Employment 2022

Last Updated August 02, 2022

Finland

Law and Practice

Authors



Kalliolaw provides a full range of legal services to a wide spectrum of corporate clients, ranging from start-ups and SMEs to multi-listed international companies and various private equity houses. In addition, the firm advises foundations, associations and public-sector entities. Kalliolaw was established in 2000 and has two offices in Finland (Helsinki and Turku) and one in London. The London office was opened in 2013 to provide comprehensive legal advice on Finnish law to the firm's UK-based clients, especially mining companies and financiers. Kalliolaw is one of the few Finnish law firms to have an office in the UK. It advises clients on how to manage employment relationships and is typically involved with planning various actions, executing decisions and solving disputes before they evolve into court matters. The team advises clients on co-operation procedures, terminations of employment, entering into employment relationships, planning and executing personnel benefit programmes and solving disputes in all the relevant courts, including arbitration proceedings.

Family Leave Reform

As part of the EU Work Life Balance Directive (Directive (EU) 2019/1158), a family leave reform came into force in Finland in August 2022. 

The reform gives all parents who have custody of their child an equal right to a daily allowance, regardless of whether they are biological or adoptive, custodial or non-custodial and regardless of the gender of the parent. The aim of the reform is to increase equality in working life and between parents, and to take better account of different types of families.

Essential points in the family leave are as follows.

  • There is a pregnancy allowance period of 40 daily allowance days for the final stage of pregnancy for the pregnant employee.
  • The number of parental leave days was increased to a quota of 160 parental allowance days for both parents. The quota of parental allowance days increases by 84 daily allowance days per second child and every child thereafter.
  • Parents can take part-time parental leave. That is, parents cannot have their parental leave at the same time but it is possible to have an arrangement where one parent takes care of the child in the mornings and the other parent in the afternoons.
  • Parents can transfer up to 63 parental allowance days to the other parent, other custodian, their spouse or the spouse of the other parent.
  • Daily allowance days can be used in several parts (except the pregnancy allowance). Parents in employment relationships are entitled to split the leave into four parts. 
  • Single parents now have the right to use the quota of both parents.
  • A relative or a person who lives in the same household as the employee now has the right to take unpaid carers’ leave for up to five days per year.

An employee must inform the employer no later than two months before the planned leave.

Amendments and New Provisions to the Employment Contract Act in August 2022

As part of implementing the EU Directive 2019/1152 on transparent and predictable working conditions in the EU, Finland has improved the protection of part-time employees and fixed-period employees. These sections bring employers the following new obligations.

  • The employer must present an employee with written information on the principal terms of work unless the terms are laid down in a written employment contract. The list of these terms is now longer and must be given to the employee sooner than was previously the case. Most of the information must be given within seven days and the rest, within one month from the beginning of the first employment relationship. 
  • The employer must check fulfilment of the variable working hours clause (see 2.3 Working Hours) every 12 months. If the number of hours worked during the period considered exceeds the employer’s stated labour need, the employer shall, within six months, offer an amendment of the working-time clause to the employee that corresponds to the hours worked during the period considered. 
  • At the request of a part-time or fixed-period employee, the employer shall, within one month, give a justified written answer about the possibility to extend the agreed working time or the period of the employment relationship. 
  • If the employer has a law or CBA-based obligation to offer training to the employee in order for the employee to do the work they have been hired for, the training shall be free of charge for the employee. The training will be regarded as part of working hours and it will occur during regular working hours.

Restructuring Protection Fee for Employer

The restructuring protection fee is a new mandatory requirement for employers based on the Act on the Financing of Unemployment Benefits. After 1 January 2023, the fee may be payable if the employer has terminated an employment contract of an employee aged 55 or over on production-related or financial grounds, and the employee has been employed by the employer for at least five years. 

The restructuring protection fee applies to employers whose payroll, on which the unemployment insurance contribution is based, exceeds the annually specified minimum level, which is EUR2,197,500. Thus, this fee will not usually concern micro-enterprises.

The amount of the restructuring protection fee is determined on the basis of the employer's restructuring protection fee multiplier. The restructuring protection fee multiplier, on the other hand, is determined according to the payroll used as the basis for the unemployment insurance contribution. The restructuring protection fee multiplier increases linearly on the basis of the employer’s payroll. The restructuring protection fee multiplier at the limit for full restructuring protection is 2.90. The figure will most likely change annually.

Restructuring protection fees are used to finance the employee's restructuring protection package. The restructuring protection package consists of two months of restructuring protection training organised by the Governmental and Economic Development Office for the employee and one month's restructuring protection allowance paid by an unemployment fund to the employee.

Provisions of CBA May Overrule Terms and Conditions of Employment Contract Even If This Is Unbeneficial to Employee

A recently pronounced judgment by the Supreme Court concluded that it is possible to weaken the terms and conditions of the employment contract based on a provision of a collective bargaining agreement (CBA). The Supreme Court found that it was possible to extend the employee’s working hours for one hour over the working hours agreed in the employment contract. In addition, the Supreme Court concluded that the amendment was not unreasonable and did not mean an essential weakening of the terms-of-employment relationship. 

Before this precedent, the rule had been that the terms and conditions agreed in the employment contract would be followed, if they were more beneficial to the employee than the provisions in the applicable CBA. As a result of this precedent, the level of “essential term” of the employment contract now differs from former legal practice, since the working hours of the employee are generally considered to be an essential term of the employment relationship. Whether the unions will use this possibility again in order to weaken the employment terms in CBAs, remains to be seen in the future.

COVID-19 Protection for Healthcare Workers

For many healthcare workers, COVID-19 vaccinations have become practically mandatory since February 2022. This temporary norm of law was included in the Communicable Diseases Act, which allows employers in the social and healthcare sectors to require that staff take the COVID-19 jab if their duties bring them into close contact with certain patient groups. If a worker refuses to take the COVID-19 vaccine they can, as an alternative, provide evidence of a recent negative COVID-19 test to their employer. A healthcare worker who has contracted and recovered from the virus is also considered to be protected. The amendment has somewhat increased the trend for healthcare workers to resign and switch to another sector. Insufficient vaccine protection is not a ground for the termination of the employment relationship, but the payment of the worker's salary may possibly be suspended until the employee has the required protection.

