THE SWEDISH UNEMPLOYMENT INSURANCE SCHEME

THE SWEDISH UNEMPLOYMENT INSURANCE SCHEME

INTRODUCTION The Swedish Unemployment Insurance Scheme is an important and integrated part of the Swedish labour market policy. The Swedish labour market policy aims to maintain a work-for-all strategy, i.e. work rather than cash support. Unemployed people are expected to return to employment as soon as possible. Cash support is only available when it is not possible to offer employment or when active labour market policy measures are not successful. In that sense, the rules of the unemployment insurance scheme are coherent with the goals of the Swedish labour market policy. During a period of unemployment, an insurance beneficiary must readjust to the new situation, which may include accepting employment outside his or her previous occupational sphere, relocation and/or a lower income than previously. The Swedish parliament legislates on unemployment insurance and provides financing. The government regulates how the legislation is applied and decides daily benefit levels. The Swedish Unemployment Insurance Board, (IAF), supervises the unemployment insurance system and is generally responsible for ensuring consistent application of the law and rules for all benefit applicants. IAF represents the state in court cases regarding unemployment insurance and issues regulations on unemployment insurance matters. IAF also participates in international co-operation and handles international unemployment insurance matters. The unemployment insurance is administrated by private unemployment insurance funds, which make decisions on compensation and handle payments. The employment service informs job seekers about the entitlement conditions for unemployment benefit and ensures that job seekers fulfil these conditions. 2 IAF September 2007

HISTORICAL BACKGROUND At the end of the 19th century, many trade unions provided some kind of financial relief to their unemployed members. In 1893, the first unemployment insurance fund was established by the Swedish Typographers Association. The Fund paid cash benefits to unemployed members that fulfilled certain conditions. These payments were financed through membership fees. Many other trade unions soon started similar funds. The first legislation on an optional unemployment insurance scheme was passed by the Parliament in 1934 and the first Unemployment Insurance Act came into force on January 1st 1935. The Act allowed the unemployment insurance funds to receive government registration and thereby receive state grants for the payment of benefits. In 1974, an additional government benefit system for the unemployed, cash labour market assistance (KAS), was introduced. The purpose of this was to secure an income for people who were not well established in the workforce and therefore not entitled to benefits from the existing unemployment insurance scheme. In 1998, a new law on unemployment insurance was adopted. The Unemployment Insurance Act integrated the cash labour market assistance with the existing unemployment insurance scheme. The Unemployment Insurance Funds The payment of unemployment benefits is administrated by 36 unemployment insurance funds. Historically these funds have been affiliated with trade unions, but today, the funds are required to be completely independent from other organisations. The funds do, however, frequently cover the same fields of activity or professions as existing trade unions. According to the Unemployment Insurance Funds Act, all unemployment insurance funds must be approved and registered by the Unemployment Insurance Board (IAF). The funds must be open to all employees and selfemployed persons that are employed in a certain field of activity or profession. The funds have created an organisation for internal co-operation, namely the Federation of Unemployment Insurance Funds (SO). IAF September 2007 3

FINANCING Unemployment benefits are mainly financed by tax revenue and members contributions. Members of the unemployment insurance funds pay membership fees to their respective funds. The membership dues cover the administrative overhead costs of the unemployment insurance funds and a statutory financing charge. Hence the unemployment insurance funds themselves bear a certain portion of the expense of benefit payments by paying the financing charge to the state. CONDITIONS FOR ENTITLEMENT TO BENEFITS The Swedish unemployment insurance scheme consists of a universal basic insurance and a voluntary loss of income insurance covering both employees and the self-employed. Basic conditions The basic conditions apply to all applicants regardless of the type of benefits in question. The jobseeker must: be partially or completely unemployed, be able to work at least 3 hours every working day and at least 17 hours per week, be prepared to accept suitable work when so offered, be registered at the public employment service and actively seek suitable work. In addition, the jobseeker must be willing to cooperate with the Employment Service in the drafting of an individual plan of action for employment. The plan of action must be agreed upon within three months from registration at the Employment Service. The purpose of the action plan is to provide the basis for further action in the individual case in order to facilitate the search for employment. 4 IAF September 2007

The Employment Service may direct the jobseeker towards all suitable vacancies or labour market programmes, irrespective of personal preferences. Any work or programme offered is considered suitable for the jobseeker if reasonable consideration of the jobseeker s personal qualifications for the work and other personal circumstances has been taken, the employment conditions are equivalent to those for employees who are employed in accordance with collective agreements in the same sector, the work is not linked to a workplace where there is an ongoing a labour dispute or industrial action, and the working conditions in the workplace are in accordance with Swedish laws and government regulations. Membership condition Membership of an unemployment insurance fund is voluntary. However, eligibility for loss of income insurance benefits requires membership for 12 months prior to the first day of unemployment. Work condition The work condition is fulfilled if the unemployed person has had gainful employment within a twelve month period immediately prior to the commencement of unemployment, for at least 6 months and at least 80 hours per calendar month, or for 480 hours during a consecutive period of 6 calendar months and at least 50 hours during each of these months. The timeframe of twelve months can be extended when the jobseeker has been unavailable for work, e.g. due to illness or parental leave. IAF September 2007 5

Self-employed Self-employed persons must cease their commercial activities at least temporarily in order to be considered unemployed. This usually means that a former self-employed person must dispose of the company and all its assets and deregister the company. If a self-employed person ceases his commercial activities only temporarily, he or she needs to be able to show that no business is being conducted by the company in order to be entitled to unemployment benefits. Suspension and reduction of benefits The unemployed person may be temporarily suspended from entitlement to benefits or receive only a reduced amount if he or she is voluntarily out of work without valid cause or has been suspended from work owing to improper conduct. Benefit period, waiting period and the calculation of benefits The benefit period is 300 days. The benefits are taxable income. There is a mandatory qualifying period of 5 days. A person receiving basic insurance benefit receives a fixed daily amount of SEK 320. A person receiving loss of income insurance benefit receives an amount based on his or her previous income from gainful employment. During the first 200 days, the beneficiary receives 80 per cent of previous earnings up to a maximum daily amount of SEK 680 per day, followed by 70 per cent of previous earnings, (up to the maximum daily amount), until day 300. A part-time unemployed person is only entitled to benefits corresponding to his or her involuntary unemployment. In order to establish entitlement, the personal work-history is compared with most recent working hours. A full-time position being transformed into a part-time position may accordingly entitle the upholder to unemployment benefits. The Unemployment Insurance Act contains special rules on how to calculate benefits for previously self-employed persons. These benefits are based on the average net income during the three years prior to the year of closure. 6 IAF September 2007

Appeals Unemployment insurance fund decisions concerning entitlement to benefits can be appealed to the County Administrative Court and subject to leave to appeal further to the Administrative Courts of Appeal and the Supreme Administrative Court. The Swedish Unemployment Insurance Board (IAF) may also on behalf of an individual party appeal against a decision concerning entitlement to benefits by a Court or an unemployment insurance fund. IAF September 2007 7

www.iaf.se