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Operation of the funds

The purpose of the unemployment funds is to pay earnings-related insurance

Unemployment funds carry out a public duty and their activities are governed by laws. The main laws affecting the functioning of the unemployment funds are the Unemployment Fund Act (työttömyyskassalaki 603/1984) and the Unemployment Protection Act (työttömyysturvalaki 1290/2002). The unemployment funds are also subject to the many laws that govern the activities of public authorities. This includes the Administrative Procedure Act and the Act on the Openness of Government Activities.

The Ministry of Social Affairs and Health provides the unemployment funds with instructions and guidelines regarding the application of these laws. Any changes to the laws governing unemployment funds are also mainly prepared by the Ministry of Social Affairs and Health or the Ministry of Economic Affairs and Employment.

In turn, the Financial Supervisory Authority monitors the activities of the funds. This monitoring includes, for example, the implementation of unemployment security, the operational measures of the funds, their financial status, and management, control, and risk management methods.

The Financial Supervisory Authority also collects statistics related to the activities of the funds.

Laws and regulations

Key laws and decrees: (in Finnish)

For the laws and decrees governing unemployment security, visit the Finnish National online database of legislative and other judicial information. Click the law in question to go to the database.

How is earnings-related allowance funded?

Financing of earnings-related benefits

The State pays an amount equal to the basic daily allowance and 5.5% of the earnings security expenditure (earnings-related allowance and job alternation compensation) paid by the employee fund. The rest of the income security expenditure pays the Finnish Employment Fund.

In an exception to the general rule, the State does not finance benefits paid for additional days or lay-offs, but the Finnish Employment Fund accounts for 94.5% of this expenditure.

The State pays the amount of the earnings-related allowance for the entrepreneurs’ unemployment fund. The Finnish Employment Fund does not pay the daily allowance for entrepreneurs. This is paid by the entrepreneurs’ funds themselves.

The State’s financial contribution is covered by tax revenue. The Finnish Employment Fund’s contribution is mainly covered by the employer and employees’ unemployment insurance contributions and the contribution of the unemployment funds is mainly covered by their membership fees. Thus, for example, members of the unemployment funds fund the income security by paying taxes, the unemployment insurance fees, and the fund membership fee.

Financing of administrative costs of unemployment funds

The administrative costs of unemployment funds are mainly covered by the fund membership fees. In addition to this, the Finnish Employment Fund and the State contribute. The contributions are determined by the number of members of the unemployment funds, the benefit expenditure, and the salaries of employees.

Unemployment funds membership fees

The membership fees of the unemployment funds are overseen by the Financial Supervisory Authority. Some unemployment funds collect membership fees as a percentage of a salary income and others use a fixed monthly or annual fee. The bases for unemployment fund membership fee bases and their extent in the different income categories can be found under the section on Unemployment fund membership fees.

In order to safeguard funding and liquidity, the unemployment fund must have a countervailing fund, the minimum and maximum amounts of which are fixed by the Financial Supervisory Authority. Detailed information on the amounts of the countervailing funds can be found in the Membership and financial statistics publication.

Meeting the shortfall

If the financial statements of the employee’s unemployment fund show that the expenditure has been higher than the income, the difference will be taken from the unemployment fund’s countervailing funds. If their countervailing funds are not enough, the Finnish Employment Funds support fund covers the shortfall. If these funds are insufficient, the State will grant an additional contribution to the unemployment fund. This ensures that the members of the unemployment funds receive their payments under all circumstances. However, the unemployment funds have taken care of their finances in such a way that the unemployment funds’ support fund was last involved in the financing of the unemployment funds in 1997.