Labor law

In general, the Employment Contracts Act (55/2001, as amended) enacts requirements applicable to employment. However, there are also numerous collective bargaining agreements regulating the terms of employment. It is worth to notice that in several key business sectors, many collective bargain agreements are generally applicable. Therefore, they must be applied by an employer even if the employer is not a member of any employers’ association.

Without going into all details of the employment legislation in Finland it is worth to notice that there are several relevant acts which must be followed. Such acts are among others: Co-operation within undertakings Act (334/2007, as amended), Working Hours Act (872/2019), Annual Holidays Act (162/2005, as amended), Occupational Safety and Health Act (738/2002, as amended), Equality between Women and Men Act (609/1986, as amended) etc.


Requirements regarding the form of the employment contracts in Finland

A written employment contract is not required, unless requested by either party of the employment relationship. However, an employer must give to the employees who are employed under an oral contract, either indefinitely or for a longer fixed period than one month, a written statement of the main terms of employment within the first pay term.

The main terms of the employment contract or requirements for written statement are stated in the Finnish Employment Contracts Act in detail.

It is relevant to notice that Collective Bargain Agreements play a central role in the Finnish labor market. The Collective Bargain Agreements governing the employment relationship can set out specific rules that substitute or supplement labor and employment law. Furthermore, they also supersede any conflicting terms of an employment contract when the terms are to the employee’s detriment (Collective Agreements Act (436/1946, as amended).


Work permits and/or residency permits in Finland

Citizens of the Nordic countries (Denmark, Iceland, Norway and Sweden) can work in Finland without an employee residence permit. However, if the work lasts longer than six months, the employees must register the relocation to Finland at the local register office. Registration is for free (2020).

In addition, citizens of other EU countries and of Liechtenstein and Switzerland can work in Finland without an employee residence permit. However, if the work lasts longer than three months, the employees must register their right of residence with the Finnish Immigration Service. The fee for the registration of EU citizens and the equivalent right to residence is currently (2020) EUR 54.

Furthermore, employees of other nationalities must, with certain exceptions, apply for an employee residence permit. The duration of the application procedure varies depending on the case, usually from one to four months. In cases of emergency, applicants can make a written request for urgent processing to the Finnish Immigration Service. The fee for an employee residence permit is currently (2020) EUR 560 (or EUR 410 if electronically applied).


Rules for termination of an employment relationship in Finland


Dismissal of an employment in Finland

An employer can dismiss an employee if the employee has seriously breached or neglected obligations arising from the employment relationship. However, the grounds for dismiss must be substantial and appropriate.

Furthermore, an employer can dismiss an employee in case the employee’s work capacity has substantially diminished over a long period of time, and the employee no longer is capable of performing his/her duties.

Sufficient grounds for termination of employment according to the legal praxis can constitute: i) carelessness, ii) failure to follow instructions, iii) gross negligence, iv) dishonesty or v) absence from work without a reason. However, each matter is needed to be reviewed separately and thoroughly prior the termination process is initiated.

It is to be noticed that some employees, such as employee representatives, enjoy special protection against dismissal.

However, before dismissing an employee, the employer generally must act in a following way: i) issue the employee a warning. By acting this way the employer makes it clear that the employee’s conduct, neglect or similar is endangering the employee’s continued employment, ii) give the employee a fair chance to improve his conduct or performance in a certain period of time, or iii) consider whether the situation can be resolved by transferring the employee to other duties within the company.

Furthermore, upon termination of an employment contract, the employment relationship will continue for the duration of the applicable notice period. However, when employee is dismissed, employees are entitled to their notice period salary, compensation for accrued holidays and other unpaid receivables. Severance is optional.


Termination of an employment with immediate effect in Finland

In case of an exceptionally severe breach of obligations of the employment, the employment relationship can also be terminated with immediate effect by both parties of the agreement if it is deemed unreasonable for the employment relationship to continue for the duration of the notice period. Furthermore, the termination notice with immediate effect must be made within 14 days of learning of such breach, otherwise the right to do so is forfeited.


Compensation for unjustified termination of employment in Finland

In case an employment agreement is terminated or rescind based on insufficient grounds, the employee can become entitled to compensation. Such compensation can correspond to 3–24 months’ salary, depending on the circumstances of the individual termination. Furthermore, there is no lower limit for the amount of compensation in case of unjustified termination on collective grounds or unjustified rescission.


For further information please contact your current contact person or named specialist on this page. We are pleased to provide further information on the above issues.