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
Date: 2002-12-12
Institutions: European Commission
Subjects: State aid, aid system, control of State aid, exchange of information, job creation, labour force, worker with disabilities

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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

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

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 point (a)(iv) and point
(b) of Article 1(1) thereof,

Having published a draft of this Regulation (2),

Having consulted the Advisory Committee on State Aid,

Whereas:

(1)

(2)

(3)

Regulation (EC) No 994/98 empowers the Commission
to declare, in accordance with Article 87 of the Treaty,
that under certain conditions aid for employment
is
compatible with the common market and not subject to
the notification requirement of Article 88(3) of
the
Treaty.

Regulation (EC) No 994/98 also empowers the Commis-
sion to declare,
in accordance with Article 87 of the
Treaty, 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.

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 guidelines on aid to 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 88 of the EC
Treaty to State aid to small and medium-sized enter-
prises (6). In the light of the Commissions experience in
applying those provisions, it is appropriate, with a view
to ensuring efficient supervision and simplifying admin-
istration without weakening Commission monitoring,
that the Commission should make use of the powers
conferred by Regulation (EC) No 994/98.

(1) OJ L 142, 14.5.1998, p. 1.
(2) OJ C 88, 12.4.2002, p. 2.
(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.

This Regulation is without prejudice to the possibility
for Member States to notify aid for employment. Such
notifications will be assessed by the Commission in
particular in the light of the criteria set out in this Regu-
lation, in Regulation (EC) No 70/2001 or in accordance
with any relevant Community guidelines or frameworks.
This is currently the case for the sector of maritime
transport. The guidelines on State aid for employment (7)
cease to apply from the date of entry into force of this
Regulation, as do the notice on monitoring of State aid
and reduction of labour costs and the notice on an accel-
erated procedure for processing notifications of employ-
ment aid (8). Notifications pending at the entry into force
of this Regulation will be assessed in accordance with its
provisions.
It is appropriate to lay down transitional
provisions concerning the application of this Regulation
to employment aid granted before its entry into force
and in breach of the obligation in Article 88(3) of the
Treaty.

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 categories
of worker still find particular difficulty in entering the
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 cate-
gories.

This Regulation applies only to employment measures
which fulfil all the conditions of Article 87(1) of the
Treaty and thus constitute State aid. A number of
employment policy measures do not constitute State aid
within the meaning of Article 87(1) because they consti-
tute aid to individuals that does not
favour certain
undertakings or the production of certain goods, or
because they do not affect trade between Member States
to promote
or because they are general measures
employment which do not distort or threaten to distort
competition by favouring certain undertakings or the
production of certain goods. Such general measures,
which may include general reduction of the taxation of
labour and social costs, boosting investment in general
education and training, measures to provide guidance
and counselling, general assistance and training for the

(5)

(6)

(7) OJ C 371, 23.12.2000, p. 12.
(8) OJ C 218, 27.7.1996, p. 4.

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unemployed and improvements in labour law are there-
fore unaffected by this Regulation. This is also the case
of measures which are deemed not
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 (1).

to meet all

employment

Having regard to those considerations, the purpose and
effect of the aid exempted by this Regulation should be
to promote
in accordance with the
European employment strategy, in particular of workers
from disadvantaged categories, without adversely affect
trading conditions to an extent contrary to the common
interest. Employment aid granted to a firm on an indivi-
dual basis may have a major impact on competition in
the relevant market because it favours that firm over
others which have not received such aid. By being
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.

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
and simplifying
administration without weakening
Commission monitoring, aid schemes should contain an
express reference to this Regulation.

This Regulation should not exempt from notification
State aid in the shipbuilding and coal-mining sectors, for
which special
respectively,
rules are laid down in,
Council Regulation (EC) No 1540/98 (2) and Council
Regulation (EC) No 1407/2002 (3).

(7)

(8)

(9)

(12)

the
In accordance with the established practice of
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.

