Finland HR Information

Updated on: 2025/08/05 15:25 (UTC)

Overview

The three parliamentary acts that largely govern employment law in the country are the Employment Contracts Act, the Working Hours Act and the Annual Holidays Act.

Hiring

Employment Contracts

Employment contracts can be either fixed-term or indefinite. Employers are always allowed to employ persons for indefinite periods. If the employer aims to hire an individual for a fixed term, however, the limit must be agreed on and justified and the grounds included in the employment contract.

Examples of acceptable justification for fixed-term contracts include:

• substitute work,
• seasonal work,
• fixed-term projects, and
• one-time work.

A continuous 12-month period of unemployment is also considered a justified reason for offering an employee a fixed-term contract.

Consecutive fixed-term contracts are illegal when drawn up for the same job between the same parties without justified grounds. If the employer’s need for labor is considered to be permanent, there is no justification for consecutive fixed-term contracts for the same work.

Employers cannot offer a variable working time contract to an employee if the company has a continuous need for the work being provided. Employers also must ensure that the minimum working time is not lower than the hours needed to complete the work.

There is no Finnish law stating that employment contracts must be in writing, but it is a customary practice. Employers must in any case provide an employee with a written document outlining the key employment terms by the end of the employee’s first salary period.

The statement must include at least the following information:

• the time when the work begins,
• the duration of any temporary contract and the reason why it is temporary,
• the length of any trial period,
• the place of work,
• the main duties of the employee,
• the collective agreement that applies to the work,
• the basis for determining the pay and the payment period,
• the regular working hours,
• the manner of determining annual vacation, and
• the period of notice of termination of the contract or the basis for determining this period.

The employer and the employee may agree that the work will begin with a probationary period. The maximum length of the probation is six months, but it may be extended if the employee is absent from work during the trial period due to sickness or family leave. If a fixed-term employment relationship is shorter than eight months, the trial period may not exceed 50 percent of the duration of the employment period. During a probationary period, the employer and the employee are both free to cancel the employment contract for an objective reason.

Restrictions on Hiring

The minimum age for full-time work is 15 years provided the individual is not attending school.

Recordkeeping

Employers must keep a record of the hours worked by and wages paid to each employee. The records must be kept for a period of two years after the employment terminates.

Background Checks

In general, background checks are only allowed if directly required for the application process and the employer has received the applicant’s written consent. Legislation effective in 2015 extended the employer’s right to carry out background checks on employees and job applicants to protect important public interests, the economy, the financial system and essential businesses such as food, water, roads, energy, and telecommunications.

Employers can require applicants to take medical examinations and drug tests if relevant to employment. Drug testing is allowed only if a job requires precision, reliability, independent judgment or quick reactions and if drug use could endanger the life, health or safety of the employee or other persons or cause financial loss to the employer or its customers. Drug tests are also permissible if the job applicant would have independent and uncontrolled access to drugs or medicines that could be used for the purposes of intoxication. The applicant must be notified prior to the signing of an employment contract that the nature of the job is such that the employer intends to require drug screening.

Noncompetition Agreements

Noncompete agreements can be set up to restrict employees’ rights to take employment with the employer’s competitors or engage in competing activities for a period of up to six months following termination of employment, a year if the employee receives reasonable compensation. In practice, noncompete agreements are most often used when the departing employee has held a leading position in the company.

The Trade Secrets Act, which went into effect on Aug. 15, 2018, prohibits the unlawful acquisition, use, and disclosure of trade secrets.

