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How is the unemployment security system financed?

We collect between 50 million euros and 60 million euros in membership fees every year. This may sound like a lot, but the amount that we take in is actually only a fraction of what we pay out in benefits each year, which is between 700 million euros and 800 million euros. Why is there such a big discrepancy?

Our job is to provide earnings-related unemployment security to our members. Financing the system is not our responsibility, however. Unemployment security is a public service and consequently financed through the government budget. Employers also benefit from unemployment security, which is why they, too, contribute financially.

Finland’s comprehensive system of earnings-related unemployment security could not exist without everyone in the labour market paying their share. The system is co-financed by the government, employers and employees. Members of unemployment funds also play a role in financing the benefits and the coordination of the system. Local authorities will begin to contribute in 2025.

The government’s contribution

The government pays for the basic part of the earnings-related daily allowance, which is 37,21 € per day.

If we have to adjust or make deductions from a claimant’s allowance, the government’s contribution is adjusted accordingly.

The government does not contribute to any allowances that we pay for lay-offs or additional days.

The government also pays a share of labour market subsidies and basic unemployment allowances.

The government’s total contribution towards earnings-related daily allowances paid out in 2022 came to approximately 714 million euros. The government also paid  1.23 billion euros towards basic unemployment allowances.

The Employment Fund’s contribution

The Employment Fund covers whatever is left after the government’s contribution and each unemployment fund’s own share of earnings-related daily allowances.

The Employment Fund also pays 94.5 per cent of any allowances that we grant for lay-offs or additional days.

The Employment Fund’s budget is made up of employers’ and employees’ unemployment insurance contributions.

Employers pay insurance contributions towards the cost of earnings-related daily allowances. Employees also pay unemployment insurance contributions to this end. Contributions paid by employees who do not belong to an unemployment fund are used to finance basic unemployment security.

The Employment Fund’s total contribution towards the earnings-related unemployment security system amounted to approximately 1.04 billion euros in 2022. The Employment Fund also paid approximately 243 million euros towards basic unemployment security.

The Unemployment Fund’s share

Our share of the cost of earnings-related daily allowances is 5.5 per cent. In the case of allowances that are paid at the higher rate, our 5.5 per cent share is calculated before the higher rate is applied.

Unemployment funds’ total contribution towards earnings-related daily allowances that were paid out in 2022 amounted to approximately 187 million euros.