(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 calculation of the grant equivalent of aid payable in
several instalments and aid in the form of a soft loan
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
rates for the purposes of
this Regulation should be
deemed to be the reference rates, provided that, in the
case of a soft loan, the loan is backed by normal security
and does not involve abnormal 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 Journal of the European Commu-
nities and on the Internet.

(14) Having regard to the differences between enterprises of
different sizes, different ceilings of aid intensity for the
creation of employment should be set for small and
medium sized enterprises and large enterprises. In order
to eliminate differences that might give rise to distor-
tions of competition, in order to facilitate coordination
between different Community and national
initiatives,
reasons of administrative clarity and legal
and for
certainty,
‘small and medium-sized
the definition of
enterprises’ (SMEs) 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 (4). That definition was also
used in Regulation (EC) No 70/2001.

(10)

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

(15)

(11)

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

(1) OJ L 10, 13.1.2001, p. 30.
(2) OJ L 202, 18.7.1998, p. 1.
(3) OJ L 205, 2.8.2002, p. 1.

The ceilings of aid intensity should be fixed, in the light
of the Commissions experience, at a level that strikes the
appropriate balance between minimising distortions of
competition and the objective of promoting employ-
ment. 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
linked to investment
projects.

employment

creation of

(4) OJ L 107, 30.4.1996, p. 4.

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(16)

Employment costs form part of the normal operating
costs of any enterprise. It is therefore particularly impor-
tant that aid should have a positive effect on employ-
ment and should not merely enable enterprises to reduce
costs which they would otherwise bear.

the context of the rescue and restructuring of a company
in difficulty,
in accordance with the provisions of the
relevant Community guidelines (1).

(17) Without rigorous controls and strict limits, employment
its
aid can have harmful effects which cancel out
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 absence of rigorous controls, such aid may be
concentrated in the most prosperous regions, contrary
to the objective of economic and social cohesion. Within
the single market, aid granted to reduce costs of employ-
ment can lead to distortions of intra-Community compe-
tition and deflections in the allocation of resources and
mobile investment,
to the shifting of unemployment
from one country to another, and to relocation.

(18) Aid to create jobs should be subject to the condition that
the created job should be maintained for a certain
minimum period. The period set
in this regulation
should override the five-year rule set out in point 4.14
of the guidelines on national regional aid.

it

It

(19) Aid to maintain jobs, meaning financial support given to
a firm to persuade it not to lay off its workers, is similar
to operating aid. Subject to any sectoral rules, therefore,
such as those which exist in the sector of maritime
should be authorised only in specific
transport,
circumstances and for a limited period.
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 those where, in
accordance with Article 87(2)(b) of
is
intended to make good the damage caused by natural
disasters or exceptional occurrences; another instance is
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 Treaty
concerning the economic development of areas where
the standard of living is abnormally low or where there
including ultra-peripheral
is serious underemployment,
regions; a third instance is where such aid is granted in

the Treaty,

it

(20) 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
be notified so that
the Commission can determine
whether they have positive employment effects. It should
in particular be ensured that such measures do not allow
the employment to be aided both at the creation of the
post and at the conversion of the contract, in such a
way that the ceiling for aid for initial investment or for
creation of employment is exceeded.

(21)

(22)

(23)

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
recruitment of new personnel. Similarly, job creation can
contribute to the economic development of less favoured
regions in the Community and thus improve economic
and social cohesion. Enterprises in those regions suffer
from the structural disadvantage of the location. It is
therefore appropriate
small and medium-sized
enterprises, and enterprises in assisted regions, should be
able to benefit from aid to create employment.

that

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 Treaty, large firms
in regions not eligible for these derogations should not
be eligible for aid to create employment.

Certain categories of worker experience particular diffi-
culty in finding work, because employers consider them
to be less productive. This perceived lower productivity
may be due either to lack of recent experience of
employment
long-term
unemployed) or to permanent handicap. Employment
aid intended to encourage firms to recruit such indivi-
duals is justified by the fact that the lower productivity
advantage
of

(for example, young workers,

these workers

financial

reduces

the

(1) OJ C 288, 9.10.1999, p. 2.

