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Employment Fund

Employment Fund brings security amid labour market changes

The Employment Fund collects unemployment insurance contributions used for funding earnings-related unemployment benefits and promoting employees' competence development through adult education benefits. The Employment Fund is an important part of the Finnish social security system, and all employers and 17-64-year-old employees in Finland are its customers.

The Employment Fund has a staff of some 150. The Fund provides advice to its customers in matters concerning unemployment insurance contributions and adult education, and contributes to changes to legislation in its sector.

The Employment Fund is an organisation established by law and managed by the labour market parties. The Employment Fund was launched on 1 January 2019 through the merger of TVR and the Education Fund. The Finnish Financial Supervisory Authority is the Employment Fund's regulator.

What is an unemployment insurance contribution?

Unemployment insurance contributions are collected from both employers and employees on the basis of the actualised wage bill. Contributions are paid to the Employment Fund by the employer, which withholds the employee's share from the employee's pay. In 2019, the employee's contribution was 1.50% of the pay. The employee contribution is staggered on the basis of the wage bill. The average employers' contribution is the same as for the employer, that is, 1.50% of the wage bill.

Unemployment insurance contributions fund unemployment benefits, insurance benefits, training and pay guarantee

The Employment Fund pays to the unemployment funds what is needed for the earnings-related part of earnings-related allowance with the exception of the share collected through unemployment fund membership fees. The fund also pays the central government transfer to the unemployment funds. The central government transfer is funded by taxes. An amount is paid annually to Kela from the unemployment insurance contributions that corresponds to the share by employees who are not members of any unemployment fund.

Unemployment insurance contributions are not only used to fund unemployment insurance but also employment pension accumulating during earnings-related allowance periods. These funds are paid to the Finnish Centre for Pensions and the State Pension Fund of Finland.

The Employment Fund pays adult education benefits and scholarships for qualified employees to support work competences. Benefits are paid for professional training and development. Employees' adult education benefits are funded in full by unemployment insurance contributions. The state pays for entrepreneurs' adult education benefits and government officials' scholarships for qualified employees.

Employees may be eligible for pay guarantee paid by the Ministry of Economic Affairs and Employment if they have pay receivables owing to the employer's insolvency. This benefit, too, is funded with unemployment insurance contributions.

Business cycle buffer evens out the contributions

Part of the unemployment insurance contributions are transferred to a business cycle buffer, the purpose of which is to guarantee that the level of unemployment insurance contributions remains stable. The objective is to build up a buffer that can be tapped into in times of higher unemployment to keep contribution increases lower. Known also as an EMU buffer, this buffer has been used during the past 20 years several times to moderate contribution increases.

The Unemployment Insurance System

The unemployment insurance system directs the employees' and employers’ unemployment insurance contributions in full to finance unemployment allowances, adult education benefits, and pay and pension security. In addition, they are used to finance training compensation and liability components. You can select English subtitles on the video.

Page updated: 16/4/2021