Govt moves to reform TE services

The government on Thursday submitted its proposal to the parliament to bring reform in the services of Employment and Economic Development Offices (TE offices), said the Ministry of Economic Affairs and Employment in a press release.

The proposed reform will transfer the services of TE Offices to municipalities on 1 January 2025.

This reform aims to create a service structure that will contribute to rapid employment of jobseekers and increase the productivity, availability, effectiveness and diversity of employment and business services.

The transfer of TE services to municipalities will bring the services closer to private customers and employers.

Transferring the responsibility for employment, municipal education and business services to one organiser promotes the objective of faster employment.

Municipalities are well-placed to offer targeted and tailored services that meet the needs of customers and local labour markets, which will improve the vitality and competitiveness of regions. Regional mobility will also be taken into account in the reform.

“We need to bring our employment services up to the Nordic level so that they can better respond to current needs both in terms of content and structure. For this reason, one of the Government’s employment measures is to transfer TE services to municipalities where they are closer to customers – both jobseekers and employers. The key goal of the reform is to organise employment services so that they support the vitality of regions, increase employment and take advantage of the many opportunities offered by the municipal ecosystem. In addition to employment services, these include services to improve regional vitality as well as educational services,” said Minister of Employment Tuula Haatainen.

The Government proposed to transfer services to municipalities or cooperation areas consisting of several municipalities that have an employment base of at least 20,000 persons.

In this way, the Government wants to ensure that sufficient resources are available for organising TE services in future too and that the services are equally accessible to jobseekers throughout Finland. Linguistic rights will also be protected.

The cooperation areas should be functional in terms of the labour market and employment, and they should border each other.

On certain grounds, municipalities or cooperation areas can apply for an exception concerning the responsibility to organise services from the Government.

The grounds may include vast stretches of archipelago, long distances and realisation of linguistic and cultural rights. All exceptions would be subject to the requirement that the municipality or employment area has allocated sufficient financial and human resources to the arrangement of employment services.

An incentive-based funding model encourages municipalities to organise services that have an impact on the labour market.

Under the model, the municipality will receive an economic benefit, if a jobseeker finds work in the open labour market. The incentives also function between municipalities and thereby promote the regional mobility of labour. The reform’s objective is that 7,000–10,000 more people would be in employment by the end of 2029.

In practice, the municipalities’ responsibility for the costs of the basic component of unemployment security will be broadened.

In addition, the link between unemployment security and the activation of services for the unemployed will be removed. Municipalities will be responsible for funding unemployment security at an earlier stage, with a gradual increase to the amount.

Municipalities will be fully compensated for the increase in the responsibility for funding unemployment security through an increase to central government transfers to local government for basic public services. As a result, the change will not have an effect on the funding position of any municipality at the time of the transfer. The compensation to municipalities will be based on the cross-sectional year, but compensation will be increased annually in accordance with the national pension index so that the compensation will not decrease in real terms over the years.

The services being transferred to the municipalities will form a new central government transfer function, to which a central government transfer of 100% will be allocated. The increase in central government transfers to local government for basic public services will be allocated based on a formula that considers the amount of working age population and the number of unemployed people (50% each). In integration training, the increase will be based on the foreign language criterion. Due to the comments received, the formula’s weighting of the number of unemployed people was raised from 30% to 50% and the weighting of the working age population was reduced from 70% to 50%.

Municipalities would be obligated to use the central government’s customer information system. This would ensure that the practices of entering customer information remain uniform, reduce the data security and protection risk relating to the processing of customer information, avoid challenges arising from procurement legislation and mitigate the financial effects of developing and maintaining data systems and, thus, of the change.

Although the responsibility for organising services is transferred to municipalities, the central government is ultimately responsible for the labour force. The central government is responsible for the employment services system and its functioning at the national level.