Types of employment contracts in Finland, Denmark and Sweden

Finland

An employment relationship is based on an employment contract, whereby the employee agrees to perform work personally for the employer, under the employer's direction and supervision in return for remuneration. An employment contract may appear in different forms (written, oral, electronical, and tacitly arisen) and types. Briefly below are the most common employment contract types and a few thoughts of the related topical issues.

Based on their duration, employment contracts may be divided into indefinitely valid contracts, fixed-term contracts and so-called "hybrid" contracts. The most common type, indefinitely valid employment contract, is valid for an unlimited period of time. A fixed-term employment contract may be concluded on the employer's initiative only, if a justified reason exists (e.g. nature of the work, peak periods etc.). As a main rule and contrary to indefinitely valid employment contract, unless otherwise agreed (please see below the "hybrid" contract), a fixed-term employment contract terminates (and may not be terminated on either party's initiative) when the agreed contract period comes to an end.

When indefinitely valid- and fixed-term contracts are mixed together, a not so widely known "hybrid" contract is born. In practice, such contract is formed when either a fixed-term employment contract contains a provision that allows the parties to terminate the contract during the agreed contract period, or an indefinitely valid employment contract contains a provision according to which the contract ends when a specifically agreed occasion occurs (e.g. when employee on child-care leave returns back to work) at the latest.

The above-described contract types may, among other differences, include various working hours' arrangements: an employment contract may be concluded for full-time, part-time or with variable working hours. In variable working hours arrangements, the employee's working hours may vary between a certain minimum and maximum or the work is performed on demand, also  known as "zero-hours" contracts.

Arrangements on variable working hours have been under debate during the recent years as no specific legislation has existed concerning such arrangements. Having said this, mandatory provisions governing variable working hours arrangements entered into force 1 June 2018. In practice, the new piece of legislation means that neither variable working hours arrangement may be agreed on the employer's initiative if a fixed need for work exists, nor may the agreed minimum working hours be less than the employer's actual need for workforce is.

When concluding employment contracts, employers are advised to assess their need for workforce and the needs of their business – needless to say that choosing the right employment contract type benefits both parties .As the legislation on variable working hours has entered into force, current practices concerning such arrangements in companies should be revised in order to ensure that the fairly new legal requirements are fulfilled.

Denmark

In Denmark, several types of employment and contracts exist. The most typical is an indefinite contract. If nothing else is agreed, a contract is considered indefinite. An employer and an employee can always agree on concluding a fixed-term contract. However, in regards to a renewal of a fixed-term contract, they can only be renewed more than once if a justified reason exists.

All types of contracts can be terminated by both parties, but both the employer and the employee needs to apply the agreed notice period, which can be different depending on the type of employment as well as the seniority of the employee.  

As in Finland the different types of contracts can, among other things, include various working hours. As a main rule, a 37 hours working week and more is considered full-time employment while everything less is considered a part-time employment. In relation to the part-time employment, it is important to be aware of the Danish Part-Time Act which provides protection for part-time employees.

Under Danish law, the employer is obliged to compose and provide a written contract at the latest 1 month after the commencement date of the employment provided that the employee will be employed for more than 1 month and will work more than 8 hours per week. As regards to the content of the contract, the Danish Employment Contract Act provides a number of mandatory requirements.

Sweden

According to the Swedish Employment Protection Act (Sw. Lag om anställningsskydd), there are only two types of employment contracts: indefinite term (Sw. tillsvidareanställning) and fixed term (Sw. tidsbegränsad anställning).

The main rule is that an employment is indefinite. This means that as long as the parties do not agree on a fixed term employment, the employment applies until further notice.

The parties may agree that the initial 6 months of an indefinite term employment are probationary. During such probationary period, both parties may terminate the employment at any time without giving a reason and without notice. Where neither party terminates the employment either during or at the end of the probationary period, the employment will continue indefinitely.

There are four types of admissible fixed term employment contracts according to the Swedish Employment Protection Act:

• general fixed term employment (Sw. allmän visstidsanställning);
• temporary substitute employment (Sw. vikariat);
• seasonal employment (Sw. säsongsanställning); and
• employment of an employee who has reached the age of 67.

Unlike indefinite term employment contracts, fixed term employment contracts apply for a specified period of time, and expire automatically upon expiration of the contract term.

The most common type of fixed-term employment is the general fixed-term employment. 

In order to protect the employee from extensive use of temporary employment contracts, general fixed term employments and temporary substitute contracts (with the same employer) which exceed 2 years during a 5 year period will automatically transform into indefinite term contracts.

Additionally, a fixed term employment automatically transforms into an indefinite term employment once the employee has been employed under subsequent general fixed term, temporary substitute and/or seasonal employment contracts for a total of more than 2 years. The employment contracts are considered subsequent if no more than 6 months have passed between the commencements of the separate employment contracts.

In order to avoid the situation where a fixed term contract transforms into an indefinite term contract, employers should consider the length of the fixed term employment, and also whether the employee has been previously employed.

Read the next article in this series: The employers right to manage work in Sweden, Finland and Denmark.