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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
offered such incentives.
It is therefore appropriate to
allow schemes providing such aid, whatever the size or
location of the beneficiary.

(29)

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

to the requirements of Article 88(3) of

(24)

The categories of worker considered to be disadvantaged
should be defined, but it should be possible for Member
States to notify aid to promote the recruitment of other
categories
to be disadvantaged, with
supporting arguments.

they consider

in

sheltered

employment.

(25) Workers with a disability may need permanent help to
enable them to remain in the labour market, going
beyond aid for initial recruitment and possibly including
participation
Schemes
providing aid for such purposes should be exempted
from notification provided that the aid can be shown to
be no more than necessary to compensate for the lower
productivity of
the ancillary
costs of employing them or the costs of establishing or
maintaining sheltered employment. This condition is
designed to prevent enterprises benefiting from such aid
from selling below competitive prices in markets also
served by other enterprises.

the workers concerned,

(26)

(27)

(28)

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 prefer-
ence to others.

In order to ensure that the aid is necessary and acts as
an incentive to employment, this Regulation should not
exempt aid for the creation of employment or for
recruitment which the beneficiary would already under-
take under market conditions alone.

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
authorities, 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
cumulation exceeds the thresholds fixed in this Regula-
tion or in the Community rules on State aid for invest-
ment, in particular the Guidelines on national regional
aid and Regulation (EC) No 70/2001. The only excep-
tions to this principle should be for aid for the recruit-
ment of disadvantaged workers or for the recruitment or
employment of disabled workers.

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

(31)

(32)

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. Such aid
would be incompatible with the Community's interna-
tional obligations under that Agreement and should not
therefore be exempted from notification, nor authorised
if so notified.

it

In order to ensure transparency and effective moni-
toring, in accordance with Article 3 of Regulation (EC)
is appropriate to establish a standard
No 994/98,
in which Member States should provide the
format
Commission with summary information whenever,
in
pursuance of this Regulation, an aid scheme is imple-
mented, with a view to publication in the Official Journal
of the European Communities. For the same reasons, it is
appropriate to establish rules concerning the records that
Member States should keep regarding the aid scheme
exempted by this Regulation. For the purposes of the
annual 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
administrative treatment and in view of the wide avail-
ability of the necessary technology, the summary infor-
mation and the annual report should be provided in
computerised form.

(33) Having regard to the Commissions 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 Regula-
tion. Pursuant to Article 4(2) of Regulation (EC) No 994/
98, it is necessary to include transitional arrangements
whereby aid schemes already exempted by this Regula-
tion will, on its expiry, continue to be exempted for
another six months,

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HAS ADOPTED THIS REGULATION

Article 1

Scope

1.
This Regulation shall apply to schemes which constitute
State aid within the meaning of Article 87(1) of the Treaty and
which provide aid for the creation of employment, provide aid
for the recruitment of disadvantaged and disabled workers or
provide aid to cover the additional costs of employing disabled
workers.

This Regulation shall apply to aid in all sectors, including
relating to the production, processing and

2.
the activities
marketing of products listed in Annex I to the Treaty.

It shall not apply to any aid granted in the coal or shipbuilding
sectors, nor to any aid for the creation of employment, within
the meaning of Article 4, granted in the transport sector. Such
aid shall remain subject to prior notification to the Commission
in accordance with Article 88(3) of the Treaty.

3.

This Regulation shall not apply:

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

(b) to aid contingent upon the use of domestic in preference to

imported goods.

