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At a meeting on 27 August 2019, the Employment Fund’s Board of Directors decided to propose to the Supervisory Board, that the unemployment insurance contributions for 2020 will be reduced.
The proposal is to reduce the average contribution for employers by 0.24 percentage points and the employee contribution by 0.25 percentage points. According to the proposal, the employer's lower contribution would be 0.45 per cent of the wage sum (up to a maximum of EUR 2.1 million per year) and the higher contribution would be 1.70 per cent (for the part that exceeds EUR 2.1 million). This would take the average unemployment insurance contribution for employers to 1.26 per cent and the employee contribution to 1.25 per cent of payroll in 2020.
The Employment Fund published its half-year report on 27 August, and it expects its income for 2019 to show a surplus of approximately EUR 500 million and its net position to be approximately EUR 1,500 million at the end of this year.
The business cycle buffer – the maximum net position – is stipulated in law. A proposal has been made to set the maximum at an amount corresponding to the expenditure necessary for an unemployment rate of six per cent – approximately EUR 1,750 million – as of the beginning of next year. This means that the business cycle buffer is approaching the maximum amount.
“We now have 20 years of experience working with the buffer. When times are good, the Employment Fund builds up assets that can be used when unemployment is high and the Fund’s income is low. The business cycle buffer helps employers and employees to avoid large fluctuations in unemployment insurance contributions. It also enables the Employment Fund to finance unemployment allowances and other benefits in a steady manner,” says Janne Metsämäki, the Employment Fund’s Managing Director.
At the moment, it is difficult to forecast how the global economy will change and how this will affect Finland’s economy. Traditionally, national cyclical fluctuations have been reflected in the Employment Fund’s operations with a delay of about six months.
“The Fund’s strong financial position and the lower rate of unemployment in recent years make it possible to reduce unemployment insurance contributions. I am satisfied that the Board of Directors unanimously decided to reduce the contributions,” says Markku Jalonen, Chairman of the Employment Fund’s Board of Directors.
The proposed reduction in unemployment insurance contributions is based on the Employment Fund’s forecast, which is also used to draw up the Fund’s budget for 2020. The forecast considers many factors, including the sum of benefits that must be financed and the Fund’s other expenditure in the coming year.
“Every year, we also prepare an imaginary risk scenario on what would happen if the economy became suddenly weaker and unemployment increased. We prepare comparable calculations for this scenario to help us visualise our risk tolerance. We also compare our calculations with the forecasts from the Ministry of Finance. We have been using the same calculation model for some time now,” says Janne Metsämäki.
The Employment Fund’s Supervisory Board will discuss the proposal at its meeting on Thursday 29 August. After this, the Employment Fund will make a proposal to the Ministry of Social Affairs and Health, and the contributions will be confirmed in the autumn. The unemployment insurance contributions are specified in law every year.
The Employment Fund will hold a background media briefing related to the unemployment insurance contribution for 2020 and other news on Thursday 29 August, 12.30 pm–1.30 pm. Register for the event by contacting firstname.lastname@example.org.
Helsinki, 27 August 2019
Chief Financial Officer
Markku Jalonen, Chairman of the Employment Fund’s Board of Directors, tel: +358 40 547 7710 (amount of payments)
Janne Metsämäki, the Employment Fund’s Managing Director, tel: +358 40 522 3614
NASDAQ OMX Helsinki
Standard & Poor's has therefore kept the credit rating unchanged.
The Employment Fund proposes that the total contribution be reduced by 0.49 percentage points.