Invitation to submit comments on the draft Commission Regulation on the application of Articles 87 and 88 of the EC Treaty to State aid for employment
Date: 2002-04-12
Institutions: European Commission
Subjects: European Commission, State aid, drafting of EU law, employment aid, exchange of information

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Invitation to submit comments on the draft Commission Regulation on the application of
Articles 87 and 88 of the EC Treaty to State aid for employment

(2002/C 88/02)

Interested parties may submit their comments within one month of the date of publication of this draft
Regulation to:

European Commission
Directorate-General for Competition
Unit A3
Office J 70 5/7
B-1049 Brussels
Fax (32-2) 296 98 13
E-mail: COMP-EMPLOYMENT-AID@cec.eu.int

Draft Commission Regulation on the application of Articles 87 and 88 of the EC Treaty to State
aid for employment

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 994/98 of 7 May
1998 on the application of Articles 92 and 93 of the Treaty
establishing the European Community to certain categories of
horizontal State aid (1), and in particular points (a)(iv) and (b) of
Article 1(1) thereof,

Having published a draft of this Regulation (2),

Having consulted the Advisory Committee on State Aid,

Whereas:

certain

is
under
compatible with the common market and not subject to
the notification requirement of Article 88(3) of the Treaty.

employment

conditions

aid

for

(2) Regulation

also

(EC) No

empowers

the Treaty,

994/98
the
in accordance with Article 87
Commission to declare,
of
that aid that complies with the map
approved by the Commission for each Member State for
the grant of regional aid is compatible with the common
market and is not subject to the notification requirement
of Article 88(3) of the Treaty.

(3) The Commission has applied Articles 87 and 88 of the
Treaty to employment aid in and outside assisted areas in
numerous decisions and has also stated its policy, in the
Community guidelines on State aid for employment (3), in
the notice on monitoring of State aid and reduction of
labour costs (4),
in the guidelines on national regional
aid (5) and in Commission Regulation (EC) No 70/2001
of 12 January 2001 on the application of Articles 87 and
aid to small and
88 of
the
the
medium-sized
Commission's experience in applying those provisions, it
is appropriate, with a view to ensuring efficient super-
vision and simplifying administration without weakening
Commission monitoring,
the Commission should
that
make use of the powers conferred by Regulation (EC)
No 994/98.

the EC Treaty to State
enterprises (6).
In

light

of

(1) Regulation (EC) No 994/98 empowers the Commission to
declare, in accordance with Article 87 of the Treaty, that

(1) OJ L 142, 14.5.1998, p. 1.
(2) OJ . . .

(3) OJ C 334, 12.12.1995, p. 4.
(4) OJ C 1, 3.1.1997, p. 10.
(5) OJ C 74, 10.3.1998, p. 9.
(6) OJ L 10, 13.1.2001, p. 33.

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(EC) No 70/2001 or

(4) This Regulation is without prejudice to the possibility for
Member States to notify aid for employment. Such notifi-
cations will be assessed by the Commission in particular
in the light of the criteria set out in this Regulation, in
in
Commission Regulation
accordance with the applicable Community guidelines or
frameworks, if such guidelines and frameworks exist. This
is currently the case for the sector of maritime transport.
The guidelines on State aid for employment cease to
apply from the date of entry into force of this Regu-
lation (1), as do the Notice on monitoring of State aid
and reduction of labour costs (2) and the Notice on an
for processing notifications of
accelerated procedure
employment aid (3). Notifications pending at
the entry
assessed in
into force of
accordance with its provisions. Employment aid which
was granted before the entry into force of this Regulation
in the absence of a Commission authorisation and in
breach of the obligation in Article 88(3) of the Treaty
will be assessed in accordance with the rules in force at
the time the aid was granted.

this Regulation will be

(5) The promotion of employment is a central aim for the
economic and social policies of the Community and of its
Member
States. The Community has developed a
European employment strategy in order to promote this
objective. Unemployment remains a significant problem
in some parts of the Community, and certain groups of
find particular difficulty in entering the
workers still
labour market. For this reason there is a justification for
public authorities to apply measures providing incentives
to enterprises to increase their levels of employment, in
particular of workers from these disadvantaged categories.

to an extent

contrary to the

(7) Having regard to those considerations, the purpose and
effect of the aid exempted by this Regulation should be to
promote employment in accordance with the European
Employment Strategy, in particular of workers from disad-
trading
vantaged categories, without adversely affect
conditions
common
interest. Employment aid granted to a firm on an indi-
vidual basis may have a major impact on competition in
the relevant market because it
firm over
received such aid. By being
others which have not
granted only to a single firm, such aid is likely to have
only a limited effect on employment. For this reason
individual awards of employment aid should continue to
be notified to the Commission, and this Regulation should
exempt aid only if given in the form of schemes.

favours that

(8) This Regulation should exempt any aid granted under a
scheme that meets all the relevant requirements of this
Regulation. With a view to ensuring efficient supervision
administration without weakening
and
Commission monitoring, aid schemes should contain an
express reference to this Regulation.

simplifying

(9) This Regulation should apply without prejudice to special
rules laid down in Council Regulations governing State
aid in the shipbuilding and coal-mining sectors.

labour

taxation of

and social
in education and training, measures

(6) General measures to promote employment which do not
distort or threaten to distort competition by favouring
certain undertakings or the production of certain goods
do not constitute State aid in the sense of Article 87(1) of
the Treaty. Such measures, which may include reducing
costs, boosting
the
investment
to
provide guidance and counselling, general assistance and
training for the unemployed and improvements in labour
law are therefore unaffected by this Regulation. This is
also the case of measures which are deemed not
to
meet all the criteria of Article 87(1) of the Treaty and
therefore do not fall under the notification requirement
of Article 88(3) of the Treaty by virtue of Commission
Regulation (EC) No 69/2001 of 12 January 2001 on the
application of Articles 87 and 88 of the EC Treaty to de
minimis aid (4).

