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Country snapshot

Key considerations

Which issues would you most highlight to someone new to your country?

Collective bargaining agreements play a vital role in Finnish working life. The Finnish labour market is characterised by a high level of organisation for both employers and employees.

One of the most significant underlying principles in Finnish employment legislation is the protection of employees. Therefore, most provisions in Finnish employment laws (and collective bargaining agreements) are mandatory and set the minimum level for the terms of employment.

What do you consider unique to those doing business in your country?

In Finland, mandatory rules based on legislation and collective agreements limit the options for employers and employees to agree the terms and conditions of employment. In addition, Finnish employees enjoy high protection against dismissal compared to many other jurisdictions.

An employer may be bound by a collective agreement even if the employer is not unionised. So-called ‘generally applicable collective agreements’ apply to all employers operating in the business field.

Compared to most other countries, Finnish legislation contains exceptionally strict provisions on data protection, including provisions limiting the employer's right to, for example, open an employee's emails or monitor employees.

Is there any general advice you would give in the employment area?

Finnish employment legislation is strict and detailed. Further, the penalties for non-compliance can be significant. 

Emerging issues/hot topics/proposals for reform

Are there any noteworthy proposals for reform in your jurisdiction?

Extensive pension reform will enter into force on January 1 2017. As a result, for example, the minimum retirement age will be raised by two years to 65 by 2025.

The so-called 'competitiveness pact' concluded between the Finnish government and labour market organisations will introduce new regulatory elements to Finnish working life – for example, the possibility to increase annual working time by 24 hours by concluding a local agreement at the workplace will be included in most collective bargaining agreements.

In addition, many working life-related government proposals are currently pending or will enter into force during 2017.

What are the emerging trends in employment law in your jurisdiction?

In recent years there has been a significant increase in discrimination claims.

The number of local agreements between individual employers and their employees or employee representatives has increased, mostly thanks to the amended terms and conditions of collective bargaining agreements.

The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

Central provisions governing employment relationships are included in the Employment Contracts Act (55/2001), the Working Hours Act (605/1996) and the Annual Holidays Act (162/2005). The Act on Cooperation within Undertakings (334/2007) regulates employees’ collective rights to information and consultation. The Act on Protection of Privacy in Working Life (759/2004) and the Personal Data Act (523/1999) regulate employment-related data protection issues.

The main acts prohibiting both direct and indirect discrimination in employment relationships are the Act on Equality between Women and Men (609/1986), the Non-discrimination Act (1325/2014), the Employment Contracts Act and the Penal Code (39/1889). Further, the Occupational Safety and Health Act (738/2002) places a duty on the employer to take care of the health and safety of employees while at work by taking the necessary measures.

Further, sector and company-specific collective bargaining agreements regulate Finnish working life.

EU legislation is usually implemented in Finland through national legislation.

As well as legislation and employment contracts, certain legal principles, case law, legal preparatory works, (established) company practices and internal rules also govern employment relationships.

Who do these cover, including categories of worker?

As a starting point, employment legislation applies equally to all employees. Finnish employment law does not generally draw distinctions between different types of worker (eg, blue-collar and white-collar workers). In addition directors, with the exclusion of managing directors, are considered to be employees.

Misclassification

Are there specific rules regarding employee/contractor classification?

Certain principles and factors are apply to distinguish employees and independent contractors. However, an overall assessment of circumstances will determine whether an individual is considered to be an employee or an independent contractor.

The existence of employer direction and supervision is often considered important in borderline cases of employee/contractor classification. A self-employed person is economically independent and free to determine his or her activities, working hours and the place of work. Individuals are likely to be regarded as self-employed if they:

  • use their own equipment;
  • hire their own assistants;
  • take financial risk for the work performed;
  • have responsibility for their own activities; and
  • can arrange for a substitute to perform the work. 

Contracts

Must an employment contract be in writing?

No, there is no legal requirement to conclude a written employment contract. This also means that oral and electronic employment agreements are legally binding. However, it is recommended and customary in Finland to have employment contracts in writing.

