International Employment Law Guide

Analysis

Finland

International Employment Law Guide 

This page outlines country-level details about the onboarding process when hiring employees, and touches upon the applicable rules when terminating employment contracts.

Last updated: 1 April 2021

A. Hiring of employees (onboarding)

Mandatory employer requirements

The employer must present an employee, whose employment relationship is valid indefinitely or for a term exceeding one month, with written information on the principal terms of work, unless the terms are laid down in a written employment contract. The information must include at least:

  • The domicile or business location of the employer and the employee;
  • The date of commencement of the work;
  • The date or estimated date of termination of a fixed-term contract and the justification for specifying a fixed term;
  • The probation period;
  • The place where the work is to be performed or, if the employee has no primary fixed workplace, an explanation of the principles according to which the employee will work in various work locations;
  • The employee's principal duties;
  • The collective agreement applicable to the work;
  • The grounds for the determination of pay and other remuneration, and the pay period;
  • The working hours to be observed;
  • The manner of determining the annual holiday;
  • The notice period or the grounds for determining it; and
  • In the case of work performed abroad for a minimum period of one month, the duration of the work, the currency in which the remuneration is to be paid, the fringe benefits, both in cash and in kind applicable abroad, and the terms for the repatriation of the employee.

When hiring employees in Finland, employers also have various registration (e.g., tax and employer registration) and insurance-related obligations (e.g., obligation to take out mandatory pension and accident insurance) as well as health and safety related obligations (e.g., duty to organize occupational health care).

It is not required to establish a legal entity in Finland to hire someone.

Probation periods

The employer and the employee may, in an employment contract that is valid until further notice, agree on a probation period of a maximum of six months starting from the beginning of the work. If the employee has been absent during the probation period due to incapacity for work or family leave, the employer is entitled to extend the probation period by one month for every 30 calendar days included in the periods of incapacity for work or family leave. In a fixed-term employment relationship, the probation period and any extensions to it, may comprise no more than half of the duration of the employment contract, and in any event may not exceed six months.

If a collective agreement applicable to the employer contains a provision on a probation period, the length of the probation period stated in the collective agreement shall be applied. The length of the probation period stated in a collective agreement cannot be longer than six months.

During the probation period, the employment contract may be terminated with an immediate effect by either party. The employment contract may not, however, be terminated on discriminatory or otherwise inappropriate grounds with regard to the purpose of the probation period.

Hiring checks

Medical examination
An employee may not refuse to attend a medical examination without good cause, if at the start or at a later stage of the employment the examination is necessary for:

  • Investigating the employee’s health in performing work or being in a working environment that presents a special risk of illness; or
  • Investigating the employee’s working capacity or functional capacity for the purposes of the health requirements associated with the job.

The medical examination is performed by mutual agreement with the employee.

Criminal background check
Criminal background checks are permissible for specific functions and as specifically determined by law. Obtaining a criminal record extract mainly requires active initiation from an individual. Based on specific legal rules, the Finnish Security and Intelligence Service carries out security clearances (a wider check than criminal background check) for companies and authorities. A security clearance is only made with the written consent of the person subject to the clearance.

Reference and education checks
Reference and education checks are permissible with consent from the individual.

Diversity & inclusion

According to Finnish law, an employer must treat all employees equally, unless deviating from this is justified in view of the duties and position of the employees. There are also provisions on equality and on the prohibition of discrimination (on several grounds, such as gender).

Types of employment contracts

The two main categories of employment relationships in Finland are:

  • Open-ended employment relationships (permanent employment relationships); and
  • Fixed-term employment relationships.

An employment contract is open-ended (permanent employment relationship) unless it has, for a justified reason, been made for a specific fixed term (fixed-term employment relationship). An example of a valid legal reason for a fixed-term employment relationship is the temporary nature of the work concerned. However, employment contracts made for a fixed term on the employer's initiative without a justified reason is considered open-ended. It is also prohibited to use consecutive fixed-term contracts when the amount or total duration of fixed-term contracts, or the totality of such contracts, indicate a permanent need of labor.

An employment contract (both open-ended and fixed-term contracts) may be oral, written or electronic. However, in case no written employment contract is available, certain information on the principal terms of work still has to be provided in writing (please see section A 1. above).