(10) This Regulation should apply in the transport sector.
However, having regard to particular characteristics of
is not appropriate to
competition in that
exempt aid for the creation of employment.

sector,

it

(11) The Commission has a consistently less favourable view of
aid targeted at specific sectors, in particular at sensitive
sectors experiencing overcapacity or in crisis. Aid schemes
which are targeted at specific sectors should not therefore
be covered by the exemption from notification provided
by this Regulation.

(1) Commission communication concerning the guidelines on State aid

for employment (OJ C 371, 23.12.2000, p. 12).

(2) OJ C 1, 3.1.1997, p. 10.
(3) OJ C 218, 27.7.1996, p. 4.
(4) OJ L 10, 13.1.2001, p. 30.

(12) In accordance with the

established practice of

the
Commission, and with a view to better ensuring that
aid is proportionate and limited to the amount necessary,
thresholds should be expressed in terms of aid intensities
in relation to a set of eligible costs, rather than in terms of
maximum aid amounts.

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(13) In order to determine whether or not aid is compatible
with the common market pursuant to this Regulation, it is
necessary to take into consideration the aid intensity and
thus the aid amount expressed as a grant equivalent. The
the grant equivalent of aid payable in
calculation of
instalments and aid in the form of a soft loan
several
requires the use of market
interest rates prevailing at
the time of grant. With a view to a uniform, transparent,
and simple application of the State aid rules, the market
this Regulation should be
rates for
deemed to be the reference rates (1), provided that,
in
the case of a soft loan, the loan is backed by normal
security and does not
risk. The
reference rates should be those which are periodically
fixed by the Commission on the basis of objective
criteria and published in the Official
the
European Communities and on the Internet.

the purposes of

Journal of

abnormal

involve

(14) Having regard to the differences between enterprises of
different sizes, different ceilings of aid intensity should be
set
for small and medium-sized enterprises and large
enterprises. In order to eliminate differences that might
give rise to distortions of competition,
to
facilitate coordination between different Community and
national
reasons of administrative
clarity and legal certainty, the definition of ‘small and
medium-sized enterprises’ used in this Regulation should
be that
laid down in Commission Recommendation
96/280/EC of 3 April 1996 concerning the definition of
small and medium-sized enterprises (2). That definition
was also used in Regulation (EC) No 70/2001.

initiatives, and for

in order

(15) The ceilings of aid intensity should be fixed, in the light of
the Commission's experience, at a level that strikes the
appropriate balance between minimising distortions of
competition in the aided sector and the objective of
promoting employment.
In the interests of coherence,
the ceilings should be harmonised with those fixed in
the guidelines on national regional aid and in Regulation
(EC) No 70/2001, which allowed aid to be calculated by
reference to the creation of employment
linked to
investment projects.

the normal operating
(16) Employment costs form part of
therefore particularly
costs of any enterprise.
is
that aid should have a positive effect on
important
employment and should not merely enable enterprises
to reduce costs which they would otherwise bear.

It

(17) Without rigorous controls and strict limits, employment
aid can have harmful effects which cancel out
its
immediate effects on job creation. If the aid is used to
protect firms exposed to intra-Community competition, it
could have the effect of delaying adjustments needed to
ensure the competitiveness of Community industry. In the

(1) OJ C 273, 9.9.1997, p. 3.
(2) OJ L 107, 30.4.1996, p. 4.

absence of rigorous controls, such aid may be concen-
trated in the most prosperous regions, contrary to the
objective of economic and social cohesion. Within the
single market, aid granted to reduce costs of employment
can lead to distortions of intra-Community competition
and deflections in the allocation of resources and mobile
investment, to the shifting of unemployment from one
country to another, and to relocation.

to any sectoral rules,

(18) Aid to maintain jobs, defined as support given to a firm
is similar to
to persuade it not to lay off its workers,
therefore,
operating aid. Subject
such as those which exist
in the sector of maritime
transport, it should be authorised only in specific circum-
stances and for a limited period. It should continue to be
notified to the Commission and should not be covered by
the exemption from such notification provided by this
Regulation. The limited circumstances in which it can
be authorised include where, in accordance with Article
87(2)(b) of the EC Treaty, it is intended to make good the
damage caused by natural disasters or exceptional occur-
rences; another instance is under the conditions applying
to operating aid in the regional aid guidelines, in regions
eligible for the derogation under Article 87(3)(a) of the EC
Treaty concerning the economic development of areas
living is abnormally low or
where the standard of
where there is serious underemployment, including ultra-
peripheral regions; a third is where such aid is granted in
the context of the rescue and restructuring of a company
in difficulty, consistently with the provisions of
the
relevant guidelines.

