EUROPEAN COMMISSION

Brussels, 6.11.2015

COM(2015) 553 final

Proposal for a

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the mobilisation of the European Globalisation Adjustment Fund
(application from Finland – EGF/2015/005 FI/Computer Programming)

EXPLANATORY MEMORANDUM

CONTEXT OF THE PROPOSAL

1.The rules applicable to financial contributions from the European Globalisation Adjustment Fund (EGF) are laid down in Regulation (EU) No 1309/2013 of the European Parliament and of the Council of 17 December 2013 on the European Globalisation Adjustment Fund (2014-2020) and repealing Regulation (EC) No 1927/2006 1 (the ‘EGF Regulation’).

2.On 12 June 2015, Finland submitted an application EGF/2015/005 FI/Computer programming for a financial contribution from the EGF, following redundancies 2 in the economic sector classified under the NACE Revision 2 Division 62 (Computer programming, consultancy and related activities) in the NUTS 3 level 2 regions of Länsi-Suomi (FI19), Helsinki-Uusimaa (FI1B), Etelä-Suomi (FI1C) and Pohjois- ja Itä-Suomi (FI1D) in Finland. These regions, taken together, comprise all of Finland with the exception of the island of Åland.

3.Following its assessment of this application, the Commission has concluded, in accordance with all applicable provisions of the EGF Regulation, that the conditions for awarding a financial contribution from the EGF are met.

SUMMARY OF THE APPLICATION

ASSESSMENT OF THE APPLICATION

Procedure

4.Finland submitted application EGF/2015/005 FI/Computer programming within 12 weeks of the date on which the intervention criteria set out in Article 4 of the EGF Regulation were met, on 12 June 2015. The Commission acknowledged receipt of the application within two weeks of the date of submission of the application, on 12 June 2015, and requested additional information from Finland on 26 June 2015. Such additional information was provided within eight weeks of the request, after an extension of the deadline by two weeks at the duly justified request of Finland. The deadline of 12 weeks of the receipt of the complete application within which the Commission should finalise its assessment of the application's compliance with the conditions for providing a financial contribution expires on 13 November 2015.

Eligibility of the application

Enterprises and beneficiaries concerned

5.The application relates to 1 603 workers made redundant in the economic sector classified under the NACE Revision 2 Division 62 (Computer programming, consultancy and related activities). The redundancies are located in the NUTS level 2 regions of Länsi-Suomi (FI19), Helsinki-Uusimaa (FI1B), Etelä-Suomi (FI1C) and Pohjois- ja Itä-Suomi (FI1D). The redundancies took place in 69 enterprises 6 , with almost half of them (778) in Microsoft Mobile Oy.

Intervention criteria

6.Finland submitted the application under the intervention criteria of Article 4(1)(b) of the EGF Regulation, which requires at least 500 workers being made redundant over a reference period of nine months in enterprises operating in the same economic sector defined at NACE Revision 2 Division and located in one region or two contiguous regions defined at NUTS 2 level in a Member State. In the Helsinki-Uusimaa (FI1B) region alone there are 737 redundancies.

7.The reference period of nine months for the application runs from 30 July 2014 to 30 April 2015.

Calculation of redundancies and of cessation of activity

8.The redundancies during the reference period have been calculated as follows:

–1 218 from the date of the employer's individual notice to lay off or to terminate the contract of employment of the worker,

–385 from the date of the de facto termination of the contract of employment or its expiry.

Eligible beneficiaries

9.The total number of eligible beneficiaries is 1 603.

Link between the redundancies and "major structural changes in world trade patterns due to globalisation"

10.In order to establish the link between the redundancies and major structural changes in world trade patterns due to globalisation, Finland argues that, in recent years, the distribution of ICT sector employment between the EU and other economies has developed to the detriment of the EU. While the volume of this domain has been increasing globally, it has dropped in Europe as businesses and services are moved to China, India, Taiwan and other non-European destinations. In 2014 alone, the personnel of Finnish ICT companies was reduced by 3 per cent or 1 500 people.

