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Employment in Finland

The Finnish labour market is characterized by highly organized relations between employee and employer, with a crucial role played by collective bargaining power in labour regulation. The core of Finnish employment legislation lies in comprehensiveness and detail of the legislation complemented by collective agreements. Around 80% of Finnish employees are covered by a collective bargaining agreement.

Key points on employment in Finland

The regulations and rules governing employment contracts, such as its definition, process of beginning and ending the contract, basic right and rules of job protection are codified in the Employments Contracts Act, applying to blue-collar workers and salaried employees, while managing directors typically fall outside these provisions. Specific provisions are also provided for other categories of workers, such as seamen and agricultural workers.

Due to the prevalence of collective agreements in the Finnish labour market, Finnish employers are obliged to provide their employees with more beneficial terms than they would receive under the statutory requirements. The power of Finnish trade unions therefore plays a significant role in the Finnish employment landscape.

  1. Contracts

    Employment Contracts

    There are several forms of basic employment contracts in Finland, administered under the Employment Contracts Act (ECA), which include permanent/fixed-term contracts, special contracts of employment, temporary agency work and probationary work. Employment contracts must be written exclusive of terms and conditions that may breach mandatory laws and provisions under the ECA or Collective Agreements Act (CAA).

    Contracts may be written, electric or oral, and for employment contracts extending longer than a month, the employer is obliged to provide a written contract detailing the following terms:

    • Location of work
    • Starting date and/or probationary period
    • Primary duties
    • Normal working hours
    • Collective agreement terms
    • Salary calculations
    • Holiday entitlements
    • Duration of contract
    • Required period of notice

    A main feature of the Finnish employment contract is that they are assumed to last indefinitely, unless a reasonable case or justification can be made for hiring an employee using a fixed-term contract for a certain period, or if the employee wishes to do so. A fixed-term contract does not need to be written, but the terms and conditions of the employment contract must be explicitly stated.

    Collective Agreements

    Collective bargaining of Finnish workers is regulated by the Collective Agreements Act which details to provisions for the terms of an employment contract negotiated between Finnish employers’ associations and trade unions. Collective agreements are very common in the Finnish labour market, with 80% of workers being members of a trade union. The collective agreements extend employment terms such as wage, salary, working hours, overtime, holidays, notice periods, etc. for the employee which are often more favourable than those stipulated under Finnish employment legislation. For example, Finland has no statutory minimum wage, but collective agreements specify minimum salaries for particular sectors which employers are obligated to comply with.

    In Finland, collective bargaining is divided into three levels: national, industry and company. The industry level negotiations involve setting out terms related to rates and basic conditions for a minimum standard in a particular industry, which in most cases employers are bound to.

Employee Entitlements

Information Explanation
Working on Sundays ?

On a Sunday in Finland many businesses choose to close as Sunday is classed as both a religious day and a day of rest. However many businesses such as shops and restaurants do still open. The normal working hours for Sunday workers is 12.00pm- 21.00pm.

By law, any individuals required to work on a Sunday are to be paid double pay (100% bonus). They are also required to receive a timetable of the work shifts they are needed to work (highlighting the employees start and end times).

Each schedule of work shift has to be handed to the employee at least a week before the work period begins. Work shifts can be changed, of course with the employee’s consent, or when special occasions appear and the employer is unable to let the employee in advance.

Time Off Work ?

In order for a worker in Finland to earn their paid holiday entitlement they must first work a ‘holiday credit year’. This starts on the 1st April every year and ends on the 31st March the following year. An employee will earn themselves 2.5 days of holiday for each month of the ‘holiday credit year they work for, therefore giving them an overall 30 days of paid holiday per year.

Employees that have been working with the company for less that a year will only be able to earn 2
holiday days off work per month, giving them only 24 days per year. Another way holiday allowance can be managed is by using a collective agreement; however it must apply to the Finish holiday laws (as above).

Medical Leave ?

Workers in Finland are entitled to sick pay once they have worked for a company for one month, as long as they are able to provide a doctor’s certificate.
Sick pay during the first month of employment is usually 50% of the worker’s salary. According to Finnish law, workers can earn up to 9 days’ worth of sick pay, though this can be altered by mutual agreement.

If an employee uses up their sick pay allowance from their employers, they will receive around 70% of their salary from the Social Insurance Institution of Finland (KELA).
It is the employer’s responsibility to set up an occupational health service for their employees.

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

Compensation under Finnish legislation is dependent on the extent and justification of an employee’s unfair dismissal under Chapter 12 of the ECA. If the employer is dismissed without a just cause, the termination is considered illegal, where the compensation awarded to the employee may equal to 3-24 months’ pay. The extent of compensation depends on criteria such as:

  • Loss of earnings suffered by employee
  • Unemployment benefits awarded to compensate loss
  • Duration of employment relationship
  • Degree of guilt found on employer’s side

If the employer provides a valid reason for termination but not for termination without notice, the compensation equals to the pay for the period of notice.

Severance / Redundancy Pay ?

Suspension from work on medical grounds – The employee must inform the employer of any absence from work immediately. The employer is entitled to ask the employee to present them with a form of proof of sickness, such as a medical certificate.

Termination of Employment ?

There are many reasons for why an employer or an employee may choose to terminate an employment contract. However they both have a legal obligation to give the correct period of notice, stated in the collective agreement. An employer cannot end an employees contract without a weighty and justified reason, however if they feel that their employee is not longer fulfilling their job role correctly, then they have the legal right end their employment without a period of notice.

Other reasons for which an employer may not have to give notice are:

  • Serious breach or neglect of obligations of the employee, or such essential changes in the conditions necessary for working related to the employee’s person
  • The work has diminished substantially and permanently for financial or production-related reasons, or for reasons arising from reorganization of the employer’s operations.

A negotiation period up to a maximum of six months’ notice period may be negotiated in the employment agreement. If the employment contract fails to incorporate a notice period, the ECA and the collective agreements is responsible for defining an applicable notice period for both the employer and employee.

The employer’s statutory notice period differ depending on the duration of employment:

  • Up to 1 year employment – 14 days
  • 1 year to 4 years – 1 month
  • 4 years to 8 years – 2 months
  • 8 years to 12 years – 4 months
  • More than 12 years – 6 months

These notice periods are specified under Chapter 6, Sec. 3 of the ECA, and may be adjusted through negotiation of the employment contract.

The employee may give notice of termination without stating the reason. The employer may only dismiss an employee if they provide substantial reasons for termination. The list of applicable reasons are covered in the ECA, however each case must be evaluated individually.

During the notice period, employers must pay the regular salary to the employee, and the employee must work normally unless otherwise agreed.

Termination without a notice period is possible, although an extremely weighty justification for dismissal is required. If an insufficient reason for termination is provided, the employer is liable to pay compensation. Typically equal to the pay foregone during the notice period.

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Finland. For companies which intend to employ their staff directly through their incorporated Finland entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Finland.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Finland.

The Shield GEO solution is an attractive alternative where:

the company is looking to employ staff quickly

the company doesn’t have an appropriately incorporated entity in Finland

the company wants to work within a defined budget

the company wants to limit its initial commitment in Finland

the company needs help with tax, employment, immigration and payroll compliance in Finland

Shield GEO can contract directly with the company to employ and payroll their staff in Finland. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.



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