Implementation of the Whistleblower Protection Directive

The Whistleblower Protection Directive (EU 2019/1937) affords protection to individuals who report violations at work, internally, externally or by way of public disclosure.

The protection provided in the national legislation applies to those who report certain violations of EU law which they observe in their work-related activities. The directive introduces a general obligation for companies and public organisations with 50 or more employees to have an internal reporting system. Some industries, like banking or investment businesses, fall within the scope of the directive, regardless of the number of employees. Before the application of an organisation’s reporting system, necessary co-operation activities must be performed. 

Establishing a whistle-blower channel will require organisations to take a number of data protection measures. These organisations will have to make sure that these systems follow the requirement set out in the GDPR and the special provisions about personal data set out in the directive. The personnel must be educated on how to use the reporting system and the reports received. The whistle-blower’s name is to be kept confidential and there is a broad prohibition on retaliatory measures being taken against the whistle-blower. 

Legal sanctions may follow, for example, if the whistle-blower’s identity is revealed or if the reporting is blocked. The aim is that there should be no negative consequences for the whistle-blowing employee. 

The motion will be given to parliament in September 2022.

Finnish employment law does not, as a rule, distinguish between blue-collar and white-collar workers. However, CBAs often define minimum salary brackets based on an employee’s main duties and work experience. In some sectors, there are different CBAs for employees in different statutes, for example, for workers, salaried and senior salaried personnel. The title of the employee does not define the terms of an employment relationship.

Types of Employment Contracts

Indefinite contract is a rule, and it can be either full time or part time. Fixed-term contracts are an exception that always require justified grounds specifying certain laws. Should an employment contract not qualify as fixed term (ie, law-stated grounds are missing), the contract will automatically become an open-ended employment contract.

An employment contract may also include a variable working hours clause. This means a working hours arrangement in which the employee’s working hours, as a specified period, vary between a minimum and a maximum amount under the employment contract. In some cases, this may also mean a working hours arrangement in which the employee undertakes to perform work for the employer only when specifically asked to do so. 

Form of Employment Contract and Recommended Terms

No written contract is required in Finland by law but it is always preferable to sign a detailed written contract first and performance of work can follow. An employment agreement may be oral, written or electronic. There are no formal requirements, even though many unions have their own model for employment contracts. Usually, the shorter the employment contract is, the more beneficial it is to the employee, since employment laws in Finland favour the employee. 

The employer must present an employee with written information on the principal terms of work as listed in the Employment Contract Act. Usually, these terms are included in the employment contract. Critically important terms and conditions in detailed written employment contracts in Finland include:

  • the identities of the parties to the employment relationship;
  • the home address of the employee and the registered place of business or, where appropriate, the domicile of the employer;
  • the date of commencement of the employment;
  • whether the employment is indefinite or fixed (where fixed, a reason for the fixed term, the end date or the expected duration thereof must be supplied);
  • a possible trial period; 
  • the place of work, or where there is no fixed or main place of work, the principle that the worker is employed at various places or is free to determine their place of work;
  • the main duties of the employee; 
  • remuneration, including salary and other fringe benefits;
  • pay day and pay period;
  • weekly and daily working hours and agreement on possible flexible working-time arrangements;
  • the training entitlement provided by the employer, if any;
  • the employee’s right to annual holiday; 
  • the notice period;
  • any applicable CBA;
  • the identity of the insurance institution receiving the pension contributions as part of the employment relationship, or through which the employer has insured the employee in case of accident or occupational disease; 
  • a definition of confidential information and how to keep it confidential;
  • intellectual property rights, including employee inventions; and
  • data protection.

The employer must consider, for example, whether there is a need to agree if the employee has the right to work remotely and where such remote work can be performed and how often. 

In any dispute between the employer and the employee, the employer has the burden of proof regarding the terms and conditions of the employment relationship. This is why a detailed written employment agreement is always recommended. 

Maximum Working Hours

The maximum working hours of an employee, including overtime, may not exceed an average of 48 hours per week over a period of four months.

Regular Working Hours

Regular working hours should not exceed eight hours per day or 40 hours per week. Weekly working hours may be organised in such a way that they average 40 hours over a period of no more than 52 weeks without exceeding the regular daily working hours of eight hours. The employer only receives a work contribution based on regular working hours in exchange for the employee’s monthly salary.

These hours are performed on regular Mondays through regular Fridays. Mandatory law does not allow longer regular working hours. Regular working hours are agreed in an employment contract. Working more than the regular working hours or outside of regular working hours means substantial additional costs for the employer. An employee must always agree, in advance, with the relevant employer representative on working more than or outside of regular working hours.

Flexible Working Arrangement

Flexible arrangements are possible. Written employment contract can include a flexible working hours’ scheme. An employer and an employee may agree on flexible working hours so that the employee may, within law-set strict limits, determine the timing of their daily regular working hours. It is important to note that flexible working hours only mean a very small fluctuation in the commencement and ending time of daily working hours (eg, regular daily working hours starting at 8 am instead of 9 am). When working flexible hours, the daily regular working hours may be reduced or extended by a flexible period which may not exceed four hours. Weekly regular working hours may average no more than 40 hours over a reference period of four months and the employee may work more or less than this number of hours within the set flexible working-hour limits.

Flexiwork

Flexiwork is a working-hours scheme in which an employer and an employee agree on flexiwork, which allows the employee to decide, within strict law-stated limits, on the placement of their working hours and the place of performance of at least half of their working hours. The weekly regular working hours may not average more than 40 hours over a maximum period of four months.

Variable Working Hours

A variable working-hours scheme means a working-hours arrangement in which:

  • the employee’s working hours vary between a minimum and maximum amount (0–40 hours per calendar week); and 
  • the employee undertakes to perform work for the employer when separately asked to do so in advance.

