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Barr Ellison Solicitors – commercial property
11 June, 2012 - 15:06 By News Desk

Employment Law Guide - Finland

Helsinki, Finland

1 What terms govern the employment relationship? In particular:

1.1 Is a written employment contract or statement of employment terms required?

Employment contracts do not have to be in writing. However, if the contract is oral and lasts for longer than one month, the employer must give the employee, in writing and by the end of the first salary period, information on:

•            The parties' domicile or business location;

•            The date of starting work;

•            The duration of a fixed-term contract and the justification for specifying a fixed term;

•            Any trial (probationary) period;

•            The place of work;

•            The employee's main duties;

•            Any collective agreements applicable to the work;

•            How salary and other remuneration are calculated, and when salary is paid;

•            The regular working hours;

•            How annual holiday is calculated; and

•            The notice period required or how the notice period is calculated.

For work performed abroad for a period of at least one month, the employer must provide the information in good time before the employee travels to the destination and in addition also provide information on the:

•            Duration of the work;

•            Currency that the salary is paid in;

•            Monetary remuneration and fringe benefits that apply abroad; and

•            Terms for the employee's repatriation.

1.2 Are there any terms implied by law into the employment contract?The Employment Contracts Act imposes general duties on employers and employees and guarantees some minimum benefits. The Employment Contracts Act contains certain provisions that cannot be departed from to the employee’s disadvantage.

1.3 Are collective agreements with trade unions or employee representatives common (generally or in specific industries)?Collective agreements are common in Finland. About 80% of employees in Finland belong to a trade union. Employers are also usually members of employers' associations. Collective agreements apply to nearly all employees, regardless of where they live or work.

Collective agreements bind all employers that are members of the employers' association that is party to the agreement (normal applicability). Employers that are not members of an employers' association must still comply with national collective agreements that are considered representative of their business area, if such an agreement exists (general applicability).

2 Is there a minimum wage? If so, please give details, in particular whether it applies to all employees, regardless of their age and experience.There is no statutory minimum wage. However, collective agreements specify minimum salary rates for various sectors. These apply equally to Finnish and foreign employees. If no collective agreement applies, the employee must be paid a reasonable, customary remuneration for the work performed.

3 Are there restrictions on working hours? If so, please give details.Regular working hours must not exceed eight a day or 40 a week, unless the employees are deemed to fall outside the Working Hours Act due to their executive-level positions or other special statutory provisions. The regular weekly working hours can also be arranged in such a way that the average is 40 hours over a period of no more than 52 weeks. Collective agreements for many business sectors also specify shorter hours. Employees under 18 years of age have more restricted working time conditions.

As a main rule, overtime work must not exceed 250 hours per year, however the employer and the employees’ representatives can agree on a maximum of 80 hours additional overtime work. Employees must give their consent each time they work overtime, although a continuous consent can be given for short periods. The remuneration for overtime work is as follows:

• The first two hours above the regular daily working hours are paid at the standard hourly rate plus 50%. Any additional daily hours are paid at twice the standard hourly rate.

• Any hours that exceed the regular weekly working hours (for example, hours worked during the weekend) are paid at the standard rate plus 50%.

Work performed on a Sunday, as part of an employee's regular weekly working hours, is paid at twice the standard hourly rate. If the work performed on a Sunday is overtime, the employee receives the revised Sunday rate plus 50%.

Further, there are various specific provisions regarding e.g. daily and weekly rest periods and emergency work.

4 Is there a minimum holiday entitlement? If so, please give details. How many public holidays are there in a year and are they included in the minimum holiday entitlement?The Annual Holidays Act sets out a minimum holiday entitlement. The Act provides that an employee is entitled to 2.5 days' holiday for each full month worked, as defined in the Act. It is necessary to work at least 14 days or 35 hours to accrue holidays for the month in question (holiday continues to accrue during certain periods of leave, such as sick leave and family leave). Holiday entitlement is only two days for each full month worked if the employment relationship has lasted for less than one year by the end of the holiday accrual year. When holiday is calculated, any fraction of a day is rounded up to one full day. The full number of holidays is 30 days per year equalling five weeks of holiday since six holiday days are consumed for each full holiday week.

