Pay subsidy is being reformed – what is changing for the jobseeker and the employer?

A pay subsidy is a financial subsidy that compensates the employer for a part of the salary costs of an unemployed jobseeker.

The pay subsidy provides a jobseeker with the opportunity of a job for which the applicant’s professional competence is not yet sufficient, or if the ability to cope at work is affected by a disability or illness. The support provides the jobseeker with access to the labour market and helps the employer to find a suitable employee.

The pay subsidy will be reformed, starting on 1 July 2023. The aim of the reform is to promote the employment of those in a weak labour market position and to increase the use of pay subsidies, especially by companies. The pay subsidy reform is part of employment measures aimed at enabling everyone to work according to their work ability.

To whom and under what conditions can a pay subsidy be granted?

Employment with the pay subsidy is primarily limited to unemployed jobseekers who are disadvantaged or have a reduced work ability. As a rule, the support is granted on the basis of a lack in competence.

The pay subsidy is a discretionary subsidy. The subsidy may be granted for a fixed-term employment relationship or an employment relationship that is valid until further notice, a full-time or a part-time employment relationship or apprenticeship training.

A pay subsidy may be granted for promoting the employment of

  • those aged 15–24
  • those aged 50 or older
  • those with only basic education
  • migrants
  • those who have not been employed for at least six months, and
  • those with a reduced work ability.

The reform also introduces an employment subsidy for persons over 55 years of age. This subsidy is intended for hiring a person over 55 years of age if the jobseeker has been unemployed for two years. The subsidy is granted if the statutory conditions concerning the employer, the employment relationship and the person to be hired are met.

The maximum duration of the pay subsidy in general is five or ten months. This depends on the duration of unemployment before the pay subsidy. The pay subsidy may be continued for hiring a person with a reduced work ability for 24 months at a time after the initial 10-month period. If the reduced work ability is permanent, the subsidy may also become permanent.

A pay subsidy may be granted for an apprenticeship for the duration of the entire training. The pay subsidy for persons over 60 years of age who have been unemployed for at least one year may also have a longer duration.

After the reform, the same person may be granted a pay subsidy for another employer immediately after the previous maximum pay subsidy period. The conditions for granting the pay subsidy must continue to be met.

Terms and conditions of the pay subsidy for the employer

Pay subsidies are contingent on the employer paying at least a salary that is in accordance with a collective agreement. If a collective agreement does not apply to the job, the salary must be normal and reasonable in relation to the work.

The pay subsidy regulations will be simplified. In the future, the amount of pay subsidy granted on the basis of a lack of professional skills will always be 50% of the salary costs. In the past, the amount of the subsidy varied depending on the duration of employed person’s previous unemployment. After the reform, the amount of pay subsidy for those with a reduced work ability will increase from 50% to 70% of the salary costs.

Redundancies will not prevent granting the pay subsidy if the employer has hired an equivalent number of employees to replace the employees who have been made redundant for production-related or financial reasons during the previous 12 months. Possible temporary layoffs are not an obstacle to receiving the pay subsidy.

The employer may receive a pay subsidy again for the same person after three years have passed from the end of the previous pay subsidy (so-called cooling-off rule).

Moving forward, salary-related expenses or holiday pay cannot be covered with the pay subsidy. After the reform, households will no longer receive pay subsidies.

Pay-subsidised work is an ordinary employment relationship and does not give the employer any special rights or obligations. The pay subsidy cannot be granted if the employment relationship has started before the decision to grant the subsidy was made.

The pay subsidy is not be granted if the employer has materially neglected its obligation to pay salaries, taxes or statutory contributions.

Pay-subsidised jobs at the City of Helsinki

Pay-subsidised jobs at the City of Helsinki can be applied for by unemployed jobseekers living in Helsinki who are eligible for the pay subsidy or the employment subsidy for those over 55 years of age . The duration of all pay-subsidised employment relationships at the City of Helsinki is seven months. Employment relationships are fixed-term and cannot be continued.

The three-year cooling-off rule does not apply to those covered by the employment obligation. Persons covered by the employment obligation include people aged 57 or more who have used their maximum earnings-related or basic unemployment allowance days since they turned 57.

More information

Pay subsidy, information for jobseekers

Pay subsidies for employers

Frequently asked questions about the pay subsidy reform , The Ministry of Economic Affairs and Employment