This arrangement provides the most flexibility. The employer shall request the employee to come to work two weeks in advance or, at the absolute minimum, one week in advance. It is important to note that if the employer and employee agree on, for example, a 20-hour working week and suddenly on Wednesday there is a need to work more hours on Thursday and Friday, the number of hours of work exceeding the agreed weekly work is regarded as overtime.

Protection of Part-Time and Fixed-Period Employees

The Employment Contract Act protects employees whose employment is for a fixed period or part-time. The employer may not apply less favourable terms to fixed-term and part-time employment relationships merely because of the duration of the employment contract or working hours, without proper and justified reason.

Employers also have an obligation to offer work to a part-time employee, if there are more duties suitable for employees already doing part-time work. If the work calls for training, the employer must provide the employee with training if this is reasonably within the aptitude of the employee.

Agreement on variable working hours may not be made at the employer’s initiative, if the employer’s labour need to which the agreement relates is fixed. In addition, any agreement that the minimum working hours included in a variable working-hours clause will be fewer than required by the employer’s labour need may not be made at the employer’s initiative. 

Compensation for Other Than Regular Working Hours

Different working-hours schemes and the remuneration payable for additional work, overtime and Sunday work are regulated in the Working Time Act. CBAs regulate supplements based on, for example, evening and night shifts in different ways. Local agreements concerning different supplements may be possible under CBAs. A local agreement means agreeing on the terms and conditions of employment at the workplace between the employer and the shop steward representing the employees, when this possibility to agree is based on the provisions of the applicable CBA.

Wage Requirements

There is no monetary minimum wage in Finnish employment law. Minimum salaries are stipulated in CBAs in multiple sectors, which are mandatary if the CBA is generally binding. 

If neither a CBA binding under the Collective Agreements Act nor a generally applicable CBA is applicable to an employment relationship, the employee will be paid a reasonable and typical remuneration for the work performed.

Holiday Bonus and Other Bonuses

The employee may be entitled to a holiday bonus according to an applicable CBA, based on an employment contract or employer practice. A holiday bonus is an additional bonus that is usually 50% of the employee’s annual holiday pay. As an employee is always entitled to holiday pay corresponding to their regular salary, the holiday bonus is paid in addition to the normal holiday pay. 

Other bonuses can be agreed between an employer and an employee, although this is not recommended. Instead, the employer should keep the right to decide on possible bonuses from time to time and unilaterally inform an employee when they will be receiving this benefit. 

Salary Increases

CBAs usually include terms and conditions on annual salary increases which an employer shall give to an employee. No other salary increases are mandatory, unless otherwise agreed in the employment contract. Possible promotions are announced to the employee based on the employer’s decision.

Annual Leave

An employee is entitled to paid leave during annual holiday, which means that the employee’s regular salary, including fringe benefits, will be paid during a holiday period. An employee is entitled to two-and-a-half weekdays of holiday for each full holiday credit month. The Holiday Act is part of mandatory legislation in Finland which means its terms and conditions may not be agreed otherwise, if this weakens the employee’s rights.

Sick Leave 

Employees who are prevented from performing their work by an illness or accident are entitled to pay during illness for a certain time. 

Employees are not entitled to pay during illness if they have caused the incapacity to work wilfully or by gross negligence. On request, the employee must present the employer with a reliable account of their incapacity for work. When the employer has paid an employee for the period of illness, it is entitled to receive, for a corresponding period, the daily sickness allowance from the Social Insurance Institution of Finland. The period for which the employer is obliged to pay salary during sick leave depends also on the length of the employment relationship and the provisions of the applicable CBA. 

Family Leave

An employee who is pregnant is entitled to take leave from work before the child’s birth (pregnancy leave or special pregnancy leave).

After the child’s birth or adoption, the employee is entitled to parental leave (see "Family Leave Reform" in 1.1 Main Changes in the Past Year). The employee is also entitled to take childcare leave in order to care for their child, or another child living permanently in their household, until the child reaches the age of three years old. 

Employees are entitled to temporary absence from work if their immediate presence is necessary due to an unforeseeable and compelling reason as a result of illness or an accident suffered by their family. 

CBAs may have different provisions on payment during and length of leave. Unless otherwise agreed in the applicable CBA, family leave is usually unpaid. Employees are, however, entitled to financial support from the Social Insurance Institution of Finland during various family leave periods.

At the end of parental leave, employees are entitled to return to their former positions. If this is not possible, employees must be offered equivalent work in accordance with their employment contract, and if this is not possible either, they must be offered other work in accordance with their employment contract.

Non-disparagement Requirements

Finnish employment law and CBAs do not comment on non-disparagement requirements, and these are not commonly used in employment contracts. Employees have a law-based loyalty obligation towards their employer, which means they must avoid acting in a way that conflicts with the actions reasonably required of employees in their position. Employees may not do work for another party or engage in any activity that would cause manifest harm to their employer as a competing activity contrary to fair employment practices.

However, non-disparagement requirements are relatively common in employment termination agreements or agreements received after mediation between the employer and the employee. When the clause can be deemed reasonable, it is usually valid. 

Employee’s Liability

An employee is obligated to perform her/his work carefully, observing the instructions concerning performance issued by the employer within its competence. 

If accident is caused by an employee at her/his duties, the employer is liable for any loss to a third party caused by an employee. The employee’s liability towards the employer is limited to a reasonable amount only. If the employee’s negligence in causing the injury or damage was merely slight, the employee is not liable to the employer for damages. The public courts finally decide the reasonable amount for compensation of damages.

Validity

Non-compete clauses limit the employee's right to conclude an employment contract to work with a competing employer when their former employment relationship ends, and they limit the employee's right to engage in such operations on their own account. 

This kind of agreement must be backed by a particularly weighty reason in order to be valid. In assessing whether these reasons exist for the purpose of instituting an agreement of non-competition, consideration should be given to the nature of the employer's operations and any need for protection related to keeping a trade secret or to special training provided to the employee by the employer, and the employee's status and duties.