(19) A particular type of aid is aid granted to employers for
the conversion of temporary or fixed-term employment
contracts into contracts of indeterminate duration. Such
measures should not be covered by the exemption from
such notification provided by this Regulation and should
the Commission can determine
be notified so that
whether
It
should in particular be ensured that such measures do
the
not allow the employment
to be aided both at
the conversion of
creation of
the
the ceiling for aid for
contract,
initial
is
exceeded.

the post and at
in such a way that

for creation of employment

they have positive

investment or

employment

effects.

(20) Small and medium-sized enterprises play a decisive role in
job creation. At the same time, their size may present a
handicap to the creation of new employment because of
the risks and administrative burden involved in the
job creation
recruitment of new personnel. Similarly,
can contribute to the economic development of
less-
favoured regions in the Community and thus improve
in those
economic and social cohesion. Enterprises
the
regions suffer from the structural disadvantage of
small and
location.
therefore appropriate that
medium-sized enterprises, and enterprises
in assisted
regions, should be able to benefit
from aid to create
employment.

is

It

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(21) Large firms in non-assisted areas do not suffer from
particular difficulties and employment costs are part of
their normal operating expenses. For this reason, and in
order to maximise the incentive effect of aid to create jobs
in SMEs and in regions eligible for the derogations under
Article 87(3)(a) and (c) of the EC Treaty,
large firms in
regions not eligible for these derogations should not be
eligible for aid to create employment.

(22) Certain categories of workers

or

through

(for example, young workers,

experience particular
difficulty in finding work, because employers consider
them to be less productive. This perceived lower produc-
tivity may be either through lack of recent experience of
long-term
employment
unemployed)
handicap.
Employment aid intended to encourage firms to recruit
such individuals is justified by the fact that the lower
financial
productivity of
advantage accruing to the firm and by the fact that the
workers also benefit from the measure and are likely to be
excluded from the labour market unless employers are
is therefore appropriate to
offered such incentives.
allow schemes providing such aid, whatever the size or
location of the beneficiary.

these workers

permanent

reduces

the

It

(23) Workers with a disability may need permanent help to
enable them to remain in the labour market, going
beyond aid for initial recruitment. Schemes providing
for
such aid should be exempted from notification
provided the aid can be shown to be no more than
necessary to compensate for the lower productivity of
the workers
costs of
employing them.

concerned or

ancillary

the

(24) This Regulation should not prevent the cumulation of aid
for the recruitment of disadvantaged workers or for the
recruitment or employment of disabled workers with
other aid granted in respect of employment costs, since
in such cases it is legitimate to provide an incentive for
workers from these categories to be employed in pref-
erence to others.

(25) In order to ensure that the aid is necessary and acts as an
this Regulation should not
for
already

incentive to employment,
exempt aid for
recruitment which
undertake under market conditions alone.

the creation of employment or

beneficiary would

the

(26) This Regulation should not exempt aid for the creation of
employment where this is cumulated with other State aid,
including aid granted by national, regional or local auth-
orities, or with Community assistance, in relation to the
same eligible costs or to the costs of investments to which
the employment concerned is linked, when such cumu-
lation exceeds the thresholds fixed in this Regulation or in
the Community rules on State aid for investment,
in
particular the Guidelines on national regional aid and

Regulation (EC) No 70/2001. The only exceptions to this
principle should be for aid for the recruitment of disad-
vantaged workers or for the recruitment or employment
of disabled workers.

(27) It is appropriate that large amounts of aid remain subject
to an individual assessment by the Commission before
into effect. Accordingly aid amounts
they are put
exceeding a fixed amount over a certain period to single
enterprise or
excluded from the
exemption provided for in this Regulation and remain
subject to the requirements of Article 88(3) of the Treaty.

establishment

are

(28) Aid measures to promote employment or other aid with
objectives
and labour
markets may be of a different nature from measures
exempted by this Regulation. Such measures should be
notified under Article 88(3).

connected with employment

(29) In the light of

the World Trade Organisation (WTO)
Agreement on subsidies and countervailing measures,
this Regulation should not exempt export aid or aid
favouring domestic over imported products.

Journal

(30) In order to ensure transparency and effective monitoring,
in accordance with Article 3 of Regulation (EC) No
994/98, it is appropriate to establish a standard format
in which Member States should provide the Commission
with summary information whenever, in pursuance of this
Regulation, an aid scheme is implemented, with a view to
publication in the Official
the European
it is appropriate to
Communities. For the same reasons,
establish rules concerning the records
that Member
States should keep regarding the aid scheme exempted
the annual
by this Regulation. For
report to be submitted to the Commission by Member
States, it is appropriate for the Commission to establish
its specific requirements.
In order to facilitate adminis-
trative treatment and in view of the wide availability of
the necessary technology, the summary information and
the annual report should be provided in computerised
form.

the purposes of

of

(31) Having regard to the Commission's experience in this
area, and in particular the frequency with which it is
generally necessary to revise State aid policy, it is appro-
priate to limit the period of application of this Regulation.
Should this Regulation expire without being extended, aid
schemes already exempted by this Regulation should
continue to be exempted for six months.