Reference Citations

Employment Contracts: Employment Contracts Act, No. 55 of 2001 (as amended), Ch. 1 § 3-4, Ch. 2 § 4; Report of the Task Force on Rules on the Use of Zero Agreements, 2017

Restrictions on Hiring: Young Workers’ Act, No. 998 of 1993 (as amended), § 2

Background checks: Act on the Protection of Privacy in the Workplace, No. 759 of 2004, § 7; Act on Background Checks, No. 177 of 2002, § 4

Noncompetition Agreements: Employment Contracts Act, No. 55 of 2001 (as amended), Ch. 3 §§ 3-5; Trade Secrets Act, 2018,

Immigration and Work Permits

In General

Nationals of other Nordic countries (Sweden, Norway, Denmark, Iceland) can enter Finland without restrictions and stay in the country without a residence or work permit. Citizens of a European Union or European Economic Area country must register with the local police station to obtain a residence permit if they plan to stay in the country for longer than 90 days. Nationals from all other countries who wish to work in Finland must obtain a residence and work permit from the Finland Immigration Service. The permit is generally granted for employment in a specific field, so the employee is entitled to move between jobs within the same field under the same permit.

Visas and Work Permits

As a general rule, individuals intending to work in Finland need a residence permit granted by the state, although there are exceptions.

Nationals of other Nordic countries (Sweden, Norway, Denmark, Iceland) can enter Finland without restrictions and stay in the country without a residence permit. They also do not require a worker’s residence permit.

Nationals from all other countries who wish to work in Finland must obtain a residence and work permit from the Finland Immigration Service. The permit is generally granted for employment in a specific field, so the employee is entitled to move between jobs within the same field under the same permit.

When applying for a residence permit for an employee in Finland, the employer must attach the following to the residence permit application:

• written information on the principal terms of work referred to in the Employment Contracts Act,
• an assurance that the terms are in accordance with current legislation and the collective agreement, and
• upon request by an employment office, a statement confirming that the employer has met and will meet its obligations as an employer.

The right to reside in Finland is valid until further notice. After four years of continuous residence, the employee is entitled to apply for permanent right of residence. A permanent residence permit is valid for an indefinite period.

Foreign workers have a right to work in Finland without a residence permit if they are permanent employees of a company operating in another EU state or the EEA. This is also allowed if such employees perform temporary contracting or subcontracting and hold permits that entitle them to reside and work in another EU member state, provided that the permits stay in force once the employees have completed their work in Finland.

Spouses are permitted to work in Finland.

Effective Jan. 1, 2018, Finland began implementing the EU’s intracompany transfer (ICT) directive. Under the directive, ICT residence permits can be obtained by non-EU national managers, specialists, and trainees who have been employed by an employer outside Finland for at least three months. Assignments cannot exceed three years for managers and specialists or one year for trainees.

Foreign workers have the right to receive residence-based social security benefits if they earn at least 696.60 euros per month when working in Finland. Foreign workers who have worked in Finland for six months may also be entitled to residence-based social security benefits for up to three months after they stop working in Finland.

Post-Entry Requirements

Employers must keep the information on their foreign workers easily available at the workplace and accessible to occupational safety and health authorities in case of necessary inspections. The employer must retain the information for four years after the termination of the foreign worker’s employment.

If an employee stays in Finland for more than six months, the employer also must file an Employer Payroll Report at the end of the year and report all wages paid.

Penalties

Foreigners who work without the necessary permission can be fined for a violation of the Aliens Act. Employers that deliberately or through negligence employ a foreign national who does not have the right to gainful employment can also be fined or sentenced to a maximum of one year’s imprisonment.

Forms

Residence Permit for an Employed Person.

Reference Citations

Visas and Work Permits: Aliens Act, No. 301 of 2004, §§ 40, 73

Nondiscrimination

In General

Finland’s Nondiscrimination Act aims to ensure equal treatment of all job seekers and employees and to protect them from discrimination in working life. The law prohibits both direct and indirect discrimination on the basis of age, ethnic or national origin, nationality, language, religion or belief, opinion, state of health or disability, sexual orientation or other personal characteristics.

The act also prohibits harassment, an instruction or order to discriminate and counteractions by employers. In some cases, discrimination favoring certain groups is allowed if the employer can show the action is needed to genuinely improve equality in the workplace. Employers have the burden of proof in establishing that they have treated their employees equally.

Employees can be awarded compensation as a remedy for discrimination. There is no limit on the amount of compensation that can be awarded. The employer or its representative can also be fined or imprisoned for up to six months for general discrimination.