Compensation for Employee

The employer is obliged to pay compensation from the beginning of the non-competition period. The compensation must be 40% of the employee’s full salary (from the period prior to the non-competition period) or 60% for a non-competition obligation lasting more than six months. The maximum non-competition period is 12 months, except for employees who are deemed to manage an independent part of the company or to be in a similar independent position. 

Non-solicitation clauses have no specific statutory limitations in Finnish employment law. The enforceability and validity of a non-solicitation clause as part of the employment contract depends on whether the term is reasonable as a whole. Possible monetary sanctions for violating a non-solicitation clause must be reasonable as well. 

If the non-solicitation clause is actually a non-competition clause rather than a non-solicitation clause, the validity of the terms and conditions will be evaluated as a non-competition agreement (see 3.1 Non-competition Clauses). 

The EU’s General Data Protection Regulation (GDPR) is applicable in Finland and is complemented by the Data Protection Act (1050/2018). 

An employer may use an employee’s personal data only if it is necessary for the fulfilment of the employer’s obligations in the employment relationship. Employee’s health information may not be collected and processed contrary to the law, not even with the consent of the employee.

Employee-related data is regulated in more detail in the Act on the Protection of Privacy in Working Life. This act, for example, defines when the employer is entitled to retrieve or open messages received in or sent from an employee’s personal work email. Most often, the employee’s prior consent is required. 

Employment surveillance is strictly regulated by the above-mentioned act as well. Before using camera surveillance, the employer must go through co-operation procedures and explore the feasibility of other methods which interfere less with the privacy protection of employees. Furthermore, use of law-stated prohibited drugs can only be processed by an employer in the few cases and by the few methods listed in the law.

Right to Work

An employer must always ensure that a foreign employee has the right to work in Finland. The permit or visa must be granted before the employee enters Finland. 

Compliance

The employment relationship of a foreign employee is generally subject to Finland’s terms and conditions of employment, including mandatory provisions of the applicable CBA (see also "Wage Requirements" under 2.4 Compensation). However, in international employment relationships the choice of law will be evaluated on a case-by-case basis. Finland’s occupational safety and health regulations must be complied with in terms of working conditions in any case. 

Minimum Salary Requirements

For different permits which allow work in Finland, there is a minimum salary requirement so that the foreign employee is able to support themselves and a possible family while they stay in Finland, throughout the time the permit is valid. The employee’s right to work depends on their citizenship and what kind of work they are about to perform and for how long a period. 

Means-Testing for Skilled Workers

A residence permit for an employed person is based on means-testing and the consideration is made on an individual basis. The applicant, who is generally an employer, must show that there are no workers available for this position from EEA countries. 

Posted Workers

For posted workers, there is separate legislation. A posted worker is an employee sent by a foreign company to Finland to perform work on a temporary basis. In these cases, the minimum terms and conditions of employment are provided in the Posted Workers Act.

The citizens of EU and EEA countries and their family members have the right to work in Finland without restrictions. However, they must register their right of residence with the Finnish authorities or apply for a residence card for a family member before starting work. 

Employees outside the EEA countries need to apply for a permit in order to work in Finland. 

There are certain exceptions for employed persons which allow employment in Finland without a residence permit. Working without a residence permit is possible with a short-term visa, for example, for teachers, research workers and artists who only do short-term work in Finland. This is an exception that must be carefully examined each time. Furthermore, employees who are transferring within a company or group of companies as a manager, specialist or trainee employee may be granted a special residence permit. 

Role of Unions

Being a member of a union is based on a voluntary decision of both an employer and an employee. Typically, many larger companies are members of a professional union and many Finnish employees are members of a trade union. Highly educated employees typically join the organisations based on education. Union membership numbers are declining, however, specifically among younger workers and employees.

The main purpose of a union is to safeguard and improve the benefits and rights of its members. This includes, for example, income development, employment security and quality of work life. In Finland, it is also an important function of trade unions to run state unemployment funds and to provide earnings-related unemployment benefits. These are typically much higher than the basic unemployment allowance provided by the Social Insurance Institution of Finland and a reason why employees are willing to be members of a union and an unemployment fund.

Co-operation Between the Unions

In Finland, there has been co-operation in the labour market for a long time. Both employee unions and employer unions negotiate certain aspects of the labour market together. The unions have been divided into three different levels, ie, local trade unions, national federations of member unions, and confederations which consist of affiliated federations. Federations conclude the CBAs that cover all of Finland.   

In CBA negotiations, employers are represented by employer organisations. Employee professional organisations negotiate the CBAs with the employer organisations every few years to update the terms and conditions of the profession's work. A trend for both organised and unorganised employers seems to be willingness to enter more into local bargaining agreements rather than follow the unions' negotiated provisions. Since the CBA provisions limit the possibility for unorganised employees to bargain on certain matters locally if they do not have a shop steward who represents their union, however, local agreements are not possible on certain matters if the CBA is generally binding and there is no shop steward. Many employees wish to have wider possibilities for local bargaining and are dissatisfied with the current provisions of the CBAs.

Shop Steward

A shop steward is the union representative and union’s contact at the workplace. The shop steward supports employees in their daily working life and participates in local negotiations with the employer. Shop stewards can participate in negotiations and assist employees in mediations. When needed, a shop steward can also confirm that workplaces comply with agreements and laws. Elected shop stewards can sign local agreements concerning employee benefits and obligations, as agreed in the applicable CBA. Unions in Finland provide training for shop stewards. 

A shop steward is elected among employed union members. Union members in the workplace have the right to participate in a shop steward election or to be elected for the shop steward’s assignment. The election of a shop steward must be organised so that all union members at the workplace are able to participate in the election. After the shop steward election, a notification form is completed to notify the designation of a shop steward. 

Occupational Safety and Health Representative

The occupational safety and health representative, also known as a labour protection delegate, represents the employees of the workplace in occupational safety and health-related questions. The occupational safety and health representative has the right to access the information required to carry out their tasks from the employer.

Employees elect the occupational safety and health representative and two deputy representatives if there are at least ten regular employees at the workplace. Smaller workplaces can also elect a representative and the deputy representatives, and the managerial staff may elect their own representatives. All employees must be able to participate in the election and the employer may not obstruct the arrangement of the election in any way. The occupational safety and health representative is usually elected for two years at a time. In addition to the law, many CBAs have specific guidelines regarding occupational safety and health representatives.

