After a couple of yellow cards – EU agreement on Swedish startup jobs

Entry jobs are the result of an initiative from Swedish LO, the Unionen trade union and the Confederation of Swedish Enterprise.

In order to hire workers for entry jobs, a company must be a party to a particular collective agreement covering such jobs where wages are lower than the regular collective agreement stipulates. The state will cover the gap to bring the worker’s pay up to the normal collectively agreed minimum wage (after tax). This contribution is paid directly to the worker, not to the employer. The state will also cover pension costs.

An entry job can last for up to two years and the idea is for it to transition into a permanent contract. Previous types of subsidised work had been criticised because companies were able to exploit these in order to use them instead of offering normal employment.

Now, LO, Unionen and the Confederation of Swedish Enterprise underline that the new employment model should not be used by employers to lower their employment costs. The three organisations will establish a cross-party committee to oversee how the collective agreements for entry jobs are applied out and adhered to. 

The main points for the new model were drawn up in a declaration of intent between the government and the three organisations as early as 2018, but in order to execute this, the government needed approval from the Commission. Since the state will cover parts of the employers' wage costs, the Commission must give its green light so that the subsidy does not distort competition and becomes in breach of EU rules on state aid. This is the approval that Sweden has now secured.

Even though relations between Sweden and the EU have been somewhat frosty lately (yellow cards both for the Directive on Minimum Wages and the Directive on Platform Work), this proposal was fully approved.

Competition Commissioner Margrethe Vestager underlined in a press release that the fight against unemployment is a top priority for the EU and that the model for entry jobs make it possible for Sweden to explore new ways of helping disadvantaged workers get access the labour market – without unduly distorting competition. 

The Commission actually concluded the proposed state aid to be proportional despite the fact that it in certain cases will be higher per recipient than the 50% of the employer’s investment costs that are usually used as a benchmark.

In most cases, the subsidy will be close to that limit. What is more, this higher level of subsidy is a result of broad negotiations between trade unions and employers’ organisations about what is the right level of pay for entry jobs, the Commission added. In other words, a slightly unexpected but welcome bow to the Swedish labour market model!