(32) It is appropriate that the Commission should propose
appropriate measures to the Member States in order
that schemes in force at the entry into force of this Regu-
lation should be brought into conformity with its terms,

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HAS ADOPTED THIS REGULATION:

Article 1

Scope

This Regulation shall apply to schemes which provide aid for
the creation of employment, to schemes which provide aid for
the recruitment of disadvantaged and disabled workers and to
schemes which provide aid to cover the additional costs of
employing disabled worker, including aid for the production,
processing and marketing of agricultural products
falling
within Annex I of
the Treaty, as well as in the forestry
sector, and in the transport sector. However, aid in the
transport sector for the creation of employment, in the sense
of Article 4, is not exempted from notification by this Regu-
lation.

— any migrant worker who moves or has moved within
the Community or becomes resident in the Community
to take up work,

— any person who is part of an ethnic minority within a
Member State and who requires development of his or
her linguistic, vocational training or work experience
profile to enhance prospects of gaining access
to
stable employment,

— any person who wishes to enter or to re-enter working
life and who has been absent both from work and from
education for at least two years, and particularly any
person who gave up work on account of the difficulty
of reconciling his or her working life and family life,

Article 2

Definitions

For the purpose of this Regulation:

— any person older than 45 who has not attained an
upper
its
educational
equivalent, and any person older than 55, who does
not have a job or who is losing their job,

qualification or

secondary

(a) ‘aid’ shall mean any measure fulfilling all the criteria laid

down in Article 87(1) of the Treaty;

— any long-term unemployed person, i.e. any person who
has been unemployed for 12 consecutive months, or six
consecutive months in the case of persons under 25,

(b) ‘small and medium-sized enterprises’ shall mean enterprises

as defined in Annex I;

— any person recognised to be or to have been an addict

in accordance with national law,

(c) ‘gross aid intensity’ shall mean the aid amount expressed as
a percentage of the relevant costs. All figures used shall be
taken before any deduction for direct taxation. Where aid is
awarded in a form other than a grant, the aid amount shall
be the grant equivalent of the aid. Aid payable in several
instalments shall be discounted to its value at the moment
of granting. The interest rate to be used for discounting
purposes and for calculating the aid amount
in a soft
loan shall be the reference rate applicable at the time of
grant;

— any person who has not previously obtained his or her
first regular paid employment following a period of
imprisonment,

— any woman in a (NUTS II) geographical area where
the
average unemployment has exceeded (100 %) of
Community average for at least (two) calendar years
and where
exceeded
(150 %) of the average unemployment rate in the area
concerned for at least (two) calendar years;

unemployment has

female

(d) ‘net aid intensity’ shall mean the discounted aid amount net
of tax expressed as a percentage of the relevant costs;

(g) ‘disabled worker’ shall mean:

(e) ‘number of employees’ shall mean the number of annual
working units (AWU), namely the number of persons
employed full time in one year, part-time and seasonal
work being AWU fractions;

(f)

‘disadvantaged worker’ shall mean any person meeting at
least one of the following criteria:

— any person recognised under national

law to have
serious disabilities which result from physical, mental
or psychological
capable of
entering the labour market;

impairments and yet

(h) ‘wage cost’ comprises:

— the gross wage, i.e. before tax, and

— any young person under 25 who has not previously
obtained his or her first regular paid employment,

— the compulsory social security contributions,

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actually payable by the beneficiary in respect of
employment concerned;

the

Article 4

Creation of employment

(i) a job is

if

it concerns

‘linked to the carrying-out of a project of
investment’
the activity to which the
investment relates and if it is created within three years
of
the
the investment's completion. During this period,
jobs created following an increase in the utilisation rate
of the capacity created by the investment are also linked
to the investment;

(j)

‘investment in tangible assets’ shall mean an investment in
fixed physical assets relating to the creation of a new estab-
lishment, the extension of an existing establishment, or the
engagement in an activity involving a fundamental change
in the product or production process of an existing estab-
lishment
(in particular through rationalisation, diversifi-
cation or modernisation). An investment in fixed assets
undertaken in the form of the takeover of an establishment
which has closed or which would have closed had it not
been purchased shall
tangible
also be
investment;

regarded as

(k) ‘investment in intangible assets’ shall mean investment in
transfer of technology by the acquisition of patent rights,
licences, know-how or unpatented technical knowledge.

Aid schemes for the creation of employment and any aid
the

1.
that could be awarded under such scheme shall
conditions of paragraphs 2 to 4.

fulfil

2. Where the employment is created in areas which do not
qualify for regional aid pursuant to Article 87(3)(a) and (c) at
the moment the aid is awarded, the gross aid intensity shall not
exceed:

(a) 15 % in the case of small enterprises;

(b) 7,5 % in the case of medium-sized enterprises.