Specific rules for executives

There is mainly one official category of executives under Finnish law whose rights deviate from the labor law rules applied to employees—managing directors (toimitusjohtaja). Managing directors are not regarded as employees in Finland and are thus not protected by the provisions of the Employment Contracts Act. Therefore, it is common to draft a specific agreement to confirm the terms and conditions applicable to the position of the managing director.

Language requirements

There are no mandatory provisions on the language in which HR-related documents (such as employment contracts) must be drawn up in Finland. Finnish employment-related documents are normally drafted in an official language—Finnish or Swedish. However, other languages are also valid, but when determining which language to use, the decisive factor should be that the employee understands the content of the document(s) concerned. Accordingly, employment-related documents in dual languages are becoming more common.

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B. Termination of employees (offboarding)

Kinds of dismissal

An open-ended employment contract can be terminated by the employer either on the basis of:

  • Economic and production-related reasons (collective dismissal–further described under section B 9. below); or
  • Reasons relating to the individual.

The employer may not terminate an open-ended employment contract without valid, substantial reason. Dismissal for reasons related to the individual requires a serious breach or neglect of obligations arising from the employment contract, or the law, that will have a material impact on the employment relationship. In addition, material changes in the employee’s capabilities necessary for working, resulting in the employee no longer being able to fulfil the work duties, can be considered a valid and substantial reason for dismissal. However, the employer's and the employee's overall circumstances must be taken into account when assessing the validity of the reason.

Dismissal for reasons related to the individual can take place either with a notice period (i.e., so-called ordinary dismissal) or with an immediate effect (i.e., so-called dismissal for serious cause−työsopimuksen purkaminen). A serious cause is such a grave breach related to the employment relationship that it would be regarded unreasonable to require the employer to continue the contractual relationship.

A fixed-term employment contract ends automatically when the agreed term expires, without notice period. An employment contract for a definite period cannot be terminated during its term, unless the parties have specifically agreed to, or if there is a serious cause, as referred to above. If the employer and employee continue to execute the employment relationship beyond its expiry date, the rules relating to an open-ended relationship will apply. Furthermore, a fixed-term employment contract for longer than five years may, at the end of the five years, be terminated on the same grounds and using the same procedure as an open-ended employment contract.

Dismissal motivation

The termination of an employment contract always requires objective and justifiable reasons.

As stated above, dismissal for reasons relating to the individual requires serious breach or negligence of obligations arising from the employment contract, or the law, having an essential impact on the employment relationship. In addition, material changes in the employee’s capabilities necessary for working may constitute a valid reason for dismissal. Employees who have neglected their duties arising from the employment relationship, or committed a breach thereof, must be warned and given a chance to amend their conduct, before notice can be given. As an alternative to the dismissal, the employer must also consider e.g., whether the employee could be transferred to other duties.

The employer must effect termination of the employment contract within a reasonable period after being informed of the existence of the dismissal grounds related to the employee. In addition, before the employer terminates an employment contract on reasons related to the individual, or terminates it with an immediate effect, the employer must provide the employee with an opportunity to be heard concerning the grounds for termination. While being heard, the employee is entitled to be assisted (e.g., by a shop steward/employee representative).

Dismissal with an immediate effect is applicable only with serious cause (e.g., when a breach or negligence is made in such a manner that it is unreasonable to expect the employer to continue the contractual relationship, even for the period of notice). It should be noted that the right to revert to the dismissal with an immediate effect lapses if the employment contract is not terminated within 14 days from when the contracting party is informed of the existence of the immediate dismissal grounds.

Dismissal for economic and production-related reasons requires that the work to be offered has diminished substantially and permanently for financial or production-related reasons, or for reasons arising from reorganization of the employer’s operations (Please see section B 9. for further information).

Notice period

The employer must inform the employee of the termination of the employment contract without delay by giving notice.

The applicable notice periods of employment contracts/relationships are generally determined by law. If a collective bargaining agreement is in place with the employer, the notice periods of the collective bargaining agreement apply. The notice period can also be negotiated between the employer and the employee. However, the maximum length of the notice period is six months and the notice period of an employee may not be longer than the notice period of the employer.

