On 8 September 2015, the Finnish Government published a proposal for exceptional changes to employment legislation in order to improve Finland's cost competitiveness. Following the extensive critique that the Government received, as well as after discussions with the collective bargaining parties, on 28 September 2015 the Government presented its altered proposal.

The proposal was published after negotiations for a social contract concerning working life reforms between the Government and the collective bargaining parties proved unsuccessful in August. The purpose of the proposed changes is to reduce unit labor costs by 5%. The Government also wants to equalize parental leave costs and make it easier for employees to be re-employed and adapt to changes in circumstances after being made redundant. 

The proposed changes to legislation are currently the following:

1. Changes to improve cost competitiveness

  • The Government proposes in its new proposal that a statutory right to a holiday bonus would be provided by law and that the holiday bonus would be around 30% less than the current rate in most sectors.
  • The benefits for paid sick leave would be reduced according to the original proposal. The first day of sickness would no longer be paid, and for days 2-9, the sick pay would be reduced from 100% of the employee's salary to 80%. The Government clarifies in its new proposal that after this period, the pay would be in accordance with the applicable collective bargaining agreement.
  • Epiphany and Ascension Day would be changed from paid public holidays to unpaid public holidays according to the original proposal. The annual number of working days would not be reduced. The Government states in its new proposal that Epiphany and Ascension Day would not entitle employees to Sunday pay in sectors where employees work every day of the week.
  • The Government proposes in its new proposal that the maximum length of paid annual leave would be six weeks. This cap would affect the longest periods of annual leave in both public and private sectors. In the original proposal the aim was to cut only the longest period of annual leave in the public sector.
  • The social security contribution made by private employers would be reduced by 1.72 percentage points according to the original proposal. In 2015, the social security contribution is 2.08% of the salaries paid by the employer. The Government states in its new proposal that details on the schedule and possible staggering of the measures are to be provided at a later time in the context of the general Government budget in the spring of 2016.

It is also worth noting that the Government withdrew the proposal to cut compensation for overtime and Sunday work.

2. Changes to improve the employees' position in the event of redundancies in companies with over 20 employees

  • In addition to paying the employees during the notice period, employers would have to offer re-employment training. The value of such training would have to be equal to at least one average monthly salary at the company.
  • Employers would have to provide occupational health care services for a six-month period after the termination of employment.

3. Changes to equalize parental leave costs

  • The costs for employers arising from female employees' parental leave would be equalized by a lump sum payment of EUR 2,500, payable to employers who pay salary to their employees during maternity leave.

The intention is to implement the changes through mandatory legislation. As many of the proposed changes concern issues that are regulated in collective bargaining agreements, such mandatory legislation would limit significantly the collective bargaining parties' freedom of contract. In the new proposal, the mandatory nature of the proposed provisions is planned to be in force for three years through fixed-term legislation. The legislation would not affect collective bargaining agreements in force at the time the legislation comes into effect, nor would contracts of employment in force be affected.

The proposal is still on a very general level and the actual legislative proposals have yet to be published. Necessary legislative drafting will take place in cooperation with the collective bargaining parties. The aim is that the legislative amendments will be made by June 2016 at the latest and the legislation would enter into force at the beginning of the next collective bargaining agreement period, in practice in 2016-2017.

Comments on the proposal from a Swedish perspective:

Many of the issues addressed in the Finnish government's proposal are not addressed by legislation in Sweden, but rather through collective bargaining agreements. The government has not communicated any intention to change this balance, so for the foreseeable future any legislative interventions such as those in Finland are unlikely to occur in Sweden. The major Swedish collective bargaining agreements terminate in 2016, so negotiations for new agreements will begin relatively soon. It remains to be seen whether there will be proposals similar to those presented by the Finnish government.