Analysis of the General Block Exemption Regulation on State Aids
EDF July 2008
“In the development and implementation of legislation and policies to implement the present Convention, and in other decision-making processes concerning issues relating to persons with disabilities, States Parties shall closely consult with and actively involve persons with disabilities, including children with disabilities, through their representative organizations.”
Article 4, paragraph 3 of the Convention on the Protection and Promotion of the Rights and Dignity of Persons with Disabilities
On 7th July 2008, the European Commision adopted a Commission Regulation on the application of Articles 87 and 88 of the Treaty declaring certain categories of aid compatible with the common market (General block exemption regulation) - GBER
The adopted regulation has introduced some important changes for the support of employment of disabled workers such as article 41 related to the percentage of aid intensity for wage subsidies since it has changed from 60% to 75% and has removed the minimum requirement of 12 months contract to enjoy the subsidies.
The European Commission has nevertheless maintained the definitions proposed in previous regulations for “disabled worker” and “sheltered employment”. It is also regrettable that the European Commission did not followed EDF proposal for a definition of “supported employment” and has decided to leave out of the scope a definition of Supported employment, that could have clarified the position of this type of support to employment in the state aids regime.
However EDF considers that the current regulation has considerably improved during its preparation if it is compared to the first draft proposal. It is nevertheless important to ensure that a correct interpretation of the articles contained in the regulation is done and therefore EDF has decided to produce a set of guidelines to be used as a toolkit when implementing state aid exemptions for disabled workers under the current GBER.
The GBER was published on 7th July 2008 (it is still pending publication in the official journal) but it is expected to enter into force during summer 2008 and will last until 31st December 2013.
The aim of the GBER (in a nutshell) is to regulate the aid intensity for employment of disabled people in each member state. The aid under the limits established by this regulation is considered an aid that does not distort the free competition within the internal market and therefore is exempted from any communication to the European Commission. All aids above the threshold fixed by this GBER can potentially distort competition and therefore have be communicated to the European Commission and consequently authorised by it before implementation of the aid scheme.
Should you be interested in more information you can contact EDF secretariat at and also consult European Commission’s website: http://ec.europa.eu/comm/competition/state_aid/reform/reform.cfm
I. Article 2 – Definitions
The regulation on GBER provides a frame of definitions setting the limits of the concepts that are covered by the scope of the directive. There are two definitions particularly relevant to disabled workers:
“(20) Disabled worker means any person:(a) Recognised as disabled under national law, or
(b) having a recognised limitation which results from physical, mental or psychological impairment”
EDF proposed during the negotiations of the CBER adding “sensory and intellectual” on the list proposed in point (b). The European Commission however understands that those concepts are included in the proposed list in point (b). The current text has to be interpreted in the following way:
Ø The regulation is covering all disabled people either recognized officially under national law or any person with a limitation even if it is not defined as a disabled worker under national law.
Ø The recognized limitations should be understood including sensory impairments covered by “physical” and intellectual disabilities should be understood under the concept of “mental”. National regulations would gain from clarifying this issue and being more accurate in the list of recognized limitations.
“(21) Sheltered employment means employment in an undertaking where at least 50% of workers are disabled”The GBER has taken EDF approach since it defines “sheltered workshops” as undertakings (in the preparatory proposals the European Commission always defined them as “establishments”). It has however left the threshold of 50% of disabled workers to be considered as an undertaking providing sheltered employment. The main conclusions of this article are:
Ø Sheltered employment undertakings are different to an “occupational centre” or establishments where people with complex dependency needs develop working activities. Those centers are excluded from any competition rule.
Ø Undertakings developing an economic activity should comply with the maximum of 50% disabled people to enjoy the recognition of a “sheltered workshop”
II. Article 7.4 – Cumulation
“By the way of derogation from paragraph 3[1], aid in favour of disabled workers, as foreseen in Articles 41[2] and 42[3], may be cumulated with aid exempted under this Regulation in relation to the same eligible costs above the highest applicable threshold under this regulation, provided that such cumulation does not result in an aid intensity exceeding 100% of the relevant costs over any period for which the workers concerned are employed”This article creates an exception, within the cumulation rules, for disabled workers. This article allows cumulation in the following cases:
Ø Wage subsidies and compensation of additional costs are different costs and can be cumulated.
Ø Aid exempted under article 41 on wage subsidies can be cumulated with aid under article 42 on compensating additional costs of employing disabled workers. This means that any disabled worker could cumulate 75% of wage subsidy plus 100% of all the additional costs.
Ø Aids in articles 41 and 42 can be cumulated with training aid (article 39) that establishes a maximum of 80% for training aid.
III. Article 39 – Training Aid
“1. Training aid 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 conditions laid down in paragraphs 2, 3 and 4 are fulfilled.2. The aid intensity shall not exceed:
(a) 25 % for specific training, and
(b) 60 % for general training.
However, the aid intensity may be increased, up to a maximum aid intensity of 80 %, as follows:
(a) by 10 percentage points if the training is given to disabled or disadvantaged workers;
(b) by 10 percentage points if the aid is awarded to medium-sized enterprises and by 20 percentage points if the aid is awarded to small enterprises.
…
3. In cases where the aid project involves both specific and general training components which cannot be separated for the calculation of the aid intensity, and in cases where the specific or general character of the training aid project cannot be established, the intensities applicable to specific training shall apply.