Distribution of ICT sector employment among the European Union and other economies (2009 & 2011)

Source: European Commission. ICT Industry Analysis Predict 2013 & 2014 Reports: An Analysis of ICT R&D in the EU and Beyond

11.These effects were particulary felt in Finland, where the entire Finnish electronics industry was severely affected, culminating in Nokia's announcement in 2011 of large-scale redundancies. In 2012, Nokia first dismissed 1 000 people in Salo (EGF/2012/006 FI/Nokia Salo), followed by another 3 700 at the end of 2012 and early 2013 (EGF/2013/001 FI/Nokia). This was followed by another 600 redundancies in the chipset development business in 2014 (EGF/2015/001 FI/Broadcom).

12.In these circumstances, the Computer programming, consultancy and related activities sector has continued its efforts to compete globally, even though the main customer of the services, i.e.Nokia, had disappeared.

13.The Finnish software industry is now increasingly investing in the industrial internet and cloud services, opting for better B-to-B (business to business) services, while at the same time experiencing problems with the B-to-C (customers) services. The latter is due to the market's global price pressure. Market players have to compete for orders with companies from lower-cost countries. There is also a tendency of global companies operating in Finland transferring some of their operations to lower-cost countries. CGI, for example, announced in November 2014 that it needed to reduce its Finnish staff by 270 and to transfer its operations outside the EU. 7

14.The software business is a global business, and software products are purchased globally from the most cost-effective sources. Software products can however still be tailored to meet country-, region- or language-specific requirements.

15.An important feature of the global software industry is that it constantly requires a new, educated workforce, as the life cycle of products and related software solutions is very short compared to the life cycle of its personnel. The competition between employees from the EU and from outside the EU is fierce. The ageing and less educated workers from the EU cannot easily compete with the young and better educated employees outside the EU.

16..While in 2008, the technology industry employed a total of 326 000 people in Finland, the number of people employed by such companies in 2014 was 276 000. This corresponds to an average decline per year of about 3% (10 000 workers

17.To date, the Computer programming, consultancy and related activities sector has been the subject of two EGF applications, one of which based on globalisation and one on the global financial and economic crisis 8 .

Events giving rise to the redundancies and cessation of activity

18.The events giving rise to these redundancies are the developments affecting Nokia in recent years, which have had a major impact on the ICT sector in Finland. Developing and designing operating systems for Nokia mobile phones used to employ thousands of Finnish people, particularly in Oulu, while now these functions have been transferred to countries outside Europe.

19.The decisions of Nokia and Microsoft (offshoring, closing down production and stopping the development work in Finland) have affected numerous software industry companies whose operations were linked to Nokia or Microsoft. As a result, Nokia's problems have impacted the situation of the entire Finnish software industry. ICT services company Tieto, for instance, justified the lay-offs it announced in autumn 2014 with the reduced number of orders from one of its major customers, i.e. Nokia. Companies such as Atos IT Solutions and Services, gaming company Rovio Entertainment and Samlink followed for similar reasons.

20.Altogether 69 software industry companies have ended up laying off employees over the autumn of 2014 and spring of 2015. The reasons that have led to these lay-offs vary, but the most common denominator is that companies have encountered ever accelerating and intensifying international competition. Nokia's and Microsoft's closures have been crucial, but most of the redundancies are part of a larger phenomenon in the whole programming sector.

Expected impact of the redundancies as regards the local, regional or national economy and employment

The NUTS 2 regions of Helsinki-Uusimaa (FI1B) and Pohjois- ja Itä-Suomi (FI1D) is where more than 75 % of the redundancies happened. This is the reason why these two regions are considered in detail in the paragraphs below.

21.Northern Ostrobothnia (the part of the Pohjois- ja Itä-Suomi (FI1D) region where Oulu is situated) is a region with a high unemployment rate (higher than the national average). In February 2015, the national unemployment rate was 13,5 %, while in Northern Ostrobothnia it was 15,7 %, and in Oulu 17,1 % . Almost two out of three unemployed jobseekers in the region live in the Oulu area, as does the majority of the region's unemployed professionals.

