The cost competitiveness negotiations between the Finnish Government and the labor market parties, which have been going on since the spring of 2015, have finally come to a conclusion. The contract to improve Finland's cost competitiveness was signed on 14 June 2016.

The central labor market parties reached an initial agreement on the cost competitiveness contract in February 2016, after which the Government canceled the proposed mandatory employment legislative reform. The changes proposed in the contract are less radical than those proposed by the Government in the so-called mandatory legislation package, but were still hard for the unions to accept, as they weaken the employees' terms and conditions of employment. The contract went through tough rounds of negotiations in many local unions. Finally, on 10 June 2016, the Metalworkers' Union accepted the terms of the contract ensuring a sufficient number of employees were covered and the contract could enter into force.

The following matters, among others, were agreed in the contract:

  • the current terms of the collective bargaining agreements will be extended by 12 months – no salary increases during this period;
  • working hours will be increased by 24 hours a year without any additional compensation;
  • a portion of the social security contributions will be paid by the employees rather than the employers;
  • holiday bonuses in the public sector will be cut by 30% in 2017–2019;
  • employers will provide re-employment training for employees made redundant; and
  • employers will provide occupational health care services to employees made redundant for six months after the duty to work has ended.

The Finnish Government has promised to reduce taxes and cancel the threatened EUR 1.5 billion additional budget cuts and tax increases in return for the conclusion of a successful contract. The cost competitiveness contract is described as being the most significant employment reform for over a hundred years. Time will show whether the contract achieves its goals.

Comments from a Swedish perspective:

Sweden has not seen any changes to the existing regime that are even close to the changes that have been agreed in Finland. That said, all major collective bargaining agreements that are in force on the Swedish labour markets expired this spring and have now been replaced, after negotiations between the relevant parties. Most of the agreements are valid for 12-13 months, a relatively short period of time in this context. The "industrial mark" (Sw: industrimärket), which is the wage increase agreed between the parties active in the Swedish export-oriented industries, was set at 2.2% for a twelve month-period. The industrial mark is generally seen as establishing the cap on wage increases in other sectors and it appears that this cap has generally been respected throughout the labour market. Notably, the largest white collar union, "Unionen", dropped its demands that more flexible retirement options (Sw: "Flexpension") should be introduced in all sectors of the labour market that are organized by Unionen, after Unionen's threatened industrial action was deemed unlawful by the Swedish Labour Court.