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Transferring TE services to municipalities responds to calls to reform employment services

Ministry of Economic Affairs and Employment
Publication date 26.1.2022 9.53
Minister of Employment Tuula Haatainen
Minister of Employment Tuula Haatainen

Employment and economic development services (TE services) are set to be transferred to municipalities during 2024. The Government’s decision is related to its aim to raise the employment rate and to increase municipal responsibility for employment services. The reform will have a broad impact on the employees and duties of both TE Offices and municipalities.

We are in a situation where the current employment services need to be reformed in terms of both content and structure. The Government is therefore preparing a reform named ‘TE Services 2024’ as part of its employment measures. Its key objective is to organise employment services so that they support the vitality of regions, increase employment and take advantage of the many opportunities offered by the municipal ecosystem. In addition to employment services, these include services to improve regional vitality as well as educational services to which investments can be flexibly allocated through central government transfers. 

Municipalities themselves have backed the reform, advocating for a transfer of TE services to the regions. The regionalisation of services can have a positive impact on employment if the incentives are correct. To this end, we have studied the experiences of other countries – Denmark and Germany in particular – that have decentralised their employment services. The employment impact of the reform is expected to be between 7,000 and 10,000 new jobs.

The reform has been prepared on a tight schedule both in the Ministerial Working Group on Promoting Employment and in cooperation with stakeholders and municipal experts. We plan to circulate the proposal for comments this spring and submit it to Parliament in autumn.

One of the reform’s key elements is an incentive-based funding model that encourages municipalities to organise services that have an impact on the labour market. Under the model, the municipality will receive an economic benefit, if a jobseeker finds work in the open labour market. According to the Government’s policy, the municipalities’ responsibility for the costs of the basic component of unemployment security will be broadened. In addition, the link between unemployment security and the activation of services for the unemployed will be removed. 

Interfaces with the health and social services, which will be transferred to the wellbeing services counties, must also be ensured so that the most vulnerable job seekers, in particular, can easily use the services across organisational boundaries. 

Taking care of the personnel plays a key role in this reform. We will safeguard the status of the personnel in TE Offices by transferring them to municipalities using the transfer-of-business principle in accordance with the Civil Servants Act where they will retain their current terms of employment. A smooth transfer of personnel to municipalities will be ensured with good human resources principles and a broad-based reform programme. Skilled personnel is at the heart of this successful reform.

Reform to help develop services suitable for local needs using the entire municipal ecosystem

The ministerial working group decided in autumn that the services would be transferred to a municipality or a cooperation area consisting of several municipalities that have a labour force of at least 20,000 persons. This corresponds to the minimum size of the ongoing local government pilots on employment. In this way, we can ensure that sufficient resources are available for organising TE services and that the services are equally accessible to jobseekers throughout Finland. Linguistic rights will also be protected.

If a municipality does not fulfil the criteria for organising services alone, it should form a cooperation area with other municipalities. The cooperation areas should be functional in terms of the labour market and employment and they should border each other. 

I hope that municipalities and regions have started a discussion on how cooperation will be carried out in the near future, as municipalities must resolve this by themselves. I also hope that the reform will be welcomed as an opportunity to develop new, innovative services that meet local needs. It is my hope that the regions will engage in close dialogue and are willing to learn from each other so that good practices and ideas can be disseminated widely. Obviously, a strong dialogue between the central and local government is also necessary.

The transfer of employment services to municipalities also needs to be supported by common regulation. The Nordic labour market service model, which will enter into force in May, will change the pace of employment services significantly. Unemployed people will not be left alone. Instead, they will receive support for their job search at an earlier stage, with the aim of preventing prolonged unemployment. Considerably more resources will be allocated to the reform compared with the current situation. Employment service systems will be developed to help solve the problem of labour market mismatch, for example. 

Our common goal is to create the best possible employment and economic development services that will invest in effective and customer-oriented services, identify competence needs, and provide efficient job search, recruitment and educational services. In this way, we can support business growth, employment and regional vitality. 

Minister of Employment Tuula Haatainen