Companies employing at least 30 workers must prepare plans aimed at preventing discrimination on the basis of age, ethnicity, national origin or nationality, language, religion, belief, opinion, political activity and trade union membership. The plans must cover both working conditions and the selection of personnel, and employees or their representatives must be consulted with regards to the effectiveness of the proposed measures.

Gender Discrimination

The Equality Act aims to promote equality between men and women and improve the position of women in working life. The act defines gender discrimination as:

• treating women and men differently on the basis of gender,
• treating women differently for reasons related to pregnancy or childbirth or
• treating women and men differently on the basis of parenthood, family responsibility or any other gender-related reason.

An employee who has been discriminated against has the right to claim compensation from the employer for the discrimination.

The act also obliges every employer to make focused and systematic efforts to promote the equal positioning of women and men in different jobs and provide them with equal opportunities to advance in their careers.

Gender Pay Reporting: Workplaces with more than 30 employees must prepare an equality plan at least every other year. As part of the equality plan, employers must complete a pay survey to ensure there are no groundless pay differences between men and women who have similar jobs or who are at the same competence level. If no acceptable reason for a pay difference exists, the employer must take steps to correct the inequality.

EU Pay Transparency Directive: As a member state of the European Union, Finland has until June 2026 to transpose the minimum requirements of the EU Pay Transparency Directive into its national law or amend any current pay equity laws to conform with the directive, which aims to promote pay equity between men and women. The directive introduces requirements on gender pay gap reporting, salary history bans during the hiring process, and wage disclosure in job vacancy listings. The national law may go beyond the minimum requirements of the directive, but the law may not directly conflict with the directive requirements.

Reference Citations

Nondiscrimination: Non-Discrimination Act, No. 21 of 2004 (as amended) § 5-8

Gender Discrimination: Act on Equality Between Men and Women, No. 609 of 1986, §§ 6-7

Employee Privacy

Employee Data

On May 25, 2018, the General Data Protection Regulation (GDPR) superseded the Data Protection Directive as the primary law governing data privacy in the EU. The GDPR establishes minimum requirements for the processing of employee data and allows EU member nations to introduce more restrictive local legislation. Stricter requirements can also be established in collective bargaining agreements or work contracts. For more information, see the In Focus: International Privacy Laws.

On Dec. 5, 2018, Finland passed the Data Protection Act (DPA), which entered into force on Jan. 1, 2019. The DPA implemented the GDPR in Finland and supplanted the Personal Data Act, 1999.

Employee Monitoring and Surveillance

Under the GDPR, employers can monitor employees only if there is a lawful basis for doing so. Lawful bases can include preventing employee misconduct, deterring crime, and ensuring compliance with health and safety procedures. Employees must be given prior notice, and any data that is collected must be used and kept only to fulfill its original purpose.

The employer has the right to retrieve and open e-mail messages sent from or received at an e-mail address that the employer has provided for the employee only if the employer has taken steps to ensure that the information cannot be obtained in another way (during an employee’s absence, for example).

Reference Citations

Employee Data: General Data Protection Regulation, 2016

Employee Monitoring and Surveillance: General Data Protection Regulation, 2016

Compensation

Hours of Work

Normal working hours may not exceed eight a day and 40 a week, although weekly working hours may be averaged over a period not exceeding 52 weeks.

Collective agreements generally provide for shorter hours of work.

Employees are entitled to take a rest period of at least 30 minutes if the daily working time is longer than six hours. Rest periods may not be scheduled for the beginning or end of the working day.

Employees are also entitled to a continuous rest period of at least 11 hours between shifts or no less than nine hours in periodic work. With the employee’s consent, an employer and a staff representative may agree on a temporary reduction in the daily rest period.

Employers must give employees a continuous rest period of no less than 35 hours once a week. This weekly rest period should include Sunday when possible. The weekly rest period may also be scheduled over a two-week period, provided that the weekly time off is no shorter than 24 hours.