In the absence of a written employment contract, the employer must provide an employee with a written statement including information on certain key terms of employment (eg, the employee's principal duties and regular working hours) by the end of the employee’s first payment period. 

Are any terms implied into employment contracts?

Yes. Even though Finnish employment relationships are extensively governed by statutory law and collective bargaining agreements, certain employment terms may also be implied. These terms are based on case law and legal principles. Further, an established practice may become binding for both parties of the employment relationship, even though it has not been agreed in writing.

The obligation of loyalty is an implied term of the employment contract. This means that the employee and the employer must act loyally towards each other.

Finnish employment law provides the employer with a right to direct the employee´s work. This means that the employer has the authority to give orders to the employee regarding his or her work and how it is arranged. The extent of the employer's right to direct work is determined on a case-by-case basis.

Are mandatory arbitration/dispute resolution agreements enforceable?

A dispute resolution clause cannot limit the employee's statutory rights. Arbitration clauses are typically deemed enforceable only in (managing) director agreements, not in ordinary employment contracts. The assessment of enforceability is carried out on a case-by-case basis.

How can employers make changes to existing employment agreements?

The parties to the employment relationship may agree on changes to the terms and conditions of employment contracts. However, employees are under no obligation to conclude new employment contracts or to amend the existing ones if their employer so requests.

An employer has the right to make unilateral changes to the binding terms and conditions of an employment contract only if there would be a valid ground for dismissal (ie, the change is made as an alternative to dismissal). 

Foreign workers

Is a distinction drawn between local and foreign workers?

As a general rule, employing foreign workers is not considerably different from employing domestic workers.

However, the employer has certain obligations when hiring foreign workers. These depend on the need for a work permit and whether the foreign employee is considered to be a posted employee.

The employer must ensure that all foreign workers either have or do not require a worker residence permit. Citizens of EU and European Economic Area member states do not need a special permit in order to undertake paid employment in Finland. Other foreign nationals must generally first obtain a visa and a worker residence permit to entitle them to work in Finland.

Recruitment

Advertising

What are the requirements relating to advertising positions?

No legal requirements apply to advertising positions or particular details about the job that must be provided in the advertisement.

However, the general principle is that the employer may require from applicants only those characteristics that are actually needed in the position advertised.

Further, discriminatory advertisements for jobs are generally prohibited.

Background checks

What can employers do with regard to background checks and inquiries in relation to the following:

(a) Criminal records?

In the majority of cases, a private sector employer is not permitted to receive an applicant's or employee's criminal record information directly or indirectly, unless it is expressly regulated by law. The law contains derogation with regard to, for example, people who work with children on a permanent and substantial basis.

General security clearances (including criminal record checks) are performed by the Finnish Security Police. The reason for this is that the checks are permitted only when they would help to prevent certain criminal offences. Prior written consent from the applicant or the employee is required before the employer can request security clearance. In practice, only private sector positions in which the employees are directly financially responsible for the employer's property or which for some other reason require considerable trust from the employer may require security clearance. This would most likely cover most executive positions.

(b) Medical history?

The employer's right to background checks related to the employee's medical history is limited.

As a general rule, the employer has the right to process information concerning the employee's state of health only if such information has been collected from the employee himself or herself, or elsewhere with the employee’s written consent, and the information must be processed:

  • in order to pay sick pay or other comparable health-related benefits;
  • to establish whether there is a justifiable reason for absence; or
  • if the employee expressly wishes his or her working capacity to be assessed on the basis of information concerning his or her state of health.

Information concerning the employee's state of health may only be processed by people who prepare, make or implement decisions concerning employment relationships on the basis of such information. The employer shall nominate such people or specify the tasks that involve the processing of health-related information.

The employer must store any information in its possession concerning the employee's state of health separately from any other personal data that it has collected.

(c) Drug screening?

The employer may process only information on drug screening which is contained in a specific drug test certificate supplied to the employer by the applicant. The employer must notify the applicant in advance that the nature of the job is such that the employer requires drug screening from applicants.

