All questions

Discontinuing employment

i Dismissal

In Finland, the termination of an employment relationship requires a proper and weighty reason. Employment may be terminated with notice for reasons attributable to the employee such as serious breach or neglect of obligations arising from the employment contract or the law and having an essential impact on the employment relationship. Employment may also be terminated when essential changes to working conditions are necessary that render the employee unnecessary or redundant. The employer's and the employee's overall circumstances must be taken into account when assessing the proper and weighty nature of the reason.

Dismissal with grounds attributable to the employee requires a prior written warning, unless the reason for termination is such a serious breach of the employee's obligations that it would be unreasonable to require the employer to continue the employment relationship.

The Employment Contracts Act further states that at least the following cannot be regarded as proper and weighty reasons for dismissal:

  1. illness, disability or an accident affecting the employee, unless working capacity is substantially reduced thereby for such a long term as to render it unreasonable to require that the employer continue the contractual relationship;
  2. participation of the employee in industrial action arranged by an employee union or in accordance with the Collective Agreements Act;
  3. the employee's political, religious or other opinions or participation in social activity or associations; and
  4. resort to means of legal protection available to employees.

Prior to terminating the employment on individual grounds, the employee must be given an opportunity to be heard on the grounds for termination. The employee has the right to have a counsel present at the hearing.

Employment may be terminated by the employer with immediate effect only because of an extremely serious breach of the employee's obligations. Otherwise, when terminating an employment contract in force until further notice, the employer must observe a notice period. Unless the employer and the employee have otherwise agreed, or the applicable collective bargaining agreement otherwise provides, the general notice periods of the Employment Contracts Act are applicable. The general notice periods to be observed by the employer depend on the length of service and vary gradually from 14 days (if the employment relationship has continued for up to one year) to six months (if the employment relationship has continued for more than 12 years). The notice period length can be agreed to be anything up to six months, but the notice period of the employee may not be longer than that of the employer.

The employer is not required to offer any severance pay in connection with termination, provided that lawful reasons for termination exist. However, the employer must pay the employee his or her salary for the notice period and compensation for accrued holidays as well as any unpaid commission or bonus.

The parties may always enter into a settlement agreement regarding the termination of the employment. There is no specific law governing settlement agreements. The parties may agree on the content of the agreement as long as the content complies with general rules and principles.

If the termination is deemed unlawful by a court, the employer will be ordered to pay compensation to the employee. The amount of the compensation could, in theory, be up to 24 months' total salary of the employee, depending on an overall assessment of the circumstances.

Finnish employment law does not recognise the concept of void or invalid dismissal. Hence, even if a termination of employment is considered unlawful and the employer could then be ordered to pay compensation to the dismissed employee, the termination will remain in force.

ii Redundancies

Under the Employment Contracts Act, the employment may be terminated by the employer owing to substantial and permanent reduction in the work to be offered either for financial or production-related reasons, or reasons arising from reorganisation of the employer's operations.

The length of the notice period in a redundancy is determined by the same principles as in any termination. Unless the employer and the employee have otherwise agreed, or the applicable collective bargaining agreement otherwise provides, the general notice periods (from 14 days to six months) are applicable.

However, an employee may not be made redundant if the employee can be placed in, or trained for, other duties. This obligation to offer work covers all the employer's operations, departments and offices, and is extended to subsidiaries and other entities if the employer exercises effective control over personnel matters in such entities.

In addition, grounds for termination are deemed not to exist if a new employee has been hired either before or after the termination for similar duties without any real change in the employer's operating conditions or if no actual reduction in work has occurred because of the reorganisation. If the employer needs new employees for the same or similar work within four months of the termination, the employer has an obligation to offer re-employment to employees who have been made redundant and are registered at an unemployment office. However, if the employment relationship has lasted for 12 years, the rehire period is six months.

Additionally, an employer employing at least 30 employees is obliged to offer employees made redundant re-employment training and has an obligation to arrange occupational healthcare for a period of six months after the employee has been released from duties. These obligations apply to employees whose employment contract has lasted for at least five years at the time of the termination of the employee's employment contract.

If the employer employs permanently more than 20 employees, it is required to enter into cooperation negotiations under the Act on Cooperation within Undertakings with its employees or their representatives when planning measures that may lead to redundancies. The purpose of the negotiations is to discuss the grounds for the planned measures, to explain how the measures affect the employees, to find possible alternatives to terminations and to inform the employees of their rights to certain unemployment benefits and to support in job seeking provided by the public employment offices.

The negotiation procedure takes approximately three to seven weeks depending on the number of employees concerned by the planned redundancies and the size of the employer. The negotiation procedure is rather formal and should be documented carefully in order to avoid later disputes. It is important that no final decisions about redundancies or any such measures that may lead to redundancies are made prior to the fulfilment of the negotiation obligation.

If the employer has failed to comply with the obligations under the Act on Cooperation within Undertakings, each employee who has been made redundant, or laid off, or whose employment has been reduced to part-time, may be entitled to an indemnity amounting to a maximum of €34,519.