Unless otherwise agreed, the notice periods to be observed by the employer are the following if the employment relationship was continuous:

Seniority Notice given by the employer
< 1 year 14 days
1 < 4 years 1 month
4 < 8 years 2 months
8 < 12 years 4 months
Over 12 years 6 months

Unless otherwise agreed, the notice periods to be observed by the employee are the following if the employment relationship was continuous:

Seniority Notice given by the employee
< 5 years 14 days
Over 5 years 1 month

The employment continues throughout the notice period. Thus, the employee is entitled to the salary and other employment benefits during the course of employment until the end of the notice period. Finnish law does not recognize the concept of indemnity in lieu of notice, as an indemnity in lieu of notice is only possible with a separate and specific consent of an employee. Unless such consent exists, the employer pays the salary during the notice period on monthly basis.

Severance pay

There is no mandatory severance pay (eroraha) in Finland to be paid in addition to the notice period salary.

Dismissal formalities

Before dismissing an employee, the employer must provide the employee with an opportunity to be heard concerning the reasons for dismissal (please also see section B 2. above).

The notice of termination should be delivered to the employee in person. If this is not possible, the notice may be delivered by letter or electronically. The notice in such situations is deemed to have been received by the recipient at the latest on the seventh day after the notice was sent.

The form of dismissal is not stipulated in the law, but for reasons of proof, a written form is highly recommended. In addition, termination reasons must be notified to the employee in writing at the employee’s request.

Special dismissal protection

Some categories of employees enjoy special statutory protection against dismissal if they are dismissed for reasons linked to their protected status. This concerns for example:

  • Pregnant employees and employees on family leave—the employer may not terminate an employment contract on the basis of the employee’s pregnancy or because the employee is exercising his or her right to family leave.
  • Shop stewards (“luottamusmies”) and comparable elected employee representatives
    • The employer is entitled to terminate the employment contract of a shop steward (employee representative elected on the basis of a collective agreement) or of a comparable elected representative on grounds related to the employee only if the majority of the employees represented by the shop steward or the comparable elected representative so agree. The employer is entitled to terminate the employment contract of a shop steward or a comparable elected representative also if the employer is declared bankrupt. Furthermore, dismissal for economic reasons is also possible, provided that the work of the shop steward or the comparable elected representative ceases completely and the employer is unable to arrange work that corresponds to the person’s professional skills, or is otherwise suitable, and that the person cannot be trained to perform some other tasks.

Legal means of employees

If the employer intentionally, or through negligence, commits a breach of obligations arising from the employment relationship or the law, the employer is liable for the loss it caused the employee.

If the employer has terminated an employment contract contrary to the reasons laid down by law, the employer is liable 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 and a maximum of 24 months (a maximum of 30 months for shop stewards). In case of dismissal for economic reasons and dismissal for serious cause, the abovementioned provision on minimum compensation shall not apply. Furthermore, an employer who has deliberately or negligently failed to observe the cooperation provisions of an employee who has been dismissed for economic and production-related reasons, is liable to pay the employee an indemnification amount of up to €35,590.

Specific rules for executives

There is mainly one official category of executives–managing directors−under Finnish law whose rights deviate from the labor law rules applied to employees.

Managing directors can be terminated at any time without any specific reason and, as there is no mandatory notice period to be applied by the parties, it is common to agree on termination provisions in detail between the parties in the managing director agreement. A fairly common “termination protection package” of a managing director consists of a notice period of between one and six months (for both parties) and a separate severance payment amounting to between three and 24 month’s salary (payable in case the termination is not caused by any failure or breach of the managing director).

Collective dismissals

As stated above in section B 2, the employer may terminate the employment contract if the work to be offered has reduced substantially and permanently for financial or production-related reasons or for reasons arising from reorganization of the employer's operations. The reduction is usually considered temporary unless it clearly exceeds a period of 90 days. In addition, it is required that the employees affected cannot, within reason, be placed in or trained for alternative or other duties.

There is no minimum number of affected employees required for the rules to apply. If the employer employs normally at least 20 persons, the employer shall follow special rules, formalities and time-lines while considering the dismissal.

If the employer dismisses at least 10 employees, he furthermore has an obligation to notify the employment and economic development office.

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Get in touch

Vesa Karvonen
Finland
Vesa.Karvonen@deloitte.fi | +35 840 721 9910

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