State aid: Commission approves €404 million Swedish scheme to help disadvantaged workers access the labour market

(Source: European Commission)

The European Commission has approved, under EU State aid rules, a Swedish scheme of around €404 million (SEK 4.2 billion) to help disadvantaged workers access the labour market. The measure aims to create so-called ‘Entry Jobs’ for disadvantaged and severely disadvantaged workers who are currently unemployed. The scheme also contributes to the EU’s strategic objectives relating to job creation.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Fighting unemployment is a top priority for the EU. This €404 million scheme will allow Sweden to explore new ways of helping disadvantaged workers, in particular newly arrived immigrants and long-term unemployed, to enter the Swedish labour market, without unduly distorting competition.”

The Swedish measure

Sweden notified the Commission of its intention to create Entry Jobs enabling newly arrived immigrants and long-term unemployed to access the Swedish labour market, and to introduce a scheme to compensate workers receiving a lower salary for work carried out in these Entry Jobs.

Entry Job collective agreements between trade unions and employers’ organisations will set out wages that are lower than the minimum wage under regular collective agreements. While a monthly salary for a full-time Entry Job will be around €605 (SEK 6,392), under regular collective agreements it reaches around €1,320 – €1,885 (SEK 14,000 – 20,000).

Under the scheme, the aid will be paid directly to the worker, complementing the wage so that the worker’s final income will match the minimum wage under the applicable regular collective agreement. In addition, Entry Job workers will receive a retirement pension in the form of a State contribution equal to 10.21% of the compensation paid to the worker. The scheme will run until May 2027.

Sweden estimates that the measure will lead to the creation of 25,750 Entry Jobs by mostly small and medium-sized enterprises, mainly in the hotel accommodation, restaurants, real estate services and manufacturing sectors.

Under the scheme, Entry Job contracts will have a maximum duration of 24 months and should lead to an employment contract of indefinite duration. In addition, the measure foresees safeguards to ensure that Entry Jobs will not be used for the sole purpose of reducing labour costs by employers and as a replacement for regular work contracts.

The Commission’s assessment

The Commission has assessed the Swedish measure under the EU State aid rules, and in particular under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU), as well as under the Employment Aid Communication.

The Commission found that

  • The scheme is necessary and appropriate to provide incentives for employers to hire newly arrived immigrants and long-term unemployed.
  • The aid provided under the measure is proportionate, even if the maximum aid intensity of 50% set out in the Employment Aid Communication, is exceeded. The aid intensity is the maximum amount of aid that can be granted per beneficiary, expressed as a percentage of eligible investment costs. While the scheme allows for aid intensities of up to 66% of eligible costs, the Commission considered the measure nonetheless proportionate, as the aid intensities will be very close to 50% in the large majority of cases. In addition, the Commission found that higher aid intensities result from broad negotiations between trade unions and employer’s associations on the right salary level for Entry Jobs.
  • The measure has significant positive effects, such as improving the employability and the labour market integration of disadvantaged workers, and it will not have undue negative effects on competition and trade in the EU.

On this basis, the Commission approved the scheme under EU State aid rules.

Background

Article 107(3) TFEU covers categories of aid which may be compatible with the internal market. In particular, Article 107(3)(c) TFEU allows Member States to grant aid to facilitate the development of economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest.

For More Information

The non-confidential version of the decision will be made available under the case number SA.100209 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

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