22.There are currently some 1 250 activity units in the ICT sector in Northern Ostrobothnia, the majority located in Oulu. Figures on economic trends show that the turnover of ICT sector companies has been declining since 2012 9 . The entire information sector accounts for approximately 12 % of the jobs in the area. These difficulties have led to numerous redundancies both in the private and public sectors. While ICT sector companies employed nearly 13 000 people in the region in 2008, this figure had been reduced to around 10 000 more recently.

23.The Oulu area has been significantly affected by the job cuts in the ICT sector since it has been a hub for company offices, R&D&I and labour since the 1980s. In spring 2015, there were approximately 1 500 unemployed jobseekers in the ICT sector in the region. Approximately 80 % of them live in the Oulu area. In addition, one-third of the unemployed with a higher education degree in the ICT sector have been continuously with no job for more than a year. The redundancies at Microsoft added to a situation already exceptionally stark.

24.New growth sectors that will provide employment, such as digitalisation of industrial processes and increased predictability are being actively developed in the Oulu area, and the inclusion of unemployed ICT experts in this development must be ensured 10 .

25.In Uusimaa at the end of February 2015, unemployed jobseekers accounted for 11 % of the workforce. Although this figure is below the national average, the growth of unemployment is considerably greater in Uusimaa (15,0 %) than in Finland as a whole (9,7 %). In February, there were 5,1 unemployed jobseekers for each vacancy. Unemployment is increasing also due to the net migration to the area. The number of unemployed jobseekers in Uusimaa has exceeded 104 000 in August 2015 and is the highest figure since the early 1990s.

26.The GDP of Uusimaa accounts for 36 % of Finland's GDP. It is responsible for 71 % of the turnover, 62 % of the employed and 52 % of the business establishments of the whole of Finland's private sector software industry. This means that, in the software industry, Uusimaa can be said to have an even greater role than in all the other industries put together.

27.In 2013, the software industry accounted for 3 % of the turnover, 5 % of the personnel and 3 % of the business establishments of the private sector in Uusimaa.

28.During the reference period, there were a total of 49 software enterprises that resorted to cooperation negotiations in the Uusimaa region. The estimated need for personnel cuts at the start of cooperation negotiations was 1 681 people.

29.Based on a preliminary assessment, it seems that (particularly in the case of CGI) the redundancies have concerned salaried employees over the age of 50, a group for which it is difficult to find new employment and it is justified to assume that by June 2016 over 50 % of these people will be long-term unemployed.

Targeted beneficiaries and proposed actions

Targeted beneficiaries

30.The estimated number of redundant workers expected to participate in the measures is 1 200. The breakdown of these workers by sex, citizenship and age group is as follows:

Eligibility of the proposed actions

31.The personalised services to be provided to redundant workers consist of the following actions:

A. Coaching measures and other preparatory measures

–Job-seeking training

The aim of job-seeking training is to provide the participants with information about the labour market, help them chart their options and improve and update their job-seeking skills. Because of the special features of job-seeking in the ICT sector, training services tailored to the vocational competence and needs of the target group will be purchased.

Employment can be promoted through training services, by supporting labour mobility in cooperation with the EURES services and, for example, by offering dedicated job-seeking training groups that focus on identifying ICT jobs abroad.

–Job coaching (individual guidance)

The purpose of job coaching is guiding a private customer in seeking employment or on-the-job training. On the one hand, job coaches can promote re-employment by guiding the jobseeker in using the various options for finding a job (case management), on the other, they can assist them in finding a new job by advising the jobseeker during the search.

–Career coaching

Career coaching is procured for persons if, according to the assessment of an Employment and Economic Development Office (TE Office) official, the customers need more functional, intensive and long-term support in their career planning.

–Expert assessments

People in the programming sector have highly varying competencies. In order to assess the job-seeker's need for services, a TE Office can organise various expert assessments such as a work ability evaluation; competency and vocational skills mapping; assessment of entrepreneurial competency and opportunities for entrepreneurial activity. The contents and scope of an expert assessment will depend on the job-seeker’s personal situation.