Article 2

Definitions

For the purpose of this Regulation:

(a) ‘aid’ means any measure fulfilling all the criteria laid down

in Article 87(1) of the Treaty;

(b) ‘small and medium-sized enterprises’ means enterprises as

defined in Annex I to Regulation (EC) No 70/2001;

(c) ‘gross aid intensity’ means 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;

(f) ‘disadvantaged worker’ means any person who belongs to a
category which has difficulty entering the labour market
without assistance, namely a person meeting at least one of
the following criteria:

(i) any person who is under 25 or is within two years
after completing full-time education and who has not
previously obtained his or her
regular paid
employment;

first

(ii) any migrant worker who moves or has moved within
the Community or becomes resident in the Commu-
nity to take up work;

(iii) any person who is a member 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;

(iv) 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;

(v) any person living as a single adult looking after a

child or children;

(vi) any person who has not attained an upper secondary
educational qualification or its equivalent, who does
not have a job or who is losing his or her job;

(vii) any person older than 50, who does not have a job

or who is losing his or her job;

(viii) any long-term unemployed person,

i.e. any person
who has been unemployed for 12 of the previous 16
months, or six of the previous eight months in the
case of persons under 25;

(ix) any person recognised to be or to have been an addict

in accordance with national law;

(x) any person who has not obtained his or her first
regular paid employment since beginning a period of
imprisonment or other penal measure;

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

female unemployment has

(d) ‘net aid intensity’ means the discounted aid amount net of

tax expressed as a percentage of the relevant costs;

(g) ‘disabled worker’ means any person either:

(e) ‘number of employees’ means

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;

(i) recognised as disabled under national law; or

(ii) having a recognised,

serious, physical, mental or

psychological impairment;

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(h) ‘sheltered employment’ means employment in an establish-
ment where at least 50 % of the employees are disabled
workers who are unable to take up work in the open
labour market;

Article 4

Creation of employment

(i) ‘wage cost’ comprises the following components actually
payable by the beneficiary of the State aid in respect of the
employment concerned:

1.
Aid schemes for the creation of employment and any aid
that could be awarded under such scheme shall fulfil the condi-
tions of paragraphs 2, 3 and 4.

(i) the gross wage, i.e. before tax; and

(ii) the compulsory social security contributions.

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

(k) ‘investment in tangible assets’ means an investment in fixed
physical assets relating to the creation of a new establish-
ment, 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, diversifica-
tion 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 also be regarded as tangible invest-
ment;

(l) ‘investment

in intangible assets’ means

in
transfer of technology by the acquisition of patent rights,
licences, know-how or unpatented technical knowledge.

investment

Article 3

Conditions for exemption

Subject to Article 9, aid schemes fulfilling all the condi-
1.
tions 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 Regula-
tion, by citing its title and publication reference in the Offi-
cial Journal of the European Communities.

2.
Aid granted under the schemes referred to in paragraph 1
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) provided
that the aid granted fulfils all the conditions of this Regulation.

2. Where the employment is created in areas or in sectors
which do not qualify for regional aid pursuant
to Article
87(3)(a) and (c) at the moment the aid is granted, 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 and in sectors
which qualify for regional aid pursuant to Article 87(3)(a) and
(c) at the moment at which the aid is awarded, the net aid
intensity shall not exceed the corresponding ceiling of regional
investment aid determined in the map applying at the time the
aid is granted, as approved by the Commission for each
Member State: for this purpose, regard shall be had, inter alia,
to the multisectoral framework for regional aid for large invest-
ment projects (1).

In the case of small and medium-sized enterprises, and unless
the map provides otherwise for such enterprises, this ceiling
shall be 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

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

The higher regional aid ceilings shall only apply if the benefi-
ciary's contribution to financing is at least 25 % and if the
employment is maintained within the qualifying region.

When employment is created in the production, processing and
marketing of products listed in Annex I to the Treaty, in areas
which qualify as less favoured areas under Council Regulation
(EC) No 1257/1999 (2), these higher aid ceilings or, if applic-
able, the higher aid ceilings of that Regulation, shall apply.

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:

(a) the employment created must represent a net increase in
the number of employees, both in the establishment and in
the enterprise concerned, compared with the average over
the past 12 months;

(1) OJ C 70, 19.3.2002, p. 8.
(2) OJ L 160, 26.6.1999, p. 80.

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(b) the

employment

a
minimum period of three years, or two years in the case of
SMEs; and

created shall be maintained for

(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.

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 para-
graphs 2 and 3.