Elected Representative

Elected representatives can only be elected if employees do not have a shop steward, as the employees are not unionised. 

Co-operation Representative of Unorganised Employees

Co-operation representatives of unorganised employees can be elected if the majority of any personnel group within an undertaking are not entitled to participate in the election of a shop steward, because they belong to another trade union or because they are unorganised. The co-operation representative of unorganised employees acts alongside the representative of organised employees in matters concerning the personnel group. Co-operation representatives can also be elected if employees have not elected a shop steward or elected representative, even though they are entitled to do so.

Administrative Representative

Companies and organisations that employ at least 150 people in Finland have to have an employee representative in the administration. This employee representative is called an administrative representative. The purpose of the administrative representative is to promote the flow of information and bring personnel’s views and expertise to decision-making within the organisation.

Secured Position of Employee Representatives

The Employment Contracts Act and CBAs have secured the employee representatives' position with better protection against termination of employment and temporary dismissal. For example, an employee representative's employment relationship can be terminated by the employer only if the majority of the personnel that elected the representative accept this, or if the representative’s work has finally ended. 

Some CBAs can be applied voluntarily and some are mandatory, according to the sector in which the organisation operates. An employer may be bound to a CBA, based on the general binding nature of the CBA, membership of a professional organisation, or if the applicable CBA is agreed in an employee’s employment contract.

Generally-Binding Employment Agreements

There are around 160 generally-binding CBAs in Finland. A company’s main sector defines which generally-binding CBA it must adhere to. These occupation-based agreements specify terms and conditions of employment in more detail than the law, although CBAs often repeat the provisions on mandatory law, as well.

A CBA may be confirmed as generally binding by the Board for the Ratification of Validity of Collective Agreements. 

Generally-binding CBAs are also binding on unaffiliated employers in their respective sectors. This means that a generally-binding CBA is as mandatory as a mandatory law in the applicable sector. 

Violation of a Binding CBA

If there are clauses in an employment contract or practices between an employer and an employee that violate the corresponding provision in the CBA part of the employment relationship, these clauses are null and void. An employee may then dispute their employment contract and claim damages from the employer based on the binding CBA and its provisions. Workplace practices contrary to binding CBA provisions are also unlawful. An employer’s violation of a binding CBA may cause criminal consequences such as fines or even imprisonment for the employer’s representative. If this kind of dispute arises in the workplace, it will cause “bad will” between employer and employee organisations and may cause specific harm to business operations. 

Grounds for Termination

Termination of an indefinitely valid employment contract can be made only for a proper and weighty reason based on a narrow list of grounds stated in law. The grounds for termination are divided into (i) financial and production-related reasons, and (ii) reasons relating to the employee’s person.

Financial and production-related grounds

Financial and production-related grounds for termination exist if the work to be offered has diminished substantially and permanently. Employer-related reasons can be financial, production-related or reasons arising from reorganisation of the employer's operations. However, the employment contract may not be terminated if the employee can be placed in another section or trained for other duties.

Grounds relating to the employee

Grounds relating to the employee’s person can be based on a serious breaches or neglect of obligations arising from the employment contract or the law that have an essential impact on the employment relationship. Also, essential changes in the conditions necessary for work related to the employee’s person that render the employee unable to cope with their work duties, can be a ground for termination. 

Grounds related to an employee’s person are the hardest grounds for employment termination in Finland. Certain causes, in particular, cannot be regarded as proper and weighty reasons. Unlawful causes for termination include, for example, the employee’s political, religious or other opinions, or participation in social activity or associations. 

The illness of an employee is an especially prohibited ground for termination. Only if an employee has been continuously absent from work for a year because of illness, is inability to cope with their work duties usually accepted to be essential and permanent. 

Warning

In most cases, an employee may not be given notice for grounds related to their person before being warned and given a chance to amend their conduct. 

Collective Redundancies

No collective redundancies are possible in Finland. Grounds for termination are evaluated case by case. 

Notice Period

Notice periods are based on the law or on the CBA or on the employment contract. The length of the period depends on the length of the employment relationship. The employee will continue to work during the notice period under the same terms and conditions, unless the employer decides to relieve the employee of this work obligation. The employee receives their normal salary during the notice period. After the notice period, the employment relationship will end immediately.

Final Salary

When an employment relationship ends, the pay period also ends, unless agreed otherwise. This means that the employee will receive their final salary, including possible commissions, supplements, benefits and holiday compensation when the employment ends. There is no statutory severance in Finland. 

Effecting Termination Timeously

The employer must effect termination of the employment contract within a reasonable period after being informed of the existence of grounds related to the person. 

No external authorisation is required, but obtaining prior advice from an attorney is preferable in all employee termination situations. 

Employee Hearing and the Employer’s Duty to Explain

The employer must provide the employee with an opportunity to be heard concerning the grounds for termination when this is based on personal grounds. Having heard the employee, the employer must further consider whether it is possible to avoid giving notice by placing the employee in other work. 

When terminating employment based on financial grounds, the employer has a duty to explain the grounds for termination and the alternatives. 

Written Notice

Written notice of termination must be given to the employee. 

Summary Dismissal 

Summary dismissal means cancelling the employment directly without a notice period. An employment contract may only be cancelled due to an extremely weighty cause. Such cause may be deemed to exist if the employee neglects their duties in a way that has an essential impact on the employment relationship and in such a serious manner that it renders it unreasonable to expect the employer to continue the employment relationship even for the period of notice. It is very exceptional for a situation like this to occur and typically, a summary dismissal is not valid. 

Possible Grounds for Summary Dismissal

The grounds for cancelling the employment may occur, for example, if the employee steals from the employer or if they become physically violent towards their employer, other employees or customers. 

An employee can cancel the employment, for example, in cases where the employer seriously neglects safety regulations or stops paying a salary to the employee. If the employee cancels the employment contract as a result of the employer's intentional or negligent actions, the employer must be ordered to pay compensation for unjustified termination of the employment contract.