B. Employment and business services

EGF-funded employment and business services provided by the TE Office include supporting independent job-seeking by online services, job offers and other employment services including international employment services, travel allowances and compensation for removal expenses, vocational and competency mapping, work ability evaluations, training, try-outs (work try-out, training trial) and pay subsidies. The TE Office is responsible for the services offered and EGF-service specialists will take charge of this work.

C. Training

Training is implemented as vocational re-education, where the goal is acquisition of a vocational or further vocational qualification within an industry with a high employment rate, or as continuing training through the strengthening of existing competencies. Training is tailored according to the target group.

The goal of such training is also to provide trainees with a practical understanding of how companies operate and with the skills necessary for working in a company, as well as the competencies required to develop a company. The aim of the training is either at finding a job in one of the partner companies or at launching a new enterprise through a development project.

Special training may be provided for those with a higher level of education.

D. Pay subsidy

Pay subsidies will be available for redundant workers to support employment in a new job by reducing the employer’s payroll costs. Pay subsidies are used especially as a way to boost private-sector recruitment with a subsidy. From 2015, the pay subsidy will be 30–50 % of the payroll costs, depending on how long the person to be hired on the subsidy has been unemployed.

E. Start-up grant

The purpose of start-up grants is to promote the creation of business activity and employment of individual persons. A start-up grant ensures an income for an aspiring entrepreneur during the time required to launch and establish a full-time business, up to a maximum of 18 months.

The start-up grant consists of two parts, the basic allowance and a supplement. In 2015, the basic allowance amounts to EUR 32,80/day. The amount of the supplement varies on a case-by-case basis, at the discretion of TE Offices. The supplement varies between 10 and 60 % of the amount of the basic allowance.

F. Steering towards entrepreneurship and services for new entrepreneurs

Steps related to the promotion of entrepreneurship are implemented as business incubator type and entrepreneurship training. In addition, new entrepreneurs are offered advice, consultation and start-up grants. Generating new enterprises will be supported through the subregional business service networks and the Ministry of Employment and the Economy (MEE) Corporation's business customership planning.

G. Allowances for travel, overnight and removal costs

A job-seeker may be granted an allowance for travel and accommodation costs incurred for job-seeking or such costs resulting from participation in training, and compensation for removal expenses when accepting a job outside one’s commuting area.

32.The proposed actions, here described, constitute active labour market measures within the eligible actions set out in Article 7 of the EGF Regulation. These actions do not substitute passive social protection measures.

33.Finland has provided the required information on actions that are mandatory for the enterprise concerned by virtue of national law or pursuant to collective agreements. They have confirmed that a financial contribution from the EGF will not replace such actions.

Estimated budget

34.The estimated total costs are EUR 4 372 000, comprising expenditure for personalised services of EUR 4 167 000 and expenditure for preparatory, management, information and publicity, control and reporting activities of EUR 205 000.

35.The total financial contribution requested from the EGF is EUR 2 623 200 (60 % of total costs).

36.The costs of the actions identified in the table above as actions under Article 7(1)(b) of the EGF Regulation do not exceed 35 % of the total costs for the coordinated package of personalised services. Finland confirmed that these actions are conditional on the active participation of the targeted beneficiaries in job-search or training activities.

37.Finland confirmed that the costs of investments for self-employment, business start-ups and employee take-overs will not exceed EUR 15 000 per beneficiary.

Period of eligibility of expenditure

38.Finland started providing the personalised services to the targeted beneficiaries on 1 August 2014. The expenditure on these actions shall therefore be eligible for a financial contribution from the EGF from 1 August 2014 to 12 June 2017.

39.Finland started incurring the administrative expenditure to implement the EGF on 1 August 2014. The expenditure for preparatory, management, information and publicity, control and reporting activities shall therefore be eligible for a financial contribution from the EGF from 1 August 2014 to 12 December 2017.

Complementarity with actions funded by national or Union funds

40.The sources of national pre-financing or co-funding mainly come from the public employment services item in the administrative branch of the MEE. Some services will also be funded from the operating expenditure of the Centres for Economic Development, Transport and the Environment (ELY Centres) and the TE Offices. Technical support tasks will be funded from the operating expenditure of the Ministry of Employment and the Economy and the ELY Centres.

