The unemployment pathway to early retirement, or basic unemployment allowance for additional days, will be phased out from the beginning of this year. The minimum age limit for the basic unemployment allowance for additional days increased for those born in 1963 and 1964, and those born in 1965 or later can no longer take the unemployment pathway to early retirement.
The unemployment pathway to early retirement was replaced by the new transition security system at the beginning of 2023. It is a system created to improve the labor status of those over 55 years of age, which includes a transition security allowance and voluntary transition security training for dismissed employees.
The goal of the reform is to promote the employment rate of those over 55 years of age and to improve their labor status and coping at work.
The payment of basic unemployment allowance for additional days will be phased out
The unemployment pathway to early retirement has made it possible to continue paying earnings-related daily allowance to unemployed people aged 61–62 until retirement age, even if the maximum payment period of the earnings-related daily allowance has ended before that. From the beginning of 2023, the age limit for the additional days was increased from 61–62 years to 63 years for those born in 1963, and to 64 years for those born in 1964. With the reform, the pathway to early retirement will no longer be available for those born in 1965 and later, and the entire system will cease to exist in 2030.
The new transition security system for dismissed employees entered into force at the beginning of 2023. It includes a transition security allowance, the right to transition security training, and a longer paid leave to find employment. An employee is considered to be covered by the new transition security system if their employment relationship has been terminated on financial and production-related grounds no earlier than January 1st, 2023, if they are at least 55 years old on the date of dismissal, and if they have been employed by the same employer for at least 5 years.
A person who meets the criteria must register as a jobseeker at the TE Office within 60 days of being dismissed. The TE Office will issue a statement to the unemployment fund or Kela, stating whether the person meets the conditions of the new transition security allowance or not.
Employees who have been dismissed will receive a transition security allowance equal to about one month’s salary from the unemployment fund or Kela.
When determining the amount of the transition security allowance, the following are considered: the salary paid by the dismissing employer that is subject to employee pension insurance, as well as any other compensation considered to be earned income that has been paid based on the terminated employment relationship during the 12 calendar months preceding the date of dismissal.
Apply for transition security allowance in writing from the unemployment fund
You must apply for the transition security allowance in writing from the unemployment fund that you were a member of on the day of dismissal. If you are not a member of an unemployment fund, you will receive the transition security allowance from Kela instead. Remember to submit the application in time, as the transition security allowance will not be granted without a compelling reason if the application has been initiated more than three months after the end of the employment relationship.
You can receive transition security allowance simultaneously with the unemployment benefit or other benefits, but receiving transition security allowance does affect the amount of income support you may receive. You may be entitled to transition security allowance already during the notice period.
The purpose of transition security training is to improve the professional or entrepreneurial skills of those who have been dismissed.
There is no obligation to participate in the transition security training. Participation is completely voluntary. The training is procured by the TE Office or the ELY Center, and it lasts a maximum of six months. The value of the training should correspond roughly to a salary of two months.
Transition security training should be organized so that the person who has been dismissed can start the training within three months of the end of their employment relationship. The training can also start later due to certain justified legal reasons, but no later than 12 months after the end of the employment relationship. The right to transition security training ceases if the dismissed person does not start the training or interrupts it without a justified reason.
Those dismissed who are not covered by transition security are still normally entitled to 5, 10 or 20 days of paid leave to find employment, depending on the length of the notice period. The paid leave to find employment for employees dismissed on financial and production-related grounds is five days longer than usual for those covered by transition security.
A person is not entitled to transition security allowance if, due to changes occurring during the notice period, the employment of the dismissed person continues with the same employer or the employment ends on grounds related to the employee’s person.
The author works at TEK as an employment lawyer.
Changes to fees collected from employers
The transition security system brought changes to the fees collected from employers. The system is financed by transition security fees, which consist of a transition security fee collected from the dismissing employer and a common part collected from all employers.
The transition security fee collected from the dismissing employer is collected upon the dismissal of the employee covered by the transition security system, and its amount increases linearly according to the employer’s total payroll, verified each year, that serves as basis for the unemployment insurance contribution for the year preceding the year of dismissal. In 2023, the lower limit of the total payroll is 2,251,500 euros, and the full fee will be charged if the total payroll exceeds 36,024,000 euros.
The other half of the transition security system is financed by the common part of the transition security fee collected from all employers. This is done by increasing the normal unemployment insurance contribution.
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