500,000 to affect as Kela to cut unemployment, housing benefits

Cuts in general housing allowances and unemployment benefits will impact about 500,000 clients of the Social Insurance Institution-Kela starting from April 1, said Kela in a press release on Monday.

The cuts made to the unemployment benefits will reduce benefits right away in April.

General housing allowances will be reduced when next reviewed, which will take place no later than March 2025.

Kela is going to cut the benefits following the changes to the law made by the Kansallinen Kokoomus (National Coalition Party-NCP) led four-party alliance government as a part of the austerity programme taken by the government.

According to Pasi Pajula, head of Kela’s Centre of Expertise in Income Security Benefits, Kela is getting ready to implement the amendments while preparing for a potential increase in the number of basic social assistance recipients.

General housing allowances will be reduced on 1 April 2024, at which point the compensation percentage will be scaled down and the basic deductible increased. The cuts will reduce general housing allowances for all current recipients.

As of February 2024, a total of 406,226 households of one or more persons received general housing allowance.

However, not all recipients will receive a smaller allowance right away. Instead, their allowance will be reduced the next time it is reviewed. Kela reviews general housing allowance at least once a year to make sure that it is paid out at the appropriate rate.

The housing allowances paid for pensioners, however, will not be affected.

Meanwhile, everyone currently receiving basic unemployment allowance or labour market subsidy from Kela will be affected by the changes in unemployment benefits immediately in April.

Unemployment benefits will be reduced by the elimination of child increases and a EUR 300 per month exempt amount.

The elimination of child increases will affect about 100,000 persons annually, while the elimination of the exempt amount will affect persons who work part-time or do incidental work and receive unemployment benefits.

In 2023, a total of 72,244 persons had earned income while drawing unemployment benefits.

Also scheduled to take effect on 1 April 2024, a further legislative amendment will affect the treatment of housing costs under the social assistance scheme. Kela will no longer pay social assistance for housing costs that exceed municipality-specific maximum limits unless there are specific reasons for the excess costs as spelled out in the law.

If no such reasons exist, Kela will advise clients to seek more affordable housing. Alternatively, customers can pay the excess themselves.

The cuts and other changes in social security scheduled to take effect in April will impact about half a million of Kela’s clients. They are expected to have the greatest impact on young people who are unemployed and/or living alone.

According to Kela’s calculations, the biggest impact will be seen among those young people who already now subsist on a small income.

Students will be impacted by the fact that they are generally not eligible for social assistance. The cuts will therefore reduce their income significantly if the government guarantees available for student loans are disregarded.

The elimination of the exempt amount and the child increases supplementing unemployment benefits will affect those currently receiving such benefits from Kela. The cuts may make some customers eligible for social assistance or qualify them for more assistance than previously.

Kela estimates that the cuts will increase the number of applications it receives for social assistance. Basic social assistance can compensate for the cuts in general housing allowances and unemployment benefits for those with the lowest incomes.

Pasi Pajula said that Kela has taken several steps ahead of the changes, including providing staff training, reconfiguring information systems, increasing customer communications and preparing for higher call volumes for customer service.

All the changes will come into effect automatically, so clients do not have to contact Kela by themselves.

In addition to the cuts scheduled for 1 April 2024, there will be further changes to unemployment benefits and general housing allowances later on in the year.

At the beginning of September, the work requirement that all who are unemployed must meet in order to qualify for unemployment benefits will be extended from 6 to 12 months.

Further, starting 1 January 2025, general housing allowance will no longer be available for housing costs in an owner-occupied home.