41.Finland has confirmed that the measures described above receiving a financial contribution from the EGF will not also receive financial contributions from other Union financial instruments.

Procedures for consulting the targeted beneficiaries or their representatives or the social partners as well as local and regional authorities

42.Finland has indicated that the co-ordinated package of personalised services has been drawn up in consultation with social partners and regional authorities. The ELY Centre and the TE Office for Northern Ostrobothnia organised an event (1 October 2014) to plan the measures included in EGF projects. Partners of the organisations implementing the project (Business Oulu, the City of Oulu, the University of Oulu, Yritystakomo (business incubator), the Chamber of Commerce and the Entrepreneurs of Northern Ostrobothnia) and target group representatives were invited to take part in this event.

43.The MEE has convened a group that addresses the redundancies in the computer programming sector and participated in the preparation of the EGF application. This group includes representatives from the ELY Centres and the TE Offices for the regions concerned, Business Oulu, social partners.

Management and control systems

44.The application contains a description of the management and control system which specifies the responsibilities of the bodies involved. Finland has notified the Commission that the financial contribution will be managed by the MEE, which also manages ESF funds. The same Ministry acts as the Certifying Authority. There is a strict separation of duties and of reporting relationships between the departments responsible for these two functions. The management functions for the EGF have been assigned to the Employment and Entrepreneurship Department, while those for the ESF are with the Regional Department. The certifying functions for both Funds are within the Human Resources and Administration Unit. The Ministry has prepared a manual setting out in detail the procedures to be followed.

45.With regard to auditing, the responsible body is the independent Internal Auditing Unit, operating directly under the Permanent Secretary of the same Ministry. Functions related to monitoring and auditing are also included in the range of functions of both the managing and the certifying authorities.

Commitments provided by the Member State concerned

46.Finland has provided all necessary assurances regarding the following:

–the principles of equality of treatment and non-discrimination will be respected in the access to the proposed actions and their implementation,

–the requirements laid down in national and EU legislation concerning collective redundancies have been complied with,

–the dismissing enterprises, which have continued their activities after the lay-offs, have complied with their legal obligations governing the redundancies and provided for their workers accordingly,

–the proposed actions will not receive financial support from other Union funds or financial instruments and any double financing will be prevented,

–the proposed actions will be complementary with actions funded by the Structural Funds,

–the financial contribution from the EGF will comply with the procedural and material Union rules on State aid.

BUDGETARY IMPLICATION

Budgetary proposal

47.The EGF shall not exceed a maximum annual amount of EUR 150 million (2011 prices), as laid down in Article 12 of Council Regulation (EU, Euratom) No 1311/2013 of 2 December 2013 laying down the multiannual financial framework for the years 2014-2020 11 .

48.Having examined the application in respect of the conditions set out in Article 13(1) of the EGF Regulation, and having taken into account the number of targeted beneficiaries, the proposed actions and the estimated costs, the Commission proposes to mobilise the EGF for the amount of EUR 2 623 200, representing 60 % of the total costs of the proposed actions, in order to provide a financial contribution for the application.

49.The proposed decision to mobilise the EGF will be taken jointly by the European Parliament and the Council, as laid down in point 13 of the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management 12 .

Related acts

50.At the same time as it presents this proposal for a decision to mobilise the EGF, the Commission will present to the European Parliament and to the Council a proposal for a transfer to the relevant budgetary line for the amount of EUR 2 623 200.

51.At the same time as it adopts this proposal for a decision to mobilise the EGF, the Commission will adopt a decision on a financial contribution, by means of an implementing act, which will enter into force on the date at which the European Parliament and the Council adopt the proposed decision to mobilise the EGF.

Proposal for a

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the mobilisation of the European Globalisation Adjustment Fund
(application from Finland – EGF/2015/005 FI/Computer Programming)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 1309/2013 of the European Parliament and of the Council of 17 December 2013 on the European Globalisation Adjustment Fund (2014-2020) and repealing Regulation (EC) No 1927/2006 13 , and in particular Article 15(4) thereof,

Having regard to the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management 14 , and in particular point 13 thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1)The European Globalisation Adjustment Fund (EGF) aims to provide support for workers made redundant and self-employed persons whose activity has ceased as a result of major structural changes in world trade patterns due to globalisation, as a result of a continuation of the global financial and economic crisis, or as a result of a new global financial and economic crisis, and to assist them with their reintegration into the labour market.