3. Where the employment is created in areas which qualify
for regional aid pursuant to Article 87(3)(a) and (c) at the
moment the aid is awarded, the net aid intensity shall not
exceed the ceiling of regional
investment aid determined in
the map approved by the Commission for each Member
State. In the case of small and medium-sized enterprises, and
unless the map provides otherwise for such enterprises, this
ceiling is increased by:

(a) 10 percentage points gross in areas covered by Article
87(3)(c), provided that the total net aid intensity does not
exceed 30 %; or

Article 3

Conditions for exemption

(b) 15 percentage points gross in areas covered by Article
87(3)(a), provided that the total net aid intensity does not
exceed 75 %.

1.
Subject to Articles 9 and 10, aid schemes fulfilling all the
conditions of this Regulation shall be compatible with the
common market within the meaning of Article 87(3) of the
Treaty and shall be exempt from the notification requirement
of Article 88(3) of the Treaty provided that:

(a) any aid that could be awarded under such scheme fulfils all

the conditions of this Regulation;

(b) the scheme contains an express reference to this Regu-
lation, by citing its title and publication reference in the
Official Journal of the European Communities.

The higher regional aid ceilings shall only apply if the bene-
ficiary's contribution to financing is at least 25 %.

As far as employment is created in the production, processing
and marketing of Annex I products in areas which qualify as
less favoured areas defined in Council Regulation (EC) No
1257/1999 of 17 May 1999 on support for rural development
from the European Agricultural Guidance and Guarantee Fund
(EAGGF) and amending and repealing certain Regulations (1),
these higher aid ceilings or, if applicable, higher aid ceilings of
Regulation (EC) No 1257/1999 apply.

As far as employment is created in the steel sector, the ceilings
in paragraph 2 of this Article apply.

Aid granted under the schemes referred to in paragraph 1
2.
shall be compatible with the common market within the
meaning of Article 87(3) of the Treaty and shall be exempt
from the notification requirement of Article 88(3) of the Treaty
provided that the aid granted fulfils all the conditions of this
Regulation.

4.
The ceilings fixed in paragraphs 2 and 3 shall apply to
the intensity of the aid calculated as a percentage of the wage
costs over a period of two years relating to the employment
created under the following conditions:

(1) OJ L 160, 26.6.1999, p. 80.

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(a) the employment created must represent a net increase in
the number of employees (as defined in Article 2(e)) both
in the establishment and in the enterprise concerned,
compared with the average over the past twelve months;

2.

The aid shall not exceed the level needed to compensate:

(a) for any reduced productivity, resulting from the disabilities

of the worker or workers;

(b) the

created shall be maintained for

a
employment
minimum period of
five years. The higher regional aid
ceilings shall only apply if the employment is maintained
within the qualifying region; and

and for any costs:

(b) of adapting premises;

(c) the new workers employed as a result of the creation of
employment must have never had a job or have lost or be
losing their previous job.

(c) of employing staff for time spent solely on the assistance of

the disabled worker or workers;

5. Where aid is granted for the creation of employment
under a scheme exempted under this Article, additional aid
may be granted in case of recruitment of a disadvantaged
or disabled worker in accordance with the terms of Articles
5 or 6.

Article 5

Recruitment of disadvantaged and disabled workers

1.
Aid schemes for the recruitment by any enterprise of
disadvantaged and disabled workers and any aid that could
be awarded under such scheme shall fulfil the conditions of
paragraphs 2 and 3.

2.
The gross intensity of the aid calculated as a percentage
of the wage costs relating to the employment of the disad-
vantaged or disabled worker or workers over a period of two
years following recruitment shall not exceed 20 %.

3.

The following conditions apply:

(a) where the recruitment does not represent a net increase in
the number of employees in the establishment concerned,
following
the post or posts must have fallen vacant
voluntary departure,
age,
voluntary reduction of working time or lawful dismissal
for misconduct and not as a result of redundancy; and

retirement on grounds of

(b) except in the case of lawful dismissal for misconduct the
entitled to continuous

worker or workers must be
employment for a minimum of [12] months.

(d) of adapting or acquiring equipment for their use;

which are additional to those which the beneficiary would have
incurred if employing workers who are not disabled, over any
period for which the disabled worker or workers are actually
employed.

Schemes exempted by this Article shall provide that aid
3.
be subject
the beneficiary maintain
records allowing verification that the aid granted to it meets
the provisions of paragraph 1 and of Article 8, paragraph 4.

to the condition that

Article 7

Necessity for the aid

1.
This Regulation shall only exempt aid under Article 4 if
before the employment concerned is created, and shall only
exempt aid under Article 5 if before the worker is recruited:

(a) either an application for aid has been submitted to the

Member State by the beneficiary; or

(b) the Member State has adopted legal provisions establishing
a legal right
to aid according to objective criteria and
without further exercise of discretion by the Member State.

In order

to ensure

2.
creation of
that
employment is not granted in situations where, because an
investment project has been undertaken,
it is clear that the
associated employment would be created in any event, this
Regulation shall exempt aid under Article 4 in cases where:

aid for

the

Article 6

Additional costs of employment of disabled workers

1.
Aid schemes for the employment of disabled workers and
any aid that could be awarded under such a scheme shall fulfil
the conditions of paragraphs 2 and 3.