Under new amendments to the Working Hours Act, which take effect on Jan. 1, 2020, employers and employees will be able to agree to flextime arrangements. Employees working a flexible hours scheme must be allowed to decide when and where to work for at least half their working time. The new law also enables the use of working hour banks even if they are not included in the applicable collective agreement.

Minimum Wage

Finland has no statutory minimum wage, and the terms of employment typically are determined by collective bargaining agreements.

Overtime

Overtime is work performed outside the normal, maximum hours as defined in Finnish law and collective bargaining agreements. Overtime must be separately agreed to on each occasion. Employees can refuse to work overtime. The maximum amount of working hours (including overtime) is 48 hours per week as calculated over a four-month period.

If an employee works overtime, a pay rate increase of 50 percent is paid for the first two hours of work in excess of regular daily working hours and a pay rate increase of 100 percent for any subsequent hours of work. An agreement may be made to exchange the wages payable for overtime work either wholly or partly for correspondingly extended time off in lieu of payment. For more information see the website of Finland’s Occupational Safety and Health Administration.

Sunday work is another category of work that refers to work done on a Sunday, on some other public holiday, on the First of May and on Finnish Independence Day (Dec. 6). A pay rate increase of 100 percent (double time) is payable for Sunday work.

Wage Payment

Wages must be paid on the last day of the pay period, unless otherwise agreed. If the basis for a time rate is a period shorter than one week, payment must be made at least twice a month, otherwise once a month.

An employees’ wages must be paid to a financial institution designated by the employee and withdrawable on the due date. Wages may be paid in cash only if necessary due to compelling reasons.

Mandatory Bonuses

Finland’s labor laws do not address bonuses.

Reference Citations

Hours of Work: Working Hours Act, No. 605 of 1996 (as amended), §§ 6-9, 28, 31

Overtime: Working Hours Act, No. 605 of 1996 (as amended), §§ 18-23, 33

Wage Payment: Employment Contracts Act, No. 55 of 2001 (as amended), Ch. 2 § 13, 16

Benefits

Vacation

In Finland, statutory annual leave is regulated by the Annual Holidays Act. Employees accrue leave annually based on how many full vacation credit months they have worked within the holiday credit year (April 1 to March 31) and on the length of the employment relationship.

During the first year of employment, employees accrue two days’ vacation per month. After one year’s seniority, the allotment increases to 2.5 days per month. Hence, the maximum length of statutory annual leave is either 24 or 30 days per year.

Under Finnish labor law, Saturdays qualify as weekdays even when the employee does not normally work on a Saturday, so in practice the usual 30 days are equal to five weeks of holiday. An employee has a right to receive at least regular or average pay for the time of the annual holiday.

To qualify for the vacation entitlement, employees must work a minimum of 14 days or 35 hours during the month in question. Employers decide when the annual leave will be taken, but must confer with the employees.

Twenty-four days of vacation must be taken during the summer holiday season of May through September. Employees have a right to carry over to later years up to six vacation days.

Collective agreements generally provide for a vacation bonus amounting to 50 percent of the pay for the annual holiday. This bonus is paid either before or after vacation, depending on the agreement. The vacation bonus is based solely on collective agreements. There are no statutory provisions on such bonuses.

Holidays

Under Finnish law, employees are entitled to the following five paid public holidays:

• Easter Saturday
• First of May
• Midsummer’s Eve
• Independence Day
• Christmas Eve

Collective bargaining agreements typically contain provisions on further holidays with full salary entitlements, including New Year’s Day, Twelfth Day, Good Friday, Easter Monday and Ascension Day.

Public holidays that occur on a weekend remain on that date. Employees who are required to work on a public holiday are entitled to double pay.

Maternity Leave

Effective Sept. 4, 2022, mothers are entitled to 40 days of paid pregnancy leave beginning 30 weekdays before child’s due date. Pregnancy leave must be started at least 14 weekdays before the due date.

Working mothers are also entitled to parental leave (see section 70.55 below).

Paternity Leave

Working fathers are entitled to parental leave (see section 70.55 below).

