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January 15, 2021

By Seppo Havia and Lisa Koskela

Back to International Employment Law




Implementation of the Amended Directive of Posting of Workers

The amendments to the Finnish Posted Workers Act entered into force on 1 December 2020. Amendments to national law implemented the amendments made to EU legislation.

A twelve-month transition period applies to posting agreements concluded before the Act comes into force. In particular, the purpose of most of the amendments is to promote equal treatment of employees and equal competition between companies.


New legislation on compensating post-employment non-competition clauses

According to a recent Government proposal, employers would be required to compensate departing employees during the non-compete period. The current law does not provide for any compensation to be paid to the employee for a post-termination non-competition undertaking, if the length of the non-compete period is up to six months.

The draft proposal would extend the pay requirement to all non-competition agreements regardless of the grounds for or the duration of the non-compete period. The compensation level would depend on the length of the non-compete period. If the period does not exceed six months, the compensation would be 40% of the employee's salary. For longer periods, the employer would be required to pay 60% of the salary (during the entire period). The employer would have the right to terminate a non-competition agreement (separately from the rest of the employment contract) by giving notice to the employee and observing a notice period of one-third of the non-competition period agreed or a minimum of two months (mandatory).

The changes are expected to enter into force on 1 January 2022 and, significantly, would also apply to existing employment agreements. However, in order to give employers time to adjust to the changes, the proposal envisages a transitional period of one year concerning existing agreements. The new rules would not be applied to these agreements before the expiry of the one-year period.


Reform of the Finnish Cooperation Act

Material amendments to the Finnish Act on Co-operation within Undertakings (the "Cooperation Act) are expected in the upcoming years. The aim of the planned reform would be to improve the company's operations and the employees' ability to influence decisions made in the company concerning their work, working conditions and position. The reform has not yet been ratified and there is no information available as to when the possible reform will come into force.

It is estimated that the scope of application of the Act would not change and it would continue to apply to companies and organisations employing at least 20 persons. Based on the draft report of the tripartite working group, the new Cooperation Act would consist of three main aspects as follows:

  • Continuous dialogue between employer and employees (meaning regular interaction at least quarterly). The continuous dialogue could address, among other things, the financial situation of the company or organisation, rules, and practices of the workplace, structure of personnel, and needed skills and well-being of employees.
  • Negotiations in changing circumstances (i.e., change negotiations). The change negotiations would be as a general rule similar to the negotiations as defined in Chapters 6 and 8 of the current Cooperation Act. Accordingly, the employer would be obliged to consult the employees or employee representatives before making any decisions on matters that could have a significant effect on the employees (e.g., reductions in workforce).
  • The provisions on employee representation would be transferred to the new Cooperation Act. Currently, these provisions are included in another statute of Finnish employment legislation. The provisions would apply to companies with at least 150 employees in Finland.
With thanks to Seppo Havia and Lisa Koskela of Dittmar & Indrenius for their invaluable collaboration on this update.




Temporary amendments to Finnish Employment Law due to COVID-19

To help ease the difficulties faced by employers as a result of the COVID-19 crisis, the following temporary changes are have been implemented and are in force until 31 December 2020:

  • Shortening the minimum co-operation consultation period for layoffs to five days (usually 14 days or up to six weeks);
  • shortening the layoff notice period to five days (usually 14 days);
  • a temporary layoff is now permitted as a result of a reduction of work or due to financial reasons;
  • employers are permitted to lay off fixed-term employees;
  • the termination of employment for financial and production-related reasons during a probationary period is now possible (usually permitted only on individual grounds); and
  • the re-employment obligation period has been extended to nine months (usually four or six months) following termination of the employment relationship by reason of redundancy.

It is important to note that the above-mentioned temporary legislative changes do not affect the applicability of the terms of any relevant collective agreements. Accordingly, the applicable collective agreement (if any) should be reviewed to check if its terms deviate from the statutory rules.


Employers' pension contributions reduced temporarily due to COVID-19

Employers' pension contributions were reduced temporarily due to the difficulties caused by the coronavirus epidemic.

Employers' pension contributions have been temporarily reduced by 2.6% from 1 May 2020 to 31 December 2020. The employees' pension insurance premiums remain unaffected.


Changes to the Finnish Act on Posting Workers

Certain key amendments to the Finnish Act on Posting Workers are due to come into force by the end of July 2020.

The changes to the Finnish Act on Posting Workers include the following:

  • employment conditions applicable to posted workers who have been posted for a period of at least 12 months shall be as beneficial as (or more advantageous than) those which would apply to workers recruited in Finland;
  • the employer shall cover the travel, accommodation and meal costs of the posted worker; and
  • the definition of 'minimum wage' shall be changed to 'minimum compensation' (although this does not affect the basis upon which compensation is calculated).




Termination of employment by small companies

In 2019, the small size of a company will be added as a factor to consider when assessing whether an employer had proper and reasonable grounds to terminate an employment relationship. The objective is to encourage small companies to hire permanent employees as the relatively high threshold for termination has presumptively discouraged them from hiring in the past.