— the employment created is linked to the carrying out of a
project of investment in tangible or intangible assets, and

— the employment

is created within three years of

the

investment's completion,

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only if
adoption referred to in paragraph 1(b),
work on the project is started.

the application referred in paragraph 1(a), or the
take place before

applying to the aid concerned, or result in an aid intensity
exceeding 100 %.

Article 8

Cumulation

The aid ceilings fixed in Articles 4, 5 and 6 shall apply
1.
regardless of whether the support for the aided employment or
recruitment
is financed entirely from State resources or is
partly financed by the Community.

2. Without prejudice to paragraph 4, aid under schemes
exempted by Article 4 of
this Regulation shall not be
cumulated with any other State aid within the meaning of
the Treaty, or with other Community
Article 87(1) of
funding, in relation to the same wage costs, if such cumulation
would result in an aid intensity exceeding that fixed by this
Regulation.

3. Without prejudice to paragraph 4, aid under schemes
exempted by Article 4 of
this Regulation shall not be
cumulated:

(a) with any other State aid within the meaning of Article
87(1) of the Treaty, or with other Community funding,
to which the
in relation to costs of any investment
created employment
is linked and which has not yet
been completed at the time the employment is created,
or which was completed in the three years before the
employment is created; or

Article 9

Aid remaining subject to prior notification to the
Commission

1.
Aid schemes which are targeted at specific sectors are not
covered by the exemption from notification provided by this
Regulation and shall
to the notification
remain subject
requirement of Article 88(3) of the Treaty.

2.
This Regulation shall not exempt from notification the
grant of aid to a single enterprise or establishment exceeding a
gross aid amount of [EUR 15 million] over any three-year
period. The Commission shall assess such aid,
if granted
under a scheme which is otherwise exempted by this Regu-
lation, by reference solely to the criteria of this Regulation.

3.
Aid to maintain jobs, defined as support given to a firm
or firms to retain workers who would otherwise be laid off,
shall remain subject to the notification requirement of Article
88(3) of the Treaty. Subject to any sectoral rules, such aid may
be authorised by the Commission only where, in accordance
with Article 87(2)(b) of the EC Treaty, it is intended to make
good the damage caused by natural disasters or exceptional
occurrences or, under the conditions applying to operating
aid in the guidelines on national regional aid,
in regions
eligible for the derogation under Article 87(3)(a) of the EC
Treaty concerning the economic development of areas where
the standard of living is abnormally low or where there is
serious underemployment.

(b) with any such aid or funding in relation to the same wage
same
employment

linked to the

to other

costs or
investment;

if such cumulation would result in an aid intensity exceeding
the relevant ceiling of regional investment aid determined in
regional aid and in the map
the guidelines on national
approved by the Commission for each Member State or the
ceiling in Regulation (EC) No 70/2001 of 12 January 2001 on
the application of Articles 87 and 88 of the EC Treaty to State
aid to small and medium-sized enterprises. Where the relevant
ceiling has been adapted in a particular case, in particular by
the application of State aid rules applying in a particular sector,
or by an instrument applying to large projects (1), the adapted
ceiling shall apply for the purposes of this paragraph.

4.
Aid under schemes exempted by Articles 5 and 6 of this
Regulation may be cumulated with other State aid within the
meaning of Article 87(1) of
the Treaty, or with other
in relation to the same costs, provided
Community funding,
such cumulation does not exceed limits established in rules

(1) For example, the multisectoral framework on regional aid for large

investment projects (OJ C 107, 7.4.1998, p. 7).

Aid for

the conversion of
contracts

fixed-term
4.
employment
indeterminate
duration shall remain subject to the notification requirement
of Article 88(3) of the Treaty.

temporary or

contracts

into

of

5.
Aid schemes for job-sharing, for provision of support for
working parents and similar employment measures which
in a net
promote employment but which do not
increase in employment, in the recruitment of disadvantaged
workers, or in the recruitment or employment of disabled
workers shall remain subject to the notification requirement
of Article 88(3) of the Treaty and shall be assessed by the
Commission in accordance with Article 87 of the Treaty.

result

and labour markets,

Other aid measures with objectives connected with
6.
employment
to
encourage early retirement, shall also remain subject to the
notification requirement of Article 88(3) of the Treaty and
shall be assessed by the Commission in accordance with
Article 87 of the Treaty.

such as measures

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conditions for exemption, as laid down in this Regulation,
are fulfilled,
including information on the status of any
company whose entitlement to aid depends on its status as
an SME. Member States shall keep a record regarding an aid
scheme for 10 years from the date on which the last individual
aid was granted under such scheme. On written request, the
Member State concerned shall provide the Commission, within
a period of 20 working days or such longer period as may be
the information which the
fixed in the request, with all
the
to assess whether
Commission considers necessary
conditions of this Regulation have been complied with.

3. Member States shall compile a report on the application
of this Regulation in respect of each whole or part calendar
year during which this Regulation applies,
in the form laid
down in Annex III,
in computerised form. Member States
shall provide the Commission with such report no later than
three months after the expiry of the period to which the report
relates.

Article 12

Entry into force and period of validity

1.
This Regulation shall enter into force on the twentieth
day following that of its publication in the Official Journal of the
European Communities.

It shall remain in force until 31 December 2006.