(2)The EGF is not to exceed a maximum annual amount of EUR 150 million (2011 prices), as laid down in Article 12 of Council Regulation (EU, Euratom) No 1311/2013 15 .

(3)On 12 June 2015, Finland submitted an application EGF/2015/005 FI/Computer programming for a financial contribution from the EGF, following redundancies in the economic sector classified under the NACE Revision 2 Division 62 (Computer programming, consultancy and related activities) in the NUTS 16 level 2 regions of Länsi-Suomi (FI19), Helsinki-Uusimaa (FI1B), Etelä-Suomi (FI1C) and Pohjois- ja Itä-Suomi (FI1D)in Finland. It was supplemented by additional information provided in accordance with Article 8(3) of Regulation (EU) No 1309/2013. That application complies with the requirements for determining a financial contribution from the EGF as laid down in Article 13 of Regulation 1309/2013.

(4)The EGF should, therefore, be mobilised in order to provide a financial contribution of EUR 2 623 200 in respect of the application submitted by Finland.

(5)In order to minimise the time taken to mobilise the EGF, this decision should apply from the date of its adoption,

HAVE ADOPTED THIS DECISION:

Article 1

For the general budget of the European Union for the financial year 2015, the European Globalisation Adjustment Fund shall be mobilised to provide the sum of EUR 2 623 200 in commitment and payment appropriations.

Article 2

This Decision shall enter into force on the day of its publication in the Official Journal of the European Union. It shall apply from [the date of its adoption] 17 .

Done at Brussels,

(1) OJ L 347, 20.12.2013, p. 855.

(2) Within the meaning of Article 3 of the EGF Regulation.

(3) Commission Regulation (EU) No 1046/2012 of 8 November 2012 implementing Regulation (EC) No 1059/2003 of the European Parliament and of the Council on the establishment of a common classification of territorial units for statistics (NUTS) as regards the transmission of the time series for the new regional breakdown (OJ L 310, 9.11.2012, p. 34).

(4) OJ L 393, 30.12.2006, p. 1.

(5) In accordance with the fourth paragraph of Article 7 of Regulation (EU) No 1309/2013.

(6) List of enterprises in the Annex

(7) http://yle.fi/uutiset/it_firm_cgi_decides_to_send_home_270_in_finland/7632870 http://www.itviikko.fi/ihmiset-ja-ura/2014/11/14/cgi-paatyi-irtisanomaan-270/201415871/7

(8) EGF/2011/016/Agile ; COM(2013) 120 final and the present one

(9) http://www.pohjois-pohjanmaa.fi/file.php?3634 pp 3

(10) http://www.temtoimialapalvelu.fi/files/2285/Ohjelmistoala_joulukuu_2014.pdf pp 42

(11) OJ L 347, 20.12.2013, p. 884.

(12) OJ C 373, 20.12.2013, p. 1.

(13) OJ L 347, 20.12.2013, p. 855.

(14) OJ C 373, 20.12.2013, p. 1.

(15) Council Regulation (EU, Euratom) No 1311/2013 laying down the multiannual financial framework for the years 2014-2020 (OJ L 347, 20.12.2013, p. 884).

(16) Commission Regulation (EU) No 1046/2012 of 8 November 2012 implementing Regulation (EC) No 1059/2003 of the European Parliament and of the Council on the establishment of a common classification of territorial units for statistics (NUTS) as regards the transmission of the time series for the new regional breakdown (OJ L 310, 9.11.2012, p. 34).

(17) Date to be inserted by the Parliament before the publication in OJ.

EUROPEAN COMMISSION

Brussels, 6.11.2015

COM(2015) 553 final

ANNEX

to the Proposal for a

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the mobilisation of the European Globalisation Adjustment Fund
(application from Finland – EGF/2015/005 FI/Computer Programming)

ANNEX