The Government has submitted a proposal to reform the Unemployment Security Act to Parliament. The proposed changes include extending the waiting period and the length of employment history required to qualify for an unemployment allowance, abolishing child supplements and standard entitlements and reintroducing periodised holiday compensation.
Some of the proposed changes would enter into force at the beginning of next year and some later in 2024.
Changes relating to the waiting period and holiday compensation to take effect at the start of the year
‘Waiting period’ refers to a period at the beginning of unemployment or a lay-off during which no earnings-related unemployment allowance is payable. The plan is to extend the waiting period from the current five days to seven.
‘Periodisation’ in the context of holiday compensation means that, if you have untaken statutory leave at the end of your employment, any payment in lieu that you receive defers the start of your entitlement to an earnings-related unemployment allowance. One month’s worth of holiday pay defers the start of the entitlement to an earnings-related allowance by approximately one month. The periodisation rule would apply to all holiday compensation payments made at the end of full-time employment that has lasted for more than two weeks.
According to the government proposal, the waiting period would be seven days for all waiting periods that begin on or after 1 January 2024. The periodised holiday compensation rule would apply to all employment relationships that end on or after 1 January 2024.
Child supplements and standard entitlements to end in April
The Government is proposing to abolish child supplements to unemployment allowances and the EUR 300 standard entitlement as of April. Under the current rules, those recipients of unemployment benefits who qualify for ‘child supplements’ receive between EUR 150 to EUR 285 extra per month, depending on the number of children. ‘Standard entitlement’ refers to an exempt amount – currently EUR 300 – that recipients of unemployment benefits can earn from employment or self-employment without these earnings affecting the amount of their allowance.
According to the government proposal, child supplements would no longer be payable for any days of unemployment on or after 1 April 2024. The standard entitlement would no longer be taken into account in the calculation of earnings-related unemployment allowances claimed on or after 1 April 2024.
Employment history requirement for earnings-related unemployment allowances to double
The Government is proposing to double the length of employment history required to qualify for an earnings-related unemployment allowance. Under the current rules, an earnings-related unemployment allowance can be claimed after six months of employment. Going forward, a full year’s employment history would be required.
The employment history requirement would also become a monetary measure. 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.
According to the government proposal, the longer employment history requirement would apply to all claims for which eligibility could be determined using the monetised model from September 2024 onwards.
No index-linked increase to unemployment allowances
In addition to the reform of the Unemployment Security Act, the Government is proposing to freeze index-linked increases for the years 2024 to 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.
A special non-index-linked 20% increase was introduced for child supplements to unemployment allowances in 2023, which will remain in effect until the end of the year. This means that the amount paid in the form of child supplements will in fact decrease on 1 January 2024. Going forward, child supplements will be between EUR 25 and EUR 48 less per month, depending on the number of children. If Parliament approves the changes that the Government is proposing to the Unemployment Security Act, the payment of child supplements will cease altogether on 1 April 2024.
Another government proposal on changes to the unemployment security system is due to be submitted in February next year. The second set of reforms includes a staggered approach to earnings-related unemployment benefits and the abolition of age-related exceptions.