Drug screening is not allowed in all jobs. Screening is permitted only if performing the work while under the influence of or when addicted to drugs could endanger business or trade secrets or cause significant financial loss to the employer or its clients, and provided that this could not be prevented by other means. The employer may also request a drug test certificate if the applicant is to carry out tasks where special trust is required or where there is independent and uncontrolled access to drugs or a quantity of medicines that could be used for the purposes of intoxication. In addition, requiring a drug test certificate can be requested if the applicant is to carry out tasks that include teaching or caring for a minor.

(d) Credit checks?

Credit checks can be carried out, but only if the statutory criteria for such checks are fulfilled in each individual case. Typically, credit checks may apply to jobs where employees are directly financially responsible for the employer's property or which for some other reason require considerable trust from the employer. This covers most executive positions.

(e) Immigration status?

The employer is generally obliged to request information on foreign employees’ immigration status, or a reason why no employee residence permit is not required.

(f) Social media?

In general, an employee’s personal data should be collected from the employee him or herself, or from elsewhere with the employee’s written consent. Accordingly, the employer has no right to perform background checks based on the employee's social media activity.

(g) Other?

During recruitment employers may use information about job applicants that is in the public domain. However, this can be done only with the applicant’s prior consent. Further, the information requested and received must be directly necessary for the employment relationship.

Wages and working time

Pay

Is there a national minimum wage and, if so, what is it?

No, there is no statutory minimum wage. However, collective bargaining agreements typically contain detailed provisions on minimum wages.

If no collective bargaining agreement applies to an employment relationship, and the employer and the employee have not agreed on remuneration, the employee must be paid reasonable remuneration for the work performed.

Are there restrictions on working hours?

Yes. The general approach under the Working Hours Act (605/1996) is that normal working hours must not exceed eight hours a day or 40 hours a week. The act also regulates certain specific working hours arrangements which deviate slightly from this general rule.

The maximum amount of overtime work during a four-month period is 138 hours, and the aggregate hours of overtime work may not exceed 250 hours in a calendar year. An employer can agree additional overtime with employee representatives, employees or an employee group. The maximum amount of additional overtime is 80 hours per calendar year, but the maximum amount of 138 hours per four months cannot be exceeded.

Stricter regulations apply to young workers aged 15 to 18.

Collective bargaining agreements typically include detailed working time provisions which may also deviate from the Working Hours Act. 

Hours and overtime

What are the requirements for meal and rest breaks?

The Working Hours Act sets out the statutory rest periods. The rules are detailed and contain a number of exceptions, but the general principles are as follows:

  • The employee must be granted at least a one-hour break a day if his or her daily working time exceeds six hours. The employer and employee may agree on a shorter rest period of no less than 30 minutes. If the daily working time exceeds 10 hours, the employee is entitled to an additional rest period of up to 30 minutes following eight hours of work. Further, the employee must be given a daily rest period of 11 consecutive hours. In addition, working hours must be arranged to allow the employee at least 35 hours of uninterrupted rest per week, preferably including Sunday.
  • The right to daily rest, a rest break and a weekly rest period may be varied by a collective bargaining agreement. In addition, there are various exceptions for certain sectors and types of activity.
  • A person of 15 years or older must be allowed at least 12 consecutive hours of rest every day. Where the daily working hours of young workers exceed four hours and 30 minutes, the worker should be granted a rest period of at least 30 minutes in the course of work. Young workers should be granted a weekly break of at least 38 consecutive hours.

How should overtime be calculated?

The maximum amount of overtime work during a four-month period is 138 hours, and the aggregate hours of overtime work may not exceed 250 hours in a calendar year. An employer can agree additional overtime with employee representatives, employees or an employee group. The maximum amount of additional overtime is 80 hours per calendar year, but the maximum amount of 138 hours per four months cannot be exceeded.

As a general rule, the payment for daily overtime work in addition to normal pay is 50% for the first two hours and 100% for the following hours. For weekly overtime work, the surcharge is 50%. Overtime may be partly or completely converted into corresponding time off work if agreed between the parties.