Deeming Employment Contract Cancelled

If the employee has been absent from work for a minimum of seven days without notifying the employer of a valid reason for their absence during this period, the employer is entitled to consider the employment contract cancelled from the date on which the absence began.

If the employer is absent from the workplace for a minimum of seven days without notifying the employee of a valid reason for this absence, the employee is entitled to consider the employment contract cancelled.

Formalities

A notice of termination must be given when terminating employment. An employer must provide the employee with an opportunity to be heard concerning the grounds for summary dismissal. 

The right to cancellation lapses if the employment contract is not cancelled within 14 days of the date on which the contracting party is informed of the existence of grounds for cancellation. 

Employment termination agreements are possible on mutual understanding between the employee and the employer. Although this form of termination agreement is not regulated by law, a detailed written agreement is highly recommended. 

One of the typical terms and conditions in an employment termination agreement is that, after completing the termination agreement, the parties will not have any claims on one another based on the employment relationship or its termination. This is a typical reason why many employers are willing to conclude a termination agreement. 

The employee’s compensation for signing the agreement is to be agreed specifically in the agreement. The correct level of payment is usually determined using a legality assessment, eg, whether the grounds for terminating the employment were legal or not, the duration of the employment relationship, the age of the employee and their chances of finding employment corresponding to their vocation. 

Other relevant terms and conditions which should be included in the agreement are the day of payment of the agreed sum or signing fee, the termination date, the work obligation, the number of unused holiday days and the holiday compensation amount. It is recommended that all receivables from the employer to the employee are specified in the termination agreement. Such agreements usually have an impact on the employee’s unemployment security, which can be taken into account. Parties may also agree possible contractual penalties or other sanctions. However, any unreasonable terms and conditions for the employee may not be valid under mandatory law. 

It is advisable that negotiations between the parties are only performed orally in order to avoid future disputes. Termination agreements are usually drafted by attorneys, since the situations are always different and the terms and conditions of the agreements should be adjusted on a case-by-case basis. The employee has to be provided with reasonable time to consider the agreement and clarify the consequences of the conditions. 

The right to dismiss shop stewards, industrial safety delegates and personnel representatives in the administration of undertakings is strictly limited by law and is often further limited by a CBA. 

In addition, an employee on family leave cannot be dismissed on collective grounds unless the whole business of the employer is closed. Furthermore, a dismissal is deemed to have taken place due to pregnancy or family leave, unless proved otherwise by the employer.

For groundless termination of an employment contract, the maximum amount of compensation due to be paid to shop stewards elected on the basis of a CBA, or to other elected representatives, is higher than other employees; equivalent to the pay due for 30 months. Unlawful employment termination may be a criminal offence.

The employee can sue the employer and demand compensation for groundless termination of an employment contract. If the employer has terminated an employment contract contrary to the grounds laid down in the Employment Contract Act, it will be ordered to pay compensation for unjustified termination of the employment contract. The exclusive compensation must be equivalent to the pay due for a minimum of three months or a maximum of 24 months. Most HR-related disputes typically concern wrongful dismissal claims. 

The grounds for a wrongful dismissal claim may be that there was no proper or weighty reason for termination. This claim can include a large variety of different situations. The ground may also be that the employee was not warned before being given notice and the termination was groundless because the employee had no chance to amend their conduct.

Typical claims in disputes related to financial and production-related grounds for termination are that no actual reduction of work has taken place as a result of work reorganisation. Also claims that the employer has, either before termination or thereafter, taken on a new employee for similar duties even though the employer's operating conditions have not changed during the equivalent period, are common. In these situations, if the claims are proved in court, the termination of employment is found to be unlawful.

In the case of more than 20 employees, the employer must first undertake a co-operation procedure according to the Act on Co-operation within Undertakings before dismissing employees for grounds related to the employer. The procedure must be continued until the end before the employer makes any decisions on possible terminations. This is critically important. If the employer has not followed the procedure, the employees who have been given notice may demand compensation from the employer for violating this act. 

Grounds for Claims

Prohibition of discrimination means that no one may be discriminated against based on age, origin, nationality, language, religion, belief, opinion, political activity, trade union activity, family relationships, state of health, disability, sexual orientation or other personal characteristics. Employment discrimination particularly means discrimination in working life, job seeking, hiring employees or terminating employment. 

Grounds for the claims in discrimination disputes related to employment can, firstly, occur in a situation where a person is not invited to a job interview, because they have a foreign last name. Secondly, there could be discrimination if a member of a minority group does not get the same education or promotions as other colleagues, even though there are no expertise-based grounds for different treatment. Thirdly, discrimination could be claimed if an employer does not reasonably accommodate an employee with a disability. 

Discriminatory job advertisements are also prohibited. Unjustified requirements related to personal characteristics, or a person’s origin or sexual orientation, cannot be included in the job advertisement. The selection process must also not be discriminatory. 

In addition, an employer has a responsibility to address any harassment occurring in the workplace. An employer's actions are considered discriminatory if, having been informed that an employee in their employment was subject to harassment, the employer neglects to take action to stop the harassment.

Burden of Proof

The employer has the burden of proof in establishing the equal treatment of employees. 

Compensation

An employee can sue their employer and claim compensation for illegal discrimination within two years of the act of discrimination. There is no maximum amount of indemnity, but the demand for compensation must be equitably proportionate to the severity of the act. 

In addition to civil procedures, the employer, or its representative, can also be fined or imprisoned for a maximum of six months for general discrimination, or discrimination at work, under the Penal Code. 

Courts

Employment disputes are handled in public courts. The first instance forum is most often the local district court. The second instance is the Court of Appeal and finally, the Supreme Court. Courts of Appeal and the Supreme Court will consider the case if the appellant is granted leave for continued consideration.

Labour Court

In matters related to CBAs, the unions can appeal to the labour court on behalf of their members. In these cases, the defendant is usually the other professional organisation contracted in the CBA. The judgments and decisions of the labour court are final. 