There have been numerous proposals and discussions on the matter, which have each induced objections from labor union's and the situation has escalated to a political strike a number of times. The latest proposal for the amendment has generally been considered less troubling and the amendment will likely be effective as of 1 July 2019.


Employees entitled to four weeks of annual holiday despite sickness absence

The Annual Holidays Act will be amended in order to secure 4 weeks of annual holidays and this is expected to come into force on 1 April 2019. The revised Act will also apply to employees that have been absent from work due to sickness or medical rehabilitation who have not accrued the minimum of 4 holiday weeks.


Reforms to the Finnish Working Hours Act

The reform to the Finnish Working Hours Act was submitted to Parliament on 27 September 2018. The objective of the Act is to adapt the legislation to today's economic structure and working environment. One of the new elements of the Act will be the right to agree flexible working arrangements for specialist work where specific goals and overall timetable are the key objective rather than set hours of work. This will mean that an employee can determine when and where the work is done and the employer will provide tasks, objectives and an overall time schedule. The new Act will also enable banking of working hours at all workplaces thereby allowing employees to bank hours worked, accrued leave and monetary benefits in exchange for leave. Currently banking of working hours are only provided in certain collective agreements

The revised Act is expected to come into force on 1 January 2020.




The Reform of the Finnish Working Hours Act

The revised Working Hours Act is expected to come into force during the summer 2018. The key changes are expected to include:

  • flexible working arrangements as well as a working time model applicable to flexi-work arrangements such that the employer and employee can agree on arrangements for average working hours; and
  • changes with regard to shift and night work, as well as the general scope of application of the Working Hours Act.


Amendments to Legislation on Using Zero-Hour Employment Contracts

The aim of the reform is to ensure that zero-hour employment contracts are used properly and only in situations where it is necessary. There will also be improved protection for employees working zero-hour employment contracts.


New Trade Secrets Act

The new Act will implement the EU Trade Secrets Directive and introduce the legal definition of a trade secret into legislation. As a result, provisions on secrecy obligations in the Employment Contracts Act will be amended.




New pension reforms come into effect

One of the principal purposes of the pension reform is to lengthen working careers. Accordingly, the age limit for old-age retirement will be gradually raised from 63 years to 65 years. In addition, accrual of pension will be standardized to 1.5 percent of annual income during the whole career. The revised legislation came into force on 1 January 2017.


Changes related to the Competitiveness Pact

The legislative changes related to the Competitiveness Pact are to enter into force at the beginning of 2017. For instance:

  • Redundant employee will be entitled to certain employer-provided training and continued occupational healthcare for up to six months after the termination of employment. These obligations affect employers with at least 30 employees in Finland.
  • The employees’ pension insurance contribution will be gradually increased to 1.2% by 2020. The employers’ contribution will be lowered accordingly.


Family leave costs to be shared more equally

As of 1 April 2017 the costs incurred from a female employee’s family leave will be compensated by a lump-sum payment of EUR 2.500 to the employer.


Practically significant changes to the Employment Contracts Act

The following changes to the Employment Contracts Act entered into force on 1 January 2017:

  • The length of the probation period can be up to six months (previously four months). If an employee takes sick leave or is on family leave during the probationary period, the initial period can be extended, provided it is done before the initially agreed probationary period expires.
  • The employer’s rehiring obligation (which is related to collective redundancies) is generally shortened from nine months to four months following the expiry of the employment relationship. However, the period is six months if the employee has been employed by the same employer for at least 12 years.
  • An employer will no longer need a specific reason justifying the use of a fixed-term contract if the individual has been unemployed for a long period of time.




Changes to the job alternation leave regime

In 2016, the prerequisite for the right to job alteration leave was increased to service of 20 years, the maximum length of job alternation leave wasshortened to 180 days and the job alternation allowance standardized to 70 % of unemployment allowance.


Restrictions on accrual of holiday and postponement of holiday when sick

As of April 2016 employees can accrue annual leave for up to a maximum period of six months during maternity, paternity, or parental leave. Previously, employees earned annual leave during the entire family leave period. In addition, employees’ right to postpone their holidays to a later date if they are incapacitated during the holiday has been tightened.


The Competitiveness Pact

The Government and Trade Unions have reached an understanding on the so-called Competitiveness Pact to enhance competitiveness of the Finnish labour market. The Pact introduces new regulatory elements to Finnish working life. New laws will be implemented in 2017.


New obligations on employers using posted workers

The Posted Workers Act was revised. The new Act imposes several changes, including the employer’s obligation to notify the authorities in advance of the use of a posted workforce. This obligation enters into force during 2017.

With thanks to Eila Ryyppö, Suvi Knaapila, Seppo Havia and Lisa Koskela of Dittmar & Indrenius for their invaluable collaboration on this update.


Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department

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