What exemptions are there from overtime?

The Working Hours Act does not generally apply to the management or employees working at home.

Working time arrangements may affect how overtime work is determined and calculated (eg, in a flexible working hours system). In addition, collective bargaining agreements may also deviate from the statutory overtime provisions. 

Is there a minimum paid holiday entitlement?

Yes. The employee is entitled to two to two-and-a-half days’ paid holiday for each month worked, depending on the length of the employment relationship. In Finland, six holiday days constitute one full week of annual holiday. 

What are the rules applicable to final pay and deductions from wages?

In cases of termination of employment, the employer shall pay the final pay, including all receivables to the employee, on the last day of employment, unless otherwise agreed. The final pay must be available in the employee’s bank account on the agreed pay date.

In Finland, several deductions are made from wages. Employees’ obligation to pay income tax is established in the Income Tax Act (1535/1992). Indirect employment-related costs include social security contributions, employment pension contributions, accident insurance contributions, unemployment insurance contributions and group life insurance contributions, most of which are covered by the employer and the employee. The employer automatically deducts the relevant withholding and contributions from the salary payable to the employee.

The employer also has a limited right to offset certain amounts from the employee's salary.

Record keeping

What payroll and payment records must be maintained?

The employer will provide the employee with a payslip (in paper form or electronically) indicating at least the amount of all payments and their basis of determination, as well as the statutory deductions made.

The employer must maintain payroll accounting indicating the amount of all payments to its employees. The law requires the employer to keep the payroll accounting for 10 years. The notes and other documentation related to payroll accounting must be kept for six years.

Discrimination, harassment & family leave

What is the position in relation to:

Protected categories

(a) Age?

Discrimination on the basis of age is prohibited.

(b) Race

Discrimination on the basis of race, origin or nationality is prohibited.

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(c) Disability?

Finland

Discrimination on the basis of disability is prohibited.

(d) Gender?

Discrimination on the basis of gender is prohibited.

(e) Sexual orientation?

Discrimination on the basis of sexual orientation is prohibited.

(f) Religion?

Discrimination on the basis of religion or belief is prohibited.

(g) Medical?

Discrimination on the basis of state of health or disability is prohibited.

(h) Other?

Discrimination is prohibited on the basis of origin, nationality, language, belief, opinion, political activity, trade union activity, family relationships, gender identity and gender expression or other personal characteristics. Discrimination is prohibited regardless of whether it is based on a fact or assumption concerning the person him or herself or another.

Family and medical leave

What is the position in relation to family and medical leave?

A female employee is entitled to maternity leave of 105 working days, which corresponds to approximately four months. Employers are not obliged to pay salary during maternity leave. However, almost all collective bargaining agreements include detailed regulations regarding this.

In addition to maternity leave, employees are entitled to parental leave of 158 working days immediately following the end of the maternity leave. As a result, the aggregate length of maternity and parental leave corresponds to approximately nine months. Parental leave can be taken by the mother or father.

The father of a new-born child is entitled to take paternity leave of a total of 54 working days.

In addition, an employee is entitled to full childcare leave from the day parental leave ends until the child turns three.

Finnish employment law provides pregnant employees and employees on family leave with enhanced protection against dismissal.

Further, an employee has the right to be absent from work due to sickness. According to the statutory rules, the right to paid sick leave is limited to nine days following the day when the employee fell ill. However, almost all collective bargaining agreements entitle employees to longer paid sick leave, even up to several months. The length of the paid sick leave typically depends on the length of the employment relationship.

Harassment

What is the position in relation to harassment?

Employers are responsible for safeguarding employees against harassment and taking active measures against it. Failure to take appropriate action to stop harassment in a reported case is considered a violation of the prohibition on discrimination or the employer's occupational safety and health obligations.

Whistleblowing

What is the position in relation to whistleblowing?

Whistleblowing reporting schemes are not yet common in Finland, although their popularity is growing. Whistleblowers are entitled to sufficient protection and the employer should ensure that they will not be subject to retaliatory action. Whistleblowing schemes should ensure that the identity of the employee making the report is treated confidentially.

