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International Transactions
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BERGMANN
Attorneys at Law
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Employment Contracts and Employer Obligations in Finland |
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Finnish labour law comprises a considerable number of interrelated legal Acts, as well as legal principles laid down by the courts. Especially in the details, the results are often surprising for foreigners and have to be taken into account in everyday working life and when drafting employment agreements. It is clear that foreign enterprises often find this rather difficult.
Collective agreements play an important role in Finnish labour law and often regulate working conditions in the relevant line of business in great detail. Many collective agreements have been declared generally binding and thus oblige all employers in the sector in question.
Personnel involvement is taken very seriously in Finland and is organised as so-called work co-operation. The parties to such co-operation are the employer and the personnel. The personnel can be represented by elected representatives. The related Act currently applies to companies with 30 and more employees, but a pending government proposal intends to extend work co-operation to companies with at least 20 employees.
Work co-operation comprises a system of information and negotiation obligations with respect to such decisions and developments within the company that may influence the status, working conditions and other interests of the employees. Neglect of such obligations can result in considerable remuneration claims being made by employee and in the imposition of penalties upon the employer.
The Finnish provisions on annual holiday are rather complicated and may appear strange to foreigners. For each working month, the employee ‘accumulates’ a certain amount of days which may be taken as holiday.
One unusual feature of this system is the concept of a holiday season, which starts in May and ends in September. Within this period, the employee may take as holiday the number of days he or she has accumulated up to the end of March in the same year. However, the employee is entitled – and in fact obliged – to take such holiday outside the holiday season as far as the number of days accumulated exceeds a certain amount.
The employer cannot unilaterally oblige employees to work overtime. All overtime work has to be remunerated by means of special compensation that amounts to 50% for the first and second daily hour of overtime work, and 100% for all additional overtime work.
The employer can be obliged to work on Sundays only under tightly regulated conditions. If Sunday work is carried out, it must be remunerated by means of additional compensation of 100% of the regular wage.
Regardless of the duration of the employment, a special reason is always necessary when concluding a fixed term-contract. Otherwise the employment contract will be regarded as having been concluded for an indefinite period. However, the prerequisites laid down by the courts are not particularly onerous. For example, it is sufficient that the further economic development of the company, and thus the future demand for personnel, appears uncertain or that the demand for a certain product is difficult to estimate.
In addition, the duration of the contract can also be linked to a certain event; for example, the finalisation of a particular project or even the validity of a certain long-term customer contract.
Finnish labour law contains clear safeguards against unfair dismissal. Terminating an employment relationship by giving notice requires a proper and weighty reason for so doing, as well as the observance of certain procedural rules. The rules against unfair dismissal are applicable regardless of the size of the company. The termination of an employment contract without grounds is only legally possible during a trial period that has been agreed on in the contact and may, as a rule, be for a period no longer than 4 months.
However, under the applicable Finnish law, termination of an employment contract by giving notice is always valid and brings the contract to an end regardless of whether it is justified or not. The absence of a proper reason for dismissal or neglect of procedural obligations will result in the employee making a compensation claim for a sum equivalent to at least 3 and at most 24 months’ salary.
If the termination arises from changes in the employer’s operations, the employer is obliged to offer an alternative position in the same company or internal re-training if possible. Even after the employment relationship has ended, the former employee is, for a period of nine months, entitled to re-employment by the employer should a suitable position within the company become available.
The general notice periods are considerably longer for the employer than for the employee. Here, it is both legitimate and advisable to adjust these periods in the employment contract, unless an applicable collective agreement prevents this.
Finnish law imposes a great number of obligations upon the employer. In addition to paying taxes and social security contributions, the employer has, in particular, the following duties:
The employer has to take out a number of different insurances for employees:
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As a rule, the employer has to take out work pension insurance for the employees and bear the majority of the related costs. Both employer and employees participate in the financing of the earnings-related pensions. The employer takes care of the pension contribution but recovers the employee's share of the contribution from the employee. •
Furthermore, all employers that employ employees at least 12 days per calendar year are obliged to take out an accident insurance for all employees. •
The statutory unemployment insurance consists of an employer and an employee share. The employer has to deduct the employee’s share from the salary and pay it together with the accident insurance. •
Generally speaking, all generally binding collective agreements provide for an obligation of the employer to take out a group life insurance for the employees. Such insurance has to be arranged and paid for in connection with the unemployment and accident insurance. The provisions of Finnish labour law, in a broader sense, are complex and cannot be dealt with in detail in the context of this article. However, at least the following central employer obligations should be pointed out:
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Every employer has to offer its employees a minimum level of occupational health care. This includes work place examinations, prophylactic health check-ups and drawing up a health care plan. Many private providers offer health care packages that usually exceed the minimum standards stipulated in the law by a considerable degree. Municipal health centres offer relatively inexpensive packages that contain only the mandatory benefits. Half of the costs are paid by the public health insurance. •
In addition to a multitude of work specific stipulations on occupational safety, every employer is obliged to work out a policy for action in order to promote health and safety and to maintain the employees’ working capacity. The employer must identify and assess the hazards and risk factors caused by the work and take the necessary measures to eliminate or minimise such risks. This obligation affects all employers regardless of the size of the company. The Occupational Safety Act provides for a fine for neglect of obligations under the Act, which may be levied on the employing company and also on the responsible representative personally. •
One obligation often neglected by international companies is to make available all provisions applicable to the employment relationship (legal Acts as well as collective agreements) to their employees at the workplace. The legal texts may also be provided as electronic documents if they are available to the employees at any time. •
The Finnish Equality Act obliges employers with 30 or more regular employees to draw up an extensive equality plan. Smaller companies must also observe strict equality rules. In particular, employers must be able to demonstrate at any time to any of their employees that he or she is not being discriminated against on the basis of gender in comparison with another employee. |