2.
Notifications pending at the time of entry into force of
this Regulation will be assessed in accordance with its
provisions. Employment aid which was granted before the
time of entry into force of this Regulation in the absence of
a Commission authorisation and in breach of the obligation in
Article 88(3) of the Treaty will be assessed against the rules in
force at the time the aid was granted.

At the end of the period of validity of this Regulation, aid
remain

3.
this Regulation shall
schemes
exempted during an adjustment period of six months.

exempted under

This Regulation shall be binding in its entirety and directly
applicable in all Member States.

Done at Brussels . . .

For the Commission

. . .

Member of the Commission

Individual cases of employment aid outside of any
7.
scheme shall remain subject to the notification requirement
of Article 88(3) of the Treaty. Such aid will be assessed in
the light of this Regulation and may be authorised by the
is compatible with any specific
Commission only if
applicable rules which may have been laid down in respect
of the sector in which the beneficiary operates and only if it
can be shown that
the aid on employment
outweigh the impact on competition in the relevant market.

the effects of

it

8.
This Regulation is without prejudice to any obligation on
a Member State to notify individual grants of aid under obli-
gations entered into in the context of other State aid
instruments, and in particular the obligation to notify, or to
inform the Commission of, aid to an enterprise receiving aid
for restructuring in the sense of the Community guidelines on
State aid for rescuing and restructuring firms in difficulty (1).

Article 10

Aid for export-related activities and aid contingent upon
the use of domestic over imported goods

This Regulation shall not exempt the grant of:

(a) aid to export-related activities, namely aid directly linked to
the quantities exported, to the establishment and operation
of a distribution network or to other current expenditure
linked to the export activity; or of

(b) aid contingent upon the use of domestic over imported

goods.

Such aid is incompatible with the Community's international
obligations under
the WTO Agreement on subsidies and
countervailing measures and may not therefore be exempted
from notification, nor authorised if so notified.

Article 11

Transparency and monitoring

1.
On implementation of an aid scheme exempted by this
Regulation, Member States shall, within 20 working days,
forward to the Commission, with a view to its publication in
the Official Journal of the European Communities, a summary of
the information regarding such aid scheme in the form laid
down in Annex II. This shall be provided in computerised
form.

2. Member States shall maintain detailed records regarding
the aid schemes exempted by this Regulation and the indi-
vidual aid granted under those schemes. Such records shall
the
contain all

information necessary to establish that

(1) OJ C 288, 9.10.1999, p. 2, in particular paragraphs 88 to 93.

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ANNEX I

DEFINITION OF SMALL AND MEDIUM-SIZED ENTERPRISES

(extract from the Commission Recommendation of 3 April 1996 concerning the definition of small and
medium-sized enterprises (OJ L 107, 30.4.1996, p. 4))

1.

Small and medium-sized enterprises, hereinafter referred to as ‘SMEs’, are defined as enterprises which:

Article 1

— have fewer than 250 employees, and

— have either,

— an annual turnover not exceeding EUR 40 million, or

— an annual balance-sheet total not exceeding EUR 27 million,

— conform to the criterion of independence as defined in paragraph 3.

2. Where it is necessary to distinguish between small and medium-sized enterprises, the ‘small enterprise’ is defined as
an enterprise which:

— has fewer than 50 employees, and

— has either

— an annual turnover not exceeding EUR 7 million, or

— an annual balance-sheet total not exceeding EUR 5 million,

— conforms to the criterion of independence as defined in paragraph 3.

3.
Independent enterprises are those which are not owned as to 25 % or more of the capital or the voting rights by
one enterprise, or jointly by several enterprises, falling outside the definitions of an SME or a small enterprise, whichever
may apply. This threshold may be exceeded in the following two cases:

— if the enterprise is held by public investment corporations, venture capital companies or institutional investors,

provided no control is exercised either individually or jointly,

— if the capital is spread in such a way that it is not possible to determine by whom it is held and if the enterprise
declares that it can legitimately presume that it is not owned as to 25 % or more by one enterprise, or jointly by
several enterprises, falling outside the definitions of an SME or a small enterprise, whichever may apply.

In calculating the thresholds referred to in paragraphs 1 and 2, it is therefore necessary to cumulate the relevant
4.
figures for the beneficiary enterprise and for all the enterprises that it directly or indirectly controls through possession
of 25 % or more of the capital or of the voting rights.

5. Where it is necessary to distinguish micro-enterprises from other SMEs, these are defined as enterprises having
fewer than 10 employees.

6. Where, at the final balance sheet date, an enterprise exceeds or falls below the employee thresholds or financial
ceilings, this is to result in its acquiring or losing the status of ‘SME’,
‘small enterprise’ or
‘micro-enterprise’ only if the phenomenon is repeated over two consecutive financial years.

‘medium-sized enterprise’,

7.
The number of persons employed corresponds to the number of annual working units (AWU), that is to say, the
number of full-time workers employed during one year with part-time and seasonal workers being fractions of AWU.
The reference year to be considered is that of the last approved accounting period.

The turnover and balance sheet total thresholds are those of the last approved 12-month accounting period. In the
8.
case of newly-established enterprises whose accounts have not yet been approved, the thresholds to apply shall be
derived from a reliable estimate made in the course of the financial year.

