Parliament has approved the Government’s proposal to amend the Unemployment Security Act. As a result of the amendment, the waiting period for unemployment security will be extended, holiday compensation will postpone the payment of unemployment allowance, child increases and the standard entitlement for earned income will be abolished, the employment condition will be lengthened and the grounds for accruing the employment condition will change.
Some of the changes will enter into force at the start of the year and others later in 2024.
Waiting period to be extended at the start of January
As a result of the legislative amendment, the waiting period will be extended from five days to seven days. ‘Waiting period’ refers to a period at the beginning of unemployment or a lay-off during which no earnings-related unemployment allowance is payable.
Holiday compensation will also affect the right to earnings-related unemployment allowance from January onwards. Holiday compensation paid for untaken holidays at the end of a full-time employment relationship lasting more than two weeks postpones the payment of earnings-related unemployment allowance for a set period of time. Holiday compensation equal to one month’s pay will postpone the start of payment of earnings-related allowance by approximately one month.
The holiday compensation postponement period and the waiting period do not elapse at the same time. The waiting period begins after the postponement due to holiday compensation ends.
Child increments and standard entitlement to be removed in April
Child increments for unemployment security will end at the start of April. In other words, child increments will be paid next year from January to March.
At the start of April, the standard entitlement for earned income of 300 euros will also be removed. The standard entitlement means that the recipient of unemployment security can earn 300 euros per month without having their daily allowance affected by earned or business income. Under the new rules, earned income will reduce unemployment security by 50% for the entire earned income.
To qualify for earnings-related unemployment allowance, you must work for one year if the work ends next September or later
The length of employment history required to qualify for earnings-related unemployment allowance will be doubled in September. Under the current rules, an earnings-related unemployment allowance can be claimed after six months of employment. From the start of next September, this is extended to one year of employment.
At the same time, the employment condition will become income-based. What this means in practice is that the length of a person’s employment history would be calculated on the basis of their earnings instead of the number of hours worked. The minimum monthly pay that will count towards the employment condition is 930 euros per month. From September onwards, in order to receive earnings-related unemployment allowance, you must therefore work for 12 months with a minimum monthly pay of 930 euros. If your monthly pay is between 465 euros and 930 euros, you will earn half of a month towards the employment condition.
The months towards the employment condition must be within a period of 28 months, or two years and four months. However, when studying, the months can be accumulated over a longer period of time.
No index-linked increase to unemployment allowances
Parliament has also approved a legislative change that will freeze index-linked increases for the years 2024–2027. In the case of earnings-related unemployment allowances, this means that the basic component and the income limit would remain at the 2023 level.
However, the calculation of daily allowance will change slightly at the turn of the year, as the percentage deduction made to earned income on which earnings-related unemployment allowance is based will decrease. The deduction is based on the employee’s contributions to occupational pension and unemployment insurance and daily health insurance contributions. This year, the deduction is 4.4%. Next year, the deduction will be 3.76%.
Overview of the entry into force of the legislative changes
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This is the first of two legislative packages concerning unemployment security. Another government proposal on changes to unemployment security is expected to be submitted early next year. The second legislative package includes a staggered approach to earnings-related unemployment benefits and the abolition of age-related exceptions.
See also: For the latest updates on the reforms proposed by the Government and the progress of the Government Programme in respect of the unemployment security system, see Changes to unemployment security in 2024