Sick Leave

Employees are legally entitled to a total of nine days of sick leave with full compensation during each working year, 50 percent compensation if employed less than one month. After this period, the Finnish National Pension Institute will pay employee daily allowances for illness at approximately 70 percent of normal wages.

Collective bargaining agreements may provide for additional employer responsibilities and extended periods of sick leave. Foreign employees working for Finnish employers must be insured by them through mandatory accident insurance.

Other Leave

Parental leave. Effective Sept. 4, 2022, both parents are entitled to parental leave, but only one parent may take parental leave at a time. Parents can, however, take 18 working days of parental leave or pregnancy and parental leave at the same time. The parental leave lasts for 320 working days. If the child has two parents, both of them are entitled to 160 working days’ leave. The parent may give up a maximum of 63 parental leave days to the child’s other parent. The person to whom the days are turned over is entitled to parental leave for those days. A single parent can use all the 320 working days. Parental leave can be taken in up to four periods and must be taken before the child turns two.

Child care leave. The Employment Contracts Act provides for child care leave beginning after parental leave and lasting until the child reaches the age of 3. A child care benefit is payable for this period by the Social Insurance Institution to families choosing not to place their child in municipal day care. Furthermore, the parents of small children have a right to a four days’ temporary child care leave in case of a sudden illness of the child, as well as a right to shortened working hours until the child goes to school. Employers are not required to compensate employees for child care leave.

Job alternation leave. Job alternation leave is an arrangement enabling an employee to take a temporary leave of absence from work lasting from 100 to 180 calendar days.

Employees are eligible for job alternation leave when they have worked for a total of at least 20 years. The maximum age to qualify for alternation leave is 60.

To substitute for the employee who is on job alternation leave, the employer must hire:

• a long-time unemployed job seeker,
• a job seeker who is under the age of 30 and has recently graduated with a vocational or higher education degree or
• a job seeker who is under the age of 25 or over the age of 55.

The employer and the employee must agree on job alternation leave. Employees taking job alternation leave are entitled to return to their former duties when the leave ends.

Study leave. Study leave is available to workers whose full-time employment with the same employer has lasted for one year in one or more periods. The maximum length of study leave is two years over a period of five years in one or more installments. If the employment has lasted for less than a year but at least three months, the maximum length of study leave is five days.

The study does not have to relate to the employer’s operations and the employee may freely choose what to study. Study leave is unpaid.

Pensions and Social Security

The pension system in Finland is based on two schemes: the national pension and a compulsory earnings-related pension scheme. The national pension provides a flat-rate benefit of up to 20 percent of average wages, with a minimum guaranteed income reduced by the amount of the earnings-related pension. The earnings-related pension is financed by contributions paid by both employers and employees.

From a base of 63 years of age starting in 2017, the minimum retirement age is rising by three months per year until 2027. After that, the retirement age will be linked to life expectancy. The normal rate of pension accrual is 1.5 percent of the annual income from work, but the rate increases with age.

Employees with at least 38 years of pension coverage are eligible to retire at age 63 with no penalty if they can demonstrate that their capacity to work has diminished due to long periods of physically demanding labor.

Disability pensions are paid to workers who suffer from an illness, disorder or handicap that limits the capacity to work when the incapacity is forecast to continue for at least one year. A worker may be eligible for rehabilitation benefits when an incapacity to work is assessed as temporary. Pensions are taxable income.

Workers’ Compensation

Employers are obligated to take out statutory workers’ compensation insurance to cover their employees against occupational injuries and occupational diseases. The employer pays the premiums.

The obligation to provide this insurance is set by the Employment Accident Insurance Act.

Employees are covered by workers’ compensation insurance in the following circumstances:

• at work,
• in circumstances arising from work at the workplace or an area belonging to it or outside the workplace,
• on the way to or from work or when on work-related business (in Finland or abroad),
• when carrying out an assignment ordered by the employer and
• when trying to protect or save the employer’s property or human life in the course of their work.