The gross intensity of all aid relating to the employment
2.
of the disadvantaged or disabled worker or workers concerned,
calculated as a percentage of the wage costs over a period of
one year following recruitment, shall not exceed 50 % for
disadvantaged workers or 60 % for disabled workers.

3.

The following conditions shall apply:

(a) where the recruitment does not represent a net increase in
the number of employees in the establishment concerned,
the post or posts must have fallen vacant following volun-
tary departure, retirement on grounds of age, voluntary
reduction of working time or lawful dismissal for miscon-
duct and not as a result of redundancy, and

(b) except in the case of lawful dismissal for misconduct the
worker or workers must be entitled to continuous employ-
ment for a minimum of 12 months.

Article 6

Additional costs of employment of disabled workers

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

The aid, together with any aid provided under Article 5,
2.
shall not exceed the level needed to compensate for any
reduced productivity resulting from the disabilities of
the
worker or workers, and for any of the following costs:

(a) costs of adapting premises;

(b) costs of employing staff for time spent solely on the assis-

tance of the disabled worker or workers;

(c) costs 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.

Where the beneficiary provides sheltered employment, aid may
the
in addition cover, but
costs of
shall not
constructing,
establishment
concerned, and any costs of administration and transport which
result from the employment of disabled workers.

exceed,
the

installing or

expanding

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

to the condition that

Article 7

Necessity for the aid

This Regulation shall only exempt aid under Article 4 if

1.
before the employment concerned is created:

(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.

2.

Aid shall enjoy exemption under Article 4 in cases where:

(a) the employment created is linked to the carrying-out of a
project of investment in tangible or intangible assets; and

(b) the employment is created within three years of the invest-

ment's completion,

only if the application referred in paragraph 1(a), or the adop-
tion referred to in paragraph 1(b), takes place before work on
the project is started.

Article 8

Cumulation

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

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Aid under schemes exempted by Article 4 of this Regula-
2.
tion shall not be cumulated with any other State aid within the
meaning of Article 87(1) of the Treaty, or with other Commu-
nity funding, in relation to the same wage costs, if such cumu-
lation would result in an aid intensity exceeding that fixed by
this Regulation.

This Regulation shall not exempt from notification the
2.
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 Regulation, by
reference solely to the criteria of this Regulation.

Aid under schemes exempted by Article 4 of this Regula-

3.
tion 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, in
relation to costs of any investment to which the created
linked and which has not yet been
employment
completed at the time the employment is created, or which
was completed in the three years before the employment is
created; or

is

(b) with any such aid or funding in relation to the same wage
costs or to other employment linked to the same invest-
ment,

if such cumulation would result in an aid intensity exceeding
the relevant ceiling of regional investment aid determined in
the guidelines on national
regional aid and in the map
approved by the Commission for each Member State or the
ceiling in Regulation (EC) No 70/2001. 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 investment projects, such
as the applicable multisectoral framework for regional aid for
large investment projects, the adapted ceiling shall apply for
the purposes of this paragraph.

4.
By way of derogation from paragraphs 2 and 3, 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 Community funding,
in relation to the same costs, including with aid under schemes
exempted by Article 4 of this Regulation which complies with
paragraphs 2 and 3, provided that such cumulation does not
result in a gross aid intensity exceeding 100 % of the wage
costs over any period for which the worker or workers are
employed.

The first subparagraph shall be without prejudice to any lower
limits on aid intensity that may have been set pursuant to the
Community framework for State aid for research and develop-
ment (1).

Article 9

This Regulation is without prejudice to any obligation on
3.
a Member State to notify individual grants of aid under obliga-
tions 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 restructuring aid
within the meaning of the Community guidelines on State aid
for rescuing and restructuring firms in difficulty and the obliga-
tion to notify regional aid for large investment projects under
the applicable multisectoral Framework.

