State aid for employment

State aid for job creation and aid to promote the recruitment of disadvantaged and disabled workers are exempt from any obligation to notify.

ACT

Commission Regulation (EC) No 2204/2002 of 12 December 2002 on the application of Articles 87 and 88 of the EC Treaty to State aid for employment. [See amending acts].

SUMMARY

The Regulation applies to two categories of employment aid: aid for job creation and aid to promote the recruitment of disadvantaged and disabled workers. Other types of employment aid are not prohibited, but they must be notified to the Commission in advance.

In accordance with Article 87(1) of the EC Treaty, aid exempted by the Regulation must have as its object and effect the promotion of employment, while leaving trade unaffected. Export aid is not covered by the Regulation.

Aid granted to an individual enterprise and aid which does not lead to an overall increase in the number of employees (e.g. aid to help convert temporary contracts into permanent ones) remains subject to the prior notification requirement. Enterprises which qualify for rescue and restructuring aid remain subject to the relevant EU guidelines.

The Regulation applies to all industries apart from coalmining (Council Regulation 1407/2002), shipbuilding (Council Regulation 1540/98) and transport, which remain subject to sector-specific rules.

Job creation

With regard to employment aid intended for job creation, the Regulation lays down the following ceilings:

• In areas and sectors which do not qualify for regional aid, the gross aid intensity must not exceed the ceilings of 15 % in the case of small enterprises and 7.5 % in the case of medium-sized enterprises.
• In areas and sectors which qualify for regional aid, the ceilings correspond to those mentioned on the regional aid maps and in the multisectoral framework for regional aid for large investment projects. In the case of SMEs, the ceiling is increased by 10 or 15 percentage points according to whether the areas are covered by point (c) or point (a) of Article 87(3). In less-favoured areas, it is these ceilings or, where appropriate, the higher ceilings provided for in Regulation 1257/1999 that apply.

Aid may be granted for a maximum period of two years, provided that the employment created:

• represents a net increase in the number of employees;
• is maintained for a minimum period of three years, or two years in the case of SMEs;
• benefits workers who have never had a job or are unemployed.

To receive this type of aid, the beneficiary must submit an application to the Member States.

Recruitment of disadvantaged or disabled workers

The Regulation contains definitions of "disadvantaged worker" and "disabled worker" that are broad enough to include, in the case of the former, any person who is a member of an ethnic minority, a migrant or unemployed and, in the case of the latter, any person who has a physical, mental or psychological impairment.

In the case of aid to promote the recruitment of disadvantaged or disabled workers, Member States may grant enterprises aid of up to 50 % (for disadvantaged workers) and 60 % (for disabled workers) of wage costs and compulsory social security contributions over a period of one year. Aid may also be granted to compensate for the reduced productivity of such workers and to adapt premises and provide special assistance.

Cumulation

The ceilings laid down in the Regulation apply irrespective of whether the resources are national resources or EU resources. On the other hand, only aid to disadvantaged and disabled workers may be combined with other State aid or with other EU support measures, provided that this does not result in a gross aid intensity exceeding 100 % of wage costs.

Transparency and monitoring

In order to ensure effective monitoring and a sufficient degree of transparency, the Commission requires Member States:

• to notify it, within 20 working days using a standard form (Annex I), of the implementation of any aid scheme exempted by the Regulation;
• to maintain detailed records of aid schemes exempted by the Regulation;
• to compile an annual report on the application of the Regulation (Annex II).

At the end of the period of validity of the Regulation, aid schemes exempted under the Regulation will remain exempted during an adjustment period of six months.

Regulation (EC) No 2204/2002, initially scheduled to expire on 31 December 2006, was extended a first time until 31 December 2007 by Regulation (EC) No 1040/2006, then a second time until 30 June 2008 by Regulation (EC) No 1976/2006.

Background

Within the framework of Regulation 994/98, which allows the Commission to exempt certain categories of State aid, the Regulation is designed to exempt aid for job creation and aid to promote the recruitment of disadvantaged and disabled workers in order to simplify administrative procedures.

In the light of experience gained in applying employment aid provisions, the Regulation exempts employment aid where it is intended for areas that qualify for regional aid, or for small and medium-sized enterprises (SMEs) rather than large enterprises.

The Regulation takes account, however, of the guidelines on national regional aid and of Regulation 70/2001 on State aid to small and medium-sized enterprises.

Last updated: 22.03.2007