Privacy in the workplace

Privacy and monitoring

What are employees’ rights with regard to privacy and monitoring?

In order for the employer to process employees’ personal data, the general prerequisites for processing personal data set out in the Personal Data Act must be met. The employer is bound by a strict requirement regarding the collection and processing of personal data of its employees – that is, the employer may process only data directly necessary for the employment relationship. The necessity requirement cannot be deviated from even with the employee's consent.

As a general rule, personal data must be primarily collected directly from the employee. In order to collect information from elsewhere, the employee's consent must be obtained. The processing of sensitive data is generally prohibited.

Employers that regularly employ at least 20 employees in Finland are subject to specific cooperation obligations. Several issues related to privacy in working life are discussed in the cooperation procedure in accordance with the Act on Cooperation within Undertakings (334/2007).

To what extent can employers regulate off-duty conduct?

The employer's right to direct work does not extend to the employees' free time. Therefore, the employer cannot issue binding directions regarding the employees' use of free time.

However, based on the general loyalty obligation, the employee may be required to behave in certain manner off duty. The more senior the employee's position in the organisation, the stricter the loyalty obligation. For example, the loyalty obligation could prevent managers from engaging in activities that are likely to harm the corporate image.

Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

The right to private communication is constitutional. As a general rule, all communication is confidential, unless otherwise provided by law. Accordingly, the monitoring of employees' social media use is not permitted. The same applies to, for example, the employee's browsing history. 

Trade secrets and restrictive covenants

Intellectual Property

Who owns IP rights created by employees during the course of their employment?

An employer may retain rights to a patentable invention created by an employee if the intellectual property is created in connection with the employee’s employment and is exploitable within the employer’s business. Should the invention be created in connection with a clearly specified work assignment, the employer obtains the right to the created intellectual property even if it is not directly usable within the employer’s existing operations. The employee is always entitled to reasonable remuneration for the invention. This right cannot be validly waived by the employee.

The Copyright Act (404/1961) contains provisions regarding the transfer of IP rights relating to computer software and databases created by an employee only. If a computer program or a work directly associated with it is created in the scope of duties in an employment relation, the copyright in the computer program and the work will pass to the employer.

With regard to other employment-related IP rights, the market practice is to agree in the employment contract that such rights are transferred to the employer.

Restrictive covenants

What types of restrictive covenants are recognised and enforceable?

The most common restrictive and enforceable covenants in Finnish employment relationships are non-compete, confidentiality, and non-solicitation obligations.

A non-compete agreement can be concluded only for a particularly weighty reason related to the employer's business and operations. In addition, the maximum length and the obligation to pay compensation for the non-compete undertaking are regulated.

The employee has a statutory obligation to keep the employer's trade and business secrets confidential during the term of employment. The employer and the employee may also agree that the confidentiality obligation remains in force after the termination of employment. 

No legal provisions govern the non-solicitation of customers and employees. Depending on the circumstances, such provisions may be deemed comparable to a non-compete undertaking. In such case, the statutory limitations regarding the use of non-compete undertakings apply.

Non-compete

Are there any special rules on non-competes for particular classes of employee?

A non-compete agreement can be concluded only for a particularly weighty reason related to the employer's business and operations. A non-compete agreement concluded without a particularly weighty reason is considered invalid.

The weight of the reason is assessed on an overall basis and is based on, for example, the nature of the employer's business. Therefore, a non-compete clause cannot be legally binding in all employment relationships.

A non-compete agreement may restrict the employee's right to engage in competing activities for a maximum of six months after expiry of the employment. However, if the employee receives fair compensation the restricted period may be extended to a maximum of one year.

An employee is released by law from non-compete obligations if the employment relationship is terminated on grounds deriving from the employer. In practice, this refers to redundancies.

Discipline and grievance procedures

Procedures

Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

No. Finnish employment legislation contains no specific discipline or grievance procedures. Some collective bargaining agreements may contain provisions relating to grievance procedures, but typically company specific practices apply (to the extent that the practice is not against mandatory provisions of law).