Labour Council

The Labour Council is an independent authority under the Ministry of Economic Affairs and Employment. For example, courts and central organisations for employers or employees can ask the Labour Council’s opinion on the application and interpretation of legislation on working hours, annual holidays and occupational safety and health, and a number of other acts concerned with the protection of employees. The Labour Council’s opinions are taken seriously in legal practice. 

Class Action Claims

A civil action is only called a class action in Finland if the legal action is taken by the Consumer Ombudsman who represents the class members. These class actions are based on the Act of Class Action. The Act is applicable in consumer disputes involving several consumers against a business.

Aside from class actions, there can certainly be more than one plaintiff and defendant in one legal proceeding, if the grounds for claims are related. In these cases, plaintiffs have the normal risk of legal costs. 

Arbitration

Arbitration is a possible means of resolution in employment disputes in Finland. Pre-dispute arbitration agreements are possible but rarely used in employment contracts for the reasons mentioned below. Arbitration as an alternative dispute resolution method is more common in business-to-business agreements and in industrial disputes. Arbitration in disputes between an employer and employee is not recommended, since it usually means extremely high costs for the employer. Even if the employer wins the matter in arbitration, it is still obliged to pay the arbitral tribunal’s fees, the administrative fees, the expenses of the institute and the attorney fees and legal costs of both parties. 

Mediation

Mediation is an alternative to a trial and preferable before starting litigation. 

Civil and application matters may be settled in public courts. Mediation is carried out by the district court, or sometimes, also in a matter appealed to the Court of Appeal. According to statistics, and based on experience, nearly 80% of mediations end in a settlement. Mediation has become widely used in civil cases, including employment disputes. A result is achieved more quickly and the process is much cheaper than a full trial. Mediation is not binding, except if the court upholds the settlement when the settlement becomes distrainable.

Out-of-court mediation is provided, for example, by the Finnish Bar Association.

The general principle is that the party who loses the case is liable for all reasonable legal costs incurred by the necessary measures of the opposing party.

Where a case is decided partly in favour of the other party, a partial reimbursement takes place. In the event that there is no clear loser, each party bears its own costs. In all cases, it is possible for the court to adjust the amount to be reimbursed to an amount the court considers reasonable in light of the circumstances of the case.

Kalliolaw

Eteläranta 12
00130 Helsinki
Finland

+358 9 6812 930

+358 9 6812 9320

info@kalliolaw.fi www.kalliolaw.com
Author Business Card

Trends and Developments


Authors



Kalliolaw provides a full range of legal services to a wide spectrum of corporate clients, ranging from start-ups and SMEs to multi-listed international companies and various private equity houses. In addition, the firm advises foundations, associations and public-sector entities. Kalliolaw was established in 2000 and has two offices in Finland (Helsinki and Turku) and one in London. The London office was opened in 2013 to provide comprehensive legal advice on Finnish law to the firm's UK-based clients, especially mining companies and financiers. Kalliolaw is one of the few Finnish law firms to have an office in the UK. It advises clients on how to manage employment relationships and is typically involved with planning various actions, executing decisions and solving disputes before they evolve into court matters. The team advises clients on co-operation procedures, terminations of employment, entering into employment relationships, planning and executing personnel benefit programmes and solving disputes in all the relevant courts, including arbitration proceedings.

Platform Work in Finland – Employees or Not?

In recent years, using the different independent internet platforms to gain more assignments has become increasingly popular in many business sectors in Finland, among both wage earners and entrepreneurs. Using the platforms makes it easier for many people to begin freelance activities or become self-employed. The unofficial term for this form of earning is “light entrepreneurship” and it has become popular since the wider birth of invoicing service platforms. This often means working under an “umbrella company” which offers an invoicing service platform for self-employed and freelance professionals. As a so-called light entrepreneur, the worker usually doesn’t need a business ID of their own. It has to be emphasised, however, that the terms "umbrella company" and "light entrepreneur" do not have any legal validity. A company using the services of such individuals is cautioned to check the legal status of the entrepreneur carefully and only then consider whether to utilise such services.

It is currently unclear when a platform workers’ agreement can be considered as an employment relationship. Since the Employment Contract Act is mandatorily binding law in Finland, certain circumstances automatically change the contract to an employment contract. This brings binding employer obligations and possible provisions in the applicable collective bargaining agreement (CBA) to be followed by a company using the services of an “entrepreneur”. “The consequences under mandatory law” may thus differ from the parties' understanding and the purpose of the agreed contract between them. The largest monetary risks for a company using the services of an entrepreneur, ie, as an employer, are the possible receivables based on the Annual Holiday Act and Working Hours Act, and the obligation to pay mandatory insurances on behalf of the employee as well as all other mandatory employer obligations, of which there are many. 

Main characteristics

The main characteristics in employment relationships are as follows:

1. a contract – the name of the contract does not define it;

2. performing work; 

3. performing work for another party;

5. remuneration; and

5. being under direction and supervision (the employer’s right to direct).

Since these characteristics also often appear in contracts concerning assignments between a company purchasing services from an entrepreneur and the entrepreneur, other key factors for identification of an employer-employee contract are when:

  • the employer determines when the work will be performed;
  • the employer offers the necessary tools or equipment for the work;
  • the employee only works for one employer;
  • the employer has taken mandatory insurances for the employee; and
  • the employee lacks authority over how to perform the work.

Actual circumstances and how the parties operate are what matter; not how the contract is formulated, named or intended. The decision as to whether the employment relationship actually exists is finally made using the overall consideration. In the overall consideration, all the material characteristics of the employment relationship and independent entrepreneurship are taken into account. It should be noted that should a situation be unclear and should there be a dispute in court, the court will likely find in favour of the entrepreneur and the relationship will then be regarded as employment and not a business relationship between a company and an entrepreneur.

The lack of clarity has already caused disputes where the worker’s unpaid wages, such as a supplement or holiday pay, were claimed from the customer, counterparty or platform entrepreneur, or even from the administrator, based on the binding employment law. The problem does not only include HR matters but also taxation. The tax authorities may independently interpret the contract differently and claim taxes based only on their interpretation. 