Reference Citations

Vacation: Annual Holidays Act, No. 62 of 2005 (as amended), §§ 4-6, 9, 11, 27

Holidays: Working Hours Act, No. 605 of 1996 (as amended), § 33

Maternity Leave: Employment Contracts Act, No. 55 of 2001 (as amended), Ch. 4; Health Insurance Act, No. 1224 of 2004 (as amended), ch. 11

Paternity Leave: Health Insurance Act, No. 1224 of 2004 (as amended), ch. 11, §§ 6-7

Sick Leave: Health Insurance Act, No. 1224 of 2004 (as amended), ch. 11; Employment Contracts Act, No. 55 of 2001 (as amended), Ch. 2 § 11

Other Leave: Health Insurance Act, No. 1224 of 2004 (as amended), ch. 11, §§ 8-10; Act on Job Alternation Leave, No. 1305 of 2002 (as amended), §§ 2-7; Study Leave Act, No. 273 of 1979 (as amended), §§ 4-6

Pensions and Social Security: Employees Pensions Act, No. 395 of 2006 (as amended), §§ 11-12

Workers’ Compensation: Employment Accidents Insurance Act, No. 608 of 1948 (as amended), § 4

Labor Relations

In General

The formation and function of trade unions are protected by the Finnish Constitution, and employees are entitled to elect individuals to represent them in matters relating to the operations of the employer. The parties bound by a collective agreement may not take industrial action while it is in effect. If no agreement is in force, employees may engage in strikes and employers in lockouts after providing advance notice.

In cases where a business is sold or transferred, the successor employer becomes responsible for its predecessor’s rights and duties towards the employees under the collective agreement.

Right to Organize

Finland has one of the highest rates of union membership in the industrialized world, approximately 75 percent. The formation and function of trade unions are protected by the constitution, and laws protect the freedom to form and join (or not join) associations and to participate in their activities.

On Jan. 1, 2022, Finland enacted an amendment to the Cooperation Law that requires employers and employees to take part in regular meetings organized by the employer. In these meetings, employers must share developments regarding the company’s financial situation and workplace rules, and employees may share any concerns or suggestions they have about their role in the business. The meetings must take place at least once every quarter or, if the employer employs less than 30 employees, twice a year, unless the employer and the personnel representative agree otherwise (the Cooperation Act does not apply to companies with fewer than 20 employees).

Works Councils

Employers in Finland are not required to set up works councils, although employees are entitled to elect one or more individuals, such as shop stewards and industrial safety delegates, to represent them in matters relating to the operations of the employer that may have an effect on the employees.

Dispute Resolution

Most collective agreements provide a grievance procedure for the settlement of disputes regarding their terms or application. If the matter cannot be resolved between the employees and the employer, negotiations will continue between the employer and the shop steward representing the trade union. If the negotiations still don’t produce a solution, the matter will be negotiated between the employers’ association and the trade union. If no solution can be found at this level, the association or the union may take the matter to the Labor Court.

Strikes and Lockouts

The parties bound by a collective agreement may not take industrial action while it is in effect. An employer or a union may be fined for breaking the industrial peace.

If no agreement is in force, employees may engage in a lawful industrial dispute regarding the terms and conditions of employment. The office of the National Conciliator must be notified of a planned strike no later than two weeks in advance. The notification must specify the causes of the planned action, when it will begin and its scope.

Industrial actions are also permitted as a means of putting pressure on government policymakers, and employees may engage in sympathetic industrial actions as a way to help employees in another sector come to terms with their employers.

If no collective agreement is in force, employers may take industrial action in the form of a lockout that prevents employees from working. The National Conciliator and opposing trade union organizations must be notified in advance when a lockout is planned.

Successorship Clauses

In cases where a business is sold or transferred, the successor employer becomes responsible for its predecessor’s rights and duties towards the employees under the collective agreement.

Reference Citations

Right to Organize: Constitution of Finland, 1999 (as amended), § 13

Successorship Clauses: Collective Agreements Act, No. 436 of 1946, § 5

Safety, Health and Security

In General

Employers are required to identify, inform employees about and remediate hazards and risks in the workplace.

