Changes to employment legislation or a social contract?

09 February 2016

Toni Haapasalo

Unless a social contract concerning working life reforms is promptly made between the parties involved in collective bargaining, there will be exceptional changes in employment legislation in order to improve Finland's cost competitiveness and reduce unit labor costs by 5%.

One of the proposed changes is that employees would have a right to a holiday bonus provided by law. The holiday bonus would be 35% of employee's holiday pay, less than the current rate in most collective agreements. In addition, the maximum length of paid annual leave would be six weeks. Also, employees would earn annual holiday only for six months during maternity, paternity or parental leave. In addition, it would not be possible to postpone the timing of annual holiday because of being unable to work for the first six days if the employee has at least a five-week annual leave. Epiphany and Ascension Day would be changed from paid public holidays to unpaid public holidays.

Some parts of the Employment Contracts Act would also be changed. For example, the first day of sickness would be unpaid, and, after that, sick pay would be reduced from 100% to 80% of the employee's salary without any scope for negotiation under collective bargaining agreements. In addition, an employer would have to offer work to an employee whose contract the employer has terminated due to financial or production-related grounds or in connection with a restructuring procedure if it needs workforce within four months instead of the current nine months which apply after the end of the employee’s employment relationship. This is the case unless the employee's notice period is 6 months, in which case the obligation would remain in force for a period of 6 months.

In addition, three fixed-term employment contracts could be made within a year without justified reason, if the employee has not been in an employment relationship with the employer during the previous two years. Also the maximum length of trial period would be extended from four months to six months. The Employer would have the right to lengthen the trial period, if the employee is prevented from performing his or her work by an illness or if the employee is on family leave.

In financial and production-related redundancies in companies with over 20 employees, 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. The employers would also have to provide occupational health care services for a six-month period after the termination of employment.

The intention at the moment 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 parties' freedom to contract in the future. However, the mandatory nature of the proposed provisions is planned to be in force for three years only through fixed-term legislation. The legislation would not affect collective bargaining agreements in force at the time that the legislation comes into force, nor would the employment contracts in force be affected.

The aim is that legislative amendments are made by June 2016 at the latest and that the legislation would enter into force at the beginning of the next collective bargaining agreement period which is 2016-2017. However, this will not be the case if a social contract concerning working life reforms is made between the collective bargaining parties within the coming weeks.