If the employee has neglected duties arising from the employment relationship or committed a breach, in general it is obliged to give written warning to the employee before terminating the employment.

Industrial relations

Unions and layoffs

Is your country (or a particular area) known to be heavily unionised?

Yes. Both Finnish employees and employers are highly unionised. More than 70% of Finnish employees are members of a trade union. 

What are the rules on trade union recognition?

The formation and function of trade unions are protected by constitutional law. Employees are protected by the freedom of association, entailing the right to form an association without a permit, to be a member of an association or not to be a member, and to participate in its activities.

What are the rules on collective bargaining?

The Collective Bargaining Agreements Act (436/1946) governs the process of concluding a collective bargaining agreement and their effects. Collective bargaining agreements can be concluded between labour market organisations or between an individual employer and a trade union.

Termination

Notice

Are employers required to give notice of termination?

An employer must provide notice of termination to employees before dismissal, regardless of the grounds for the termination. Notice should be given in writing and given to the employee personally.

If a party to the employment relationship commits a fundamental breach of the employment contract, the other party is entitled to terminate the employment with immediate effect (ie, without observing the notice period).

Redundancies

What are the rules that govern redundancy procedures?

Grounds for redundancies are that the work has been permanently and materially reduced or ceased due to financial and production-related reasons or restructuring of the employer company.

The Act on Cooperation within Undertakings (334/2007) sets out a strict consultation procedure which the employer must follow before making a decision on redundancies. The act applies to employers that regularly employ at least 20 employees in Finland.

Employers that regularly employ fewer than 20 employees have a simple consultation obligation set out in the Employment Contracts Act (55/2001). Accordingly, an employer that intends to make an employee redundant must discuss the reasons for the redundancy with the employee in question as early as possible.

The statutory periods of notice are set out by the Employment Contracts Act. These may be deviated from by an individual employment agreement or a collective bargaining agreement.

Are there particular rules for collective redundancies/mass layoffs?

Generally, the rules that apply to redundancies are determined by the size of the employer (see above).

The cooperation obligation under the Act on Cooperation within Undertakings is more extensive if the plan subject to consultation may lead to the redundancy of at least 10 employees. In that case, the minimum consultation period is extended from two to six weeks.

Protections

What protections do employees have on dismissal?

Finnish employees enjoy high protection against dismissal.

The employer must always have proper and weighty grounds set forth by law for terminating an employment contract. In addition, certain groups of employee enjoy particular protection against dismissals. Such employees include shop stewards, industrial safety delegates and other employee representatives, pregnant employees and employees on family leave.

If an employee is dismissed without legal grounds, he or she is entitled to compensation for unfair dismissal corresponding to three to 24 months’ salary (for employee representatives, the maximum amount is 30 months' salary). Failure to comply with the cooperation and consultation obligation may lead to the court ordering the employer to pay compensation of up to €34,519 per redundant employee. 

Courts/tribunals

Jurisdiction and procedure

Which tribunals or courts have jurisdiction to hear complaints?

Jurisdiction in employment-related matters primarily belongs to the ordinary courts – that is, the district court (first instance), the Court of Appeal (second instance) and the Supreme Court (the highest instance).

However, the Labour Court operates as a special court and has jurisdiction over disputes relating to application and interpretation of collective bargaining agreements. Its decisions are not subject to appeal.

What is the procedure and typical timescale?

An employment-related civil case becomes pending when a written application for a summons is filed by the plaintiff to the competent district court. After the summons is issued, the defendant must respond to the demands. The proceeding typically continues to an oral preparation in a preparatory hearing which is followed by the main hearing.

At first instance a case takes an average of eight to 12 months. However, the processing times may vary to a great extent depending on the matter concerned and the relevant court.

The decision-making process at the Labour Court takes approximately six months, but varies significantly depending on the case.

Appeals

What is the route for appeals?

A district court decision can be appealed to the Court of Appeal and thereafter to the Supreme Court, provided that leave to appeal is granted.

The Labour Court’s decisions are not subject to appeal.