Employers may require a worker to take a drug test if the employer has cause to suspect that the employee is under the influence of drugs at work or if the work requires special precision, reliability, independent judgment or quick reactions.

Workplace Safety and Health

Finland’s Occupational Health and Safety Act imposes a general duty on employers to ensure the health and safety of their employees at work. In addition to the duty of care, employers are required to:

• develop a written policy of action with regard to health and safety in the workplace,
• identify any hazards or risk factors caused by the work or the work environment,
• inform workers about the potential hazards in the workplace and
• eliminate these hazards as far as reasonably possible.

Employers are also responsible for insuring employees against occupational accidents and occupational diseases under the Employment Accident Insurance Act. In addition, employees in companies with 10 or more workers are entitled to elect a health and safety representative plus two deputies to represent them in dealings with the employer and to keep contact with the health and safety authorities. If an employer has 20 or more workers, it also must appoint a separate health and safety board for consultation and supervision purposes on key health and safety issues.

Foreign employers sending employees to Finland for temporary work must notify the Operational Safety and Health Administration of the posting before work commences. Notification is not required when the employer transfers workers as an internal transfer within a group of companies for a maximum period of five days.

Employers that fail to comply with health and safety requirements can be held liable for injuries to employees in the workplace. The employer’s representatives can also be fined or imprisoned for a maximum of one year.

Drug and Alcohol Use

Employers may require workers to take a drug test if the employer has cause to suspect that the employee is under the influence of drugs at work or has a drug addiction. Testing is also permitted if essential to establish the employee’s working or functional capacity when the work requires special precision, reliability, independent judgment or quick reactions.

Reference Citations

Workplace Safety and Health: Occupational Safety and Health Act, No. 738 of 2002, §§ 8-14

Termination

Termination by Employer

Employers must have good cause for terminating an employment contract. The most common reason for dismissal is a decline in business profitability or a reorganization of production that renders the employer unable to provide the previous or other work to the employee.

To justify termination, the reduction in work must be substantial and permanent. If other work becomes available, either in the enterprise concerned or in some other enterprise in which the employer exercises control in staffing matters, this work must be offered to employees who are otherwise threatened with a layoff.

Employees can also have their contracts terminated for performance-related reasons, such as neglect of duties, although in this situation the employee must first be given a warning and an opportunity to correct his or her performance.

The following do not constitute justifiable reasons for termination of employment:

• illness,
• participation in industrial action that complies with the Collective Agreements Act or
• political, religious or other views.

A court may order an employer that unlawfully dismisses an employee to pay compensation of between three and 24 months’ wages, although even in cases of unlawful dismissal the court cannot order reinstatement.

An employer must provide notice of termination in writing. The employer and the employee can agree on the length of the notice period in the employment contract, although the maximum notice allowed is six months and the notice period required of the employer cannot be shorter than that required of the employee.

Employers can terminate employment with immediate effect, no notice required, if the employee commits a fundamental breach of the employment contract. Termination with immediate effect must be performed within two weeks from the date the employer becomes aware of the breach.

If the notice period is not agreed or set forth by a collective agreement, the employer must apply the following statutory notice periods based on the employee’s length of service:

• 14 days if the employment is less than a year,
• one month if the employment has continued for between one and four years,
• two months if the employment has continued for between four and eight years,
• four months if the employment has continued for between eight and 12 years and
• six months if the employment has continued for longer than 12 years.

Employers with 30 or more workers must provide outplacement services to employees who are made redundant. The obligation only applies to employees with over five years’ service. The value of the outplacement service must equal or exceed the company’s average salary. The service must be provided within two months after the expiration of the notice period.

Employers also must continue to offer the employee the same healthcare services offered during employment for six months following termination of employment. The obligation ends if the former employee finds employment elsewhere during the six-month period, provided the new employment contract is valid for at least six months.