4.
Aid schemes to promote the recruitment of categories of
worker who are not disadvantaged within the meaning of
Article 2(f) shall remain subject to the notification requirement
of Article 88(3) of the Treaty unless exempted under Article 4.
On notification, Member States shall submit, for appraisal by
the workers
the Commission,
concerned are disadvantaged. In this respect, Article 5 shall
apply.

arguments

showing

that

5.
Aid to maintain jobs, namely financial support given to
an undertaking 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 Treaty, it is intended to
make good the damage caused by natural disasters or excep-
tional occurrences or, under the conditions applying to oper-
ating aid in the guidelines on national regional aid, in regions
eligible for the derogation under Article 87(3)(a) concerning
the economic development of areas where the standard of
living is abnormally low or where there is serious underem-
ployment.

Aid for

the conversion of

fixed-term
6.
employment contracts into contracts of indeterminate duration
shall remain subject to the notification requirement of Article
88(3) of the Treaty.

temporary or

Aid subject to prior notification to the Commission

Aid schemes which are targeted at particular sectors shall
1.
not be exempted from notification under this Regulation and
shall remain subject to the notification requirement of Article
88(3) of the Treaty.

(1) OJ C 45, 17.2.1996, p. 5.

7.
Aid schemes for job-sharing, for provision of support for
working parents and similar employment measures which
promote employment but which do not result in a net 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 accor-
dance with Article 87.

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Other aid measures with objectives connected with
8.
employment and labour markets, such as measures to encou-
rage early retirement, shall also remain subject to the notifica-
tion requirement of Article 88(3) of the Treaty and shall be
assessed by the Commission in accordance with Article 87.

9.
Individual cases of employment aid granted independently
of any scheme shall remain subject to the notification require-
ment of Article 88(3) of the Treaty. Such aid will be assessed in
the light of this Regulation and may be authorised by the
Commission only if it is compatible with any specific 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 effects of the aid on employment outweigh the impact
on competition in the relevant market.

Article 10

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 I. This shall be provided in computerised form.

2. Member States shall maintain detailed records regarding
the aid schemes exempted by this Regulation and the individual
aid granted under those schemes. Such records shall contain all
information necessary to establish that
the 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 fixed in the

the information which the Commission
request, with all
considers necessary to assess whether the 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 II, 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 11

Entry into force, period of validity, and transitional
arrangements

1.
This Regulation shall enter into force on the 20th day
following 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 shall be assessed in accordance with its provi-
sions.

Aid schemes implemented before the date of entry into force of
this Regulation, and aid granted under these schemes, in the
absence of a Commission authorisation and in breach of the
obligation in Article 88(3) of the Treaty, shall be compatible
with the common market within the meaning of Article 87(3)
of the Treaty and shall be exempted under this Regulation if
they fulfil
the conditions laid down in Article 3(1)(a) and
Article 3(2). Any aid which does not fulfil these conditions
shall be assessed by the Commission in accordance with the
relevant frameworks, guidelines, communications and notices.

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

3.
schemes
this Regulation shall
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, 12 December 2002.

For the Commission

Mario MONTI

Member of the Commission

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ANNEX I

Information communicated by Member States regarding State aid granted under 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

(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 remarks: 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 Articles 4, 5 and 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.

Economic sector(s) concerned:

— all Community sectors (1)

— all manufacturing (1)

— all services (1)

— other (please specify)

Explanatory remarks: 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 No and where possible the address for electronic mail.

(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.

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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.’

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ANNEX II

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 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 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.

2.

3.

Title and No of aid scheme

Commission exemption regulation applicable

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, guar-
antee, 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.

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). Aid for the recruitment of disadvantaged workers should be broken down
by the categories in Article 2(f).

3.5.

3.6. Regional breakdown of amounts under point 3.1 either by regions defined at NUTS (1) level II or below or by

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

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

covered, indicate the amount for each):
— coalmining

— manufacturing of which:

— steel
— shipbuilding
— synthetic fibres
— motor vehicles
— other manufacturing

— services of which:

— transport services
— financial services
— other services

— other sectors (please specify)

4. Other information and remarks

(1) NUTS is the nomenclature of territorial units for statistical purposes in the European Community.