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ANNEX II

Information communicated by Member States regarding State aid granted under Commission Regulation (EC)
No . . ./2002 of . . . 2002 on the application of Articles 87 and 88 of the EC Treaty to State aid for employment

(to be provided in computerised form, by electronic mail, to stateaidgreffe@cec.eu.int)

Aid No:

Explanatory remark: This number will be filled in by DG COMP.

Member State:

Region:

Explanatory remark: Indicate the name of the region if the aid is granted by a sub-central authority.

Title of aid scheme:

Explanatory remark: Indicate the name of the aid scheme.

Legal basis:

Explanatory remark: Indicate the precise national legal reference for the aid and a publication reference.

Annual expenditure planned under the scheme:

Explanatory remark: Amounts are to be given in euro or, if applicable, national currency.

Indicate the annual overall amount of the budget appropriation(s) or the estimated tax loss per year for all aid
instruments contained in the scheme.

For guarantees, indicate the (maximum) amount of loans guaranteed.

Maximum aid intensity under:

— Article 4: creation of employment,

— Article 5: recruitment of disadvantaged and disabled workers,

— Article 6: additional costs of employment of disabled workers.

Explanatory remark: Indicate the maximum aid intensity distinguishing between aid under Article 4, Article 5 and Article
6 of the Regulation.

Date of implementation:

Explanatory remark: Indicate the date from which aid may be granted under the scheme.

Duration of scheme:

Explanatory remark: Indicate the date (year and month) until which aid may be granted under the scheme.

Objective of aid:

— Article 4: creation of employment,

— Article 5: recruitment of disadvantaged and disabled workers,

— Article 6: employment of disabled workers.

Explanatory remark: The primary objective(s) of the measure should be identified from among the three options. This field
also gives the opportunity to indicate further (secondary) objectives pursued.

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Economic sector(s) concerned:

— All EC sectors (1),

— All manufacturing (1),

— All services (1),

— Other (please specify).

Explanatory remark: Choose from the list, where relevant. Aid schemes which are targeted at specific sectors are not
covered by the exemption from notification provided by this Regulation.

Name and address of the granting authority:

Explanatory remark: Please include the telephone number and where possible the address for electronic mail.

Other information:

Explanatory remarks: If the scheme is co-financed by Community funds, please add the following sentence:

‘The aid scheme is co-financed under [reference].’

If the scheme's duration extends beyond the date of validity of this Regulation, please add the following sentence:

‘The exemption regulation expires on 31 December 2006 followed by a transitional period of six months.’

(1) With the exception of the shipbuilding sector, and other sectors which are the subjects of special rules in Regulations and Directives

governing all State aid within the sector.

ANNEX III

FORM OF THE PERIODIC REPORT TO BE PROVIDED TO THE COMMISSION

Annual reporting format on aid schemes exempted under a group exemption regulation adopted pursuant to
Article 1 of Council Regulation (EC) No 994/98

Member States are required to use the format below for their reporting obligations to the Commission under group
exemption regulations adopted on the basis of Council Regulation (EC) No 994/98.

The reports should be provided in computerised form to stateaidgreffe@cec.eu.int

Information required for all aid schemes exempted under group exemption regulations adopted pursuant to
Article 1 of Regulation (EC) No 994/98

1. Title of aid scheme

2. Commission exemption regulation applicable

3. Expenditure

Separate figures have to be provided for each aid instrument within a scheme (e.g. grant, soft loans, etc.). The figures
have to be expressed in euro or, if applicable, national currency. In the case of tax expenditure, annual tax losses
have to be reported. If precise figures are not available, such losses may be estimated.

These expenditure figures should be provided on the following basis:

For the year under review indicate separately for each aid instrument within the scheme (e.g. grant, soft loan,
guarantee, etc.):

3.1. Amounts committed, (estimated) tax losses or other revenue forgone, data on guarantees, etc. for new decisions
to grant aid. In the case of guarantee schemes, the total amount of new guarantees handed out should be
provided.

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3.2. Actual payments, (estimated) tax losses or other revenue forgone, data on guarantees, etc. for new and current
grants of aid. In the case of guarantee schemes, the following should be provided: total amount of outstanding
guarantees, premium income, recoveries, indemnities paid out, operating result of the scheme under the year
under review.

3.3. Number of new decisions to grant aid.

3.4. Estimated overall number of jobs created or disadvantaged or disabled workers recruited or employed under

new decisions to grant aid (as appropriate).

3.5. Regional breakdown of amounts under 3.1 either by regions defined at NUTS (1) level 2 or below or by Article

87(3)(a) regions, Article 87(3)(c) regions and non-assisted regions.

3.6. Sectoral breakdown of amounts under 3.1. by beneficiaries' sectors of activity (If more than one sector is

covered, indicate the share of each):

Coalmining

Manufacturing

of which:

Steel

Shipbuilding

Synthetic fibres

Motor vehicles

Other manufacturing (please specify)

Services

of which:

Transport services

Financial services

Other services (please specify)

Other sectors (please specify)

4. Other information and remarks

(1) NUTS is the nomenclature of Territorial Units for statistical purposes in the EC.