Whistleblowing. Effective Jan. 1, 2023, companies employing over 249 workers must implement a whistleblowing program no later than April 1, 2023. For smaller companies, employing 50 to 249 workers, the deadline is Dec. 17, 2023. Under the Whistleblower Protection Act, which implements the EU Whistleblowing Directive into national law, covered employers must set up an internal reporting channel to allow employees to report suspected misconduct and potential wrongdoings. Under the law, employers can outsource the whistleblowing channel to an external service provider. Employers with fewer than 50 employees are exempted from the obligation to set up a whistleblowing system.

Termination by Employee

An employee is free to terminate the employment contract without giving any reason. Unless otherwise stipulated in a collective agreement or individual employment contract, the employee must observe the following periods of notice when resigning from employment:

• 14 days if the employment has continued no longer than five years and
• one month if the employment has continued for longer than five years.

If notice is not given, employees risk forfeiting compensation.

Plant Closings and Mass Layoffs

Under the Act on Cooperation Within Undertakings, employers must give 14 days’ notice prior to laying off employees. The Act also obliges employers to negotiate with employees whenever considering measures that may lead to terminations or layoffs affecting multiple employees. Some procedures, such as the length of the negotiation period, may differ depending on the number of jobs at risk. If the planned dismissals concern at least 10 employees, the period of consultation should be six weeks, if fewer 14 days.

Payment on Termination

There is no statutory obligation to pay severance.

Unemployment Insurance

Unemployed workers may be eligible for an earnings-related unemployment benefit, a basic unemployment allowance or a labor market subsidy. An earnings-linked per diem allowance is paid to job seekers belonging to an unemployment fund. Other employees receive a basic unemployment allowance from the Social Insurance Institution.

Earnings-linked unemployment benefits and a basic unemployment allowance are paid to unemployed workers who have worked for eight months over the preceding 28 months. A job seeker who fails to satisfy this condition or who has received an unemployment benefit for a maximum of 500 days is eligible for the labor market subsidy from the Social Insurance Institution.

Employees who have been laid off are generally also entitled to unemployment benefits.

The basic unemployment allowance varies from year to year. The earnings-linked per diem allowance is about 50–70 percent of regular average wages.

All unemployment benefits include a supplement for dependent children varying according to the number of children supported.

Enrollment as an unemployed job seeker at an Employment and Economic Development Office is an absolute condition of receiving unemployment benefits.

Unemployment benefits are taxable income.

Reference Citations

Termination by Employer: Employment Contracts Act, No. 55 of 2001 (as amended), Ch. 6 §§ 1-4, Ch. 7 §§ 1-2; Amendment to the Occupational Healthcare Act, 2016

Termination by Employee: Employment Contracts Act, No. 55 of 2001 (as amended), Ch. 6 § 3

Plant Closings and Mass Layoffs: Act on Cooperation with Undertakings, No. 334 of 2007, §§ 49-51

Unemployment Insurance: Unemployment Security Act, No. 1290 of 2002 (as amended), §§ 2-8 (Finnish)

Personal Taxes

Residency Requirements

Individuals are deemed to be resident in Finland if they have their main abode in Finland or if they stay in Finland for a continuous period of more than six months.

Taxable Income

A Finnish resident is liable to tax on his or her worldwide income. Nonresidents are subject to tax only on Finnish-sourced income.

Individuals are generally subject to tax on all income, whether earned or unearned.

Tax Rates

Employees pay progressive tax rates ranging from 6 percent to 31.25 percent.

A foreign individual working in Finland for a period of up to six months has final tax withheld from wages paid by a Finnish employer at the rate of 32 percent. Residents of a country within the European Economic Area or a country that has a bilateral tax treaty with Finland may request taxation under the progressive scale. A foreign individual working in Finland continuously for a period of over six months is taxed under the progressive scale in the same way as a taxpayer resident in Finland.

Finnish individuals must file tax returns by either May 7 or May 13 of the subsequent year (depending on individual circumstances).

Reference Citations

Residency Requirements: Income Tax Act, No. 1535 of 1992 (as amended), § 11 (Finnish)

Web References

In English.

Law and Regulation

Act on Job Alternation Leave

Annual Holidays Act

Collective Agreements Act

Employment Contracts Act

Working Hours Act