been reserved for the adult education allowance in the budget. The cost of the adult education allowance is estimated to be EUR 183 million for around 26,000 applicants and EUR 12 million in vocational qualification grants for around 26,000 people.
If an employer has declared bankruptcy or is otherwise unable to pay salaries, employees may be paid the salary claims arising from the employment relationship as wage security. Although the allowance is paid by the ELY Centre, the funds are actually provided by the Unemployment Fund. Next year’s budget for this contribution is EUR 19 million.
Unemployment insurance contributions set to reduce in 2020
As a result of falling unemployment and rising employment, unemployment insurance contributions may be reduced for the third consecutive year.
The employees’ unemployment insurance contribution of 1.25% and the average employers’ contribution of 1.26% play an important role in society, with the Employment Fund and each person who pays unemployment insurance providing EUR 2 billion in job-seeking support next year.