4. The eligible costs of a training aid project shall be:
(a) trainers' personnel costs;
(b) trainers' and trainees' travel expenses, including accommodation;
(c) other current expenses such as materials and supplies directly related to the project;
(d) depreciation of tools and equipment, to the extent that they are used exclusively for the training project;
(e) cost of guidance and counselling services with regard to the training project;
(f) trainees' personnel costs and general indirect costs (administrative costs, rent, overheads) up to the amount of the total of the other eligible costs referred to in points (a) to (e). As regards the former type of costs, only the hours during which the trainees actually participate in the training, after deduction of any productive hours, may be taken into account.”
Training aid is regulated under article 38[4] and article 39. Both articles regulate the maximum aid authorized under the regulation. The conclusions of these articles are as follows:
Ø When the disabled worker receives specific training, the costs of the training can be covered through: 25% for specific training , plus 10% for being a disabled worker, plus 10% (if medium size) or 20% (if small size). This means that depending on the size of the company, the costs of specific training for a disabled worker can be covered between 35% (for big companies) to 55% (for small companies)
Ø When the disabled worker receives general training the costs of the training can be covered as follows: 60% of general training, plus 10 % for being a disabled worker, plus 10% (if medium size) or 20% (if small size). This means that depending on the size of the company, the costs of specific training for a disabled worker can be covered between 70% (for big companies) to 80% (for small companies) as a maximum threshold established by the GBER.
Ø Measures regarding supported employment through the ways of counseling and training could be covered trough this article
Ø Applying the exception of article 7.4, training for disabled workers could be covered up to 100% of the costs if combined with other aid in favour of disabled people for the same eligible costs.
Ø A threshold for these costs is established at article 6.1.g[5] up to EUR 2 million per training project
IV. Article 41 – Aid for the employment of disabled workers in the form of wage subsidies
“1. Aid for the employment of disabled workers in the form of wage subsidies 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 the conditions laid down in paragraphs 2 to 5 are fulfilled.2. The aid intensity shall not exceed 75 % of the eligible costs.
3. Eligible costs shall be the wage costs over any given duration during which the disabled worker is being employed.
4. Where the recruitment does not represent a net increase, compared with the average over the previous twelve months, in the number of employees in the undertaking concerned, the post or posts shall have fallen vacant following voluntary departure, disability, retirement on grounds of age, voluntary reduction of working time or lawful dismissal for misconduct and not as a result of redundancy.
5. Except in the case of lawful dismissal for misconduct the workers shall be entitled to continuous employment for a minimum period consistent with their national legislation or collective agreements governing employment contracts. In case the period of employment is shorter than 12 months, the aid shall be reduced pro rata accordingly.”
This article refers to the maximum aid that wage subsidies can cover, this article should be interpreted as follows:
Ø Wage costs should be understood as foreseen in point 15 of definitions:
15) "wage cost" means the total amount actually payable by the beneficiary of the aid in respect of the employment concerned, comprising:
(a) the gross wage, before tax;
(b) the compulsory contributions, such as social security charges, and
(c) child care and parent care costs;
Ø The maximum to be paid will be 75% of wage costs
Ø This affects contracts of any duration (in the former exemption regulation there was a minimum of 12 months)
Ø The contract of the disabled worker should not mean the unlawful or force dismissal of any other worker in the company.
Ø Article 6.1.i (please see footnote 5) establishes a threshold of EUR 10 million per undertaking per year for these costs.
V. Article 42 – Aid for compensating the additional costs of employing disabled workers
1. Aid for compensating the additional costs of employing disabled workers 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 the conditions laid down in paragraphs 2 and 3 are fulfilled.2. The aid intensity shall not exceed 100 % of the eligible costs.
3. Eligible costs shall be costs other than wage costs covered by Article 39, which the employer has to bear and which are additional to those which the undertaking would have incurred if employing workers who are not disabled, over the duration during which the worker concerned is being employed.
The following costs shall be eligible:
(a) costs of adapting premises;
(b) costs of employing staff for time spent solely on the assistance of the disabled workers;
(c) costs of adapting or acquiring equipment, or acquiring and validating software for their use by disabled workers, including adapted or assistive technology facilities, which are additional to those which the beneficiary would have incurred if employing workers who are not disabled;
(d) where the beneficiary undertaking provides sheltered employment, the costs of constructing, installing or expanding the establishment concerned, and any costs of administration and transport which result directly from the employment of disabled workers;
Article 42 is the list of extra costs covered by the legislation. EDF proposed a more exhaustive lists but the European Commission wanted to keep it a little bit shorter. Anyhow almost all main extra costs linked to disability are covered (bearing on mind that training aid is included in article 39). This article should be interpreted as follows:
Ø that 100% of the extra costs should be eligible
Ø reasonable accommodation for a disabled worker should be covered under point a)
Ø supported employment through staff employed to support the disabled worker or colleagues supporting the disabled worker should be included under point b)
Ø Adapted equipment, software, assistive technologies, etc are also covered under the GBER
Ø Sheltered workshops can receive also compensation for constructing; installing, expanding the premises and costs linked to administration and transport.
Ø Article 6.1.j (please see footnote 5) establishes a threshold of EUR 10 million per undertaking per year to cover these costs.
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[1] 7.3 Aid exempted by this Regulation shall not be cumulated with any other aid exempted under this Regulation or ‘de minimis’ aid fulfilling the conditions laid down in Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Article 87 and 88 of the Treaty to the ‘minimis’ aid or with other Community funding in relation to the same – partly or fully overlapping- eligible costs if such cumulation would result in exceeding the highest aid intensity or aid amount applicable to this aid under this Regulation