As an example of how tricky the current situation in Finland is, according to the Labour Council’s opinion from 2021, WOLT delivery service couriers are employees, even though they are independent entrepreneurs in the eyes of the administrative court. The Labour Council’s opinion was based mostly on the fact that the main characteristics (1–5) of the employment relationship existed in the couriers’ legal relationship and no material characteristics of independent work came up. For example, the couriers cannot set the prices for their services and based on the remuneration paid for their work cannot, for example, cover accident and unemployment insurance contributions.

In another proceeding between the tax authorities and WOLT, however, the administrative court concluded in 2021 that a WOLT courier was an independent entrepreneur. As a result, the WOLT courier was obliged to pay VAT. This issue will be concluded by the Administrative Appeal Court, but currently, the question of a WOLT courier's official status remains open. 

It is highly recommended that employers and independent platform entrepreneurs/service operators, ask an attorney’s opinion on whether the terms and conditions in the contract or in the actual circumstances may be regarded as an employment relationship. Legal practice concerning platform working is changing rapidly and the authorities currently have different interpretations of this. Before EU legislation on platform workers gives us more clarity, it is likely that the results of these proceedings and the legal grounds of the judgments will be analogically applied to many other platform operators and their workers in Finland. 

It remains to be seen whether platform work will lead to degradation of labour protection law in Finland or an increase in the number of legislative norms in this area. At this point, many wage earners are increasingly using platforms in addition to their daily work or providing services on platforms as a hobby. Whichever way legal practice develops, the consequences will require more diligence from all the parties involved. 

Dismissals During Trial Period

The number of dismissals during trial periods has increased in recent years and, as a result, civil actions and court proceedings concerning wrongful dismissals during trial periods have also increased. 

Trial period in employment law

According to the Employment Contract Act, the employer and the employee may agree on a trial period of a maximum of six months, starting from the beginning of the work. In the case of a fixed-term employment relationship, the trial period can be no more than half of the duration of the employment contract. 

During the trial period, the employment contract may be cancelled by either party with immediate effect. Although employment contracts may not be cancelled on discriminatory or otherwise inappropriate grounds with regard to the purpose of the trial period, the majority of disputes are definitely based on claims that the dismissal was made on discriminatory grounds. 

Agreeing on the trial period term and conditions

If a collective agreement applicable to an employer contains a provision on a trial period, the employer must inform the employee of the application of this provision at the time the contract is concluded. If the employer does not inform the employee about the notice period, it will not be applied. Thus, it is always critically important to agree on trial periods in written employment contracts. 

Procedural special characteristics in trial period disputes in court

Since the dismissal procedure is also strict during the trial period, employees most often dispute dismissal for procedural cause. Disputes may relate to safety at work, duration of the trial period clause, or claims about discrimination. That is, grounds related to the employer will not usually be part of dismissal in the trial period.

In the case of a trial period dispute in court, the burden of proof is divided differently between the employer and the employee than in other employment termination situations. Normally, in employment disputes, the employer has the burden of proof. In a trial period dispute, however, the employee is required to identify why the dismissal during the trial period should be deemed to be based on inappropriate grounds. This means the employee will, when necessary, bring likely evidence to this effect. Thereafter, the employer must prove that there were appropriate, law-based grounds for dismissal. 

Parties’ possibility to diminish disputes related to the trial period

Where the employee has been absent from work due to incapacity or family leave, for example, the employer has the possibility to extend the trial period by one month for every 30 calendar days of the employee's period of incapacity to work or family leave. This option is, unfortunately, not very commonly used, even though it would often make it clearer to the employer whether the employee is suitable for the job or whether the employer should end the employment relationship based on the term of the trial period. An extension in the above-mentioned circumstances only requires written notification to the employee before the trial period. 

As in all employment termination situations relating to the employee's person, the employer must provide the employee with an opportunity to be heard concerning the grounds for termination. The employee is also entitled to legal assistance when being heard. Unfortunately, this obligation is often neglected by the employer and the employee does not know about this right. Where the hearing is arranged, it is preferable to make a memorandum for possible further use. Typical claims in trial period disputes are that compensation for wrongful dismissal should be higher because the employee did not have the opportunity to be heard. 

Kalliolaw

Eteläranta 12
00130 Helsinki
Finland

+358 9 6812 930

+358 9 6812 9320

info@kalliolaw.fi www.kalliolaw.com
Author Business Card

Law and Practice

Authors



Kalliolaw provides a full range of legal services to a wide spectrum of corporate clients, ranging from start-ups and SMEs to multi-listed international companies and various private equity houses. In addition, the firm advises foundations, associations and public-sector entities. Kalliolaw was established in 2000 and has two offices in Finland (Helsinki and Turku) and one in London. The London office was opened in 2013 to provide comprehensive legal advice on Finnish law to the firm's UK-based clients, especially mining companies and financiers. Kalliolaw is one of the few Finnish law firms to have an office in the UK. It advises clients on how to manage employment relationships and is typically involved with planning various actions, executing decisions and solving disputes before they evolve into court matters. The team advises clients on co-operation procedures, terminations of employment, entering into employment relationships, planning and executing personnel benefit programmes and solving disputes in all the relevant courts, including arbitration proceedings.

Trends and Development

Authors



Kalliolaw provides a full range of legal services to a wide spectrum of corporate clients, ranging from start-ups and SMEs to multi-listed international companies and various private equity houses. In addition, the firm advises foundations, associations and public-sector entities. Kalliolaw was established in 2000 and has two offices in Finland (Helsinki and Turku) and one in London. The London office was opened in 2013 to provide comprehensive legal advice on Finnish law to the firm's UK-based clients, especially mining companies and financiers. Kalliolaw is one of the few Finnish law firms to have an office in the UK. It advises clients on how to manage employment relationships and is typically involved with planning various actions, executing decisions and solving disputes before they evolve into court matters. The team advises clients on co-operation procedures, terminations of employment, entering into employment relationships, planning and executing personnel benefit programmes and solving disputes in all the relevant courts, including arbitration proceedings.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.