Holiday is divided into two seasons:

• The summer holiday season lasts from 2 May until 30 September. During this period, employees have the right to take up to 24 days of their holiday entitlement.

• The winter holiday season lasts from 1 October to 1 May.

There are 13 public holidays a year, which are not included in the employees' minimum holiday entitlement. Collective agreements often specify more generous holiday benefits than the Annual Holidays Act.

5 What rights do employees have to time off in the case of illness or injury? Is that time off paid? Can an employer recover from the state sick pay granted to its employees?Employees who are prevented from performing their work by illness or accident are entitled to the following salary during the first ten days of illness or recovery:

• Their full salary if the employment relationship has lasted for at least one month.

• Half their salary if the employment relationship has lasted for less than one month.

The ten days includes the first day of illness or recovery. Collective agreements usually provide for more generous sick pay entitlements.

Employees are not entitled to salary during illness or recovery if they have caused the illness or injury wilfully or through gross negligence.

After the first ten days, the Finnish Social Insurance Institution (Kela) pays the employee the national sickness allowance, under the Sickness Insurance Act 2004. This is calculated according to the employee's earned income. In 2011, the allowance is a minimum of €22.13 for each working day. The allowance is paid for a maximum of 300 days.

In general, the employer cannot recover the salary it pays during the first ten days of illness or recovery. However, in cases where a collective agreement obliges the employer to pay sick pay for more than the first ten days, the employer can recover national sickness allowance under the Sickness Insurance Act or the Employment Accidents Insurance Act from the Finnish Social Insurance Institution (Kela) for a corresponding period (but for no more than the amount paid to the employee).

6 What are the statutory rights of employees who are parents or carers (including those of disabled children and adult dependants)? How is employee’s pay affected during periods of leave?Maternity rights

A mother is entitled to 105 working days' maternity allowance + 158 days parental allowance. The right to maternity leave starts between 50 and 30 days before the expected date of childbirth.

The Social Insurance Institution pays income-related compensation to employees during maternity leave. Some collective agreements guarantee full salary for part of the maternity leave period. These benefits are only payable if the employee has a permanent home in Finland.

After taking family leave, employees are entitled to return to their former job.

Paternity rights

During the 105 days' maternity leave, the father can take up to 18 days' leave with paternity benefits. In certain circumstances, this can be increased by an additional 12 days (which forms part of the 158 days' parental allowance period). If the father takes at least the 12 last days of the parental allowance period, he gets an additional one to 24 days off.

Adoption rights

Adoptive parents are eligible for largely the same family benefits as biological parents. While adoptive parents are not eligible for the maternity allowance, they are entitled to an extended parental leave and parental allowance.

Parental rights

Either the mother or the father (in the case of couples) can take the 158 days parental allowance or it can be shared between the parents.

After parents have used family leave, they are entitled to childcare leave. This means they can take full-time leave to look after a child under the age of three, and are entitled to return to their previous job or a comparable position after childcare leave. However, both parents cannot be on full-time leave at the same time. Employers are not required to pay employees on childcare leave. A child-home care allowance, which consists of a care allowance and care supplement, is available to parents looking after a child who is under the age of three. The Social Insurance Institution pays this allowance.

Parents can also choose to take part-time childcare leave, which means they can reduce their working time until the end of the year in which their child starts school. The employer can reduce the employee's salary pro rata. However, the Social Insurance Institution can pay a partial care allowance to parents of a child under three years old, who work up to 30 hours a week while looking after their child.

Carers' rights

If the employee's child, or another child who is under the age of ten and permanently lives in the employee's household suddenly falls ill, the employee is entitled to temporary childcare leave for a maximum of four working days at a time, to arrange care for the child or care for the child personally. Two parents who are entitled to temporary childcare leave can take it during the same calendar month, but not concurrently.

7 Does a period of continuous employment create benefits for employees?A period of continuous employment entitles employees to minimum holiday leave and minimum notice periods as set out in the Employment Contracts Act or applicable collective agreements. Further, employees who have a continuous work history with the same employer are, under some circumstances upon termination of the employment relationship, entitled to receive support for their re-employment by the employer and employment authorities.

7.1 If individual employees are transferred to a new entity, are they deemed to retain their period of continuous employment?Employees retain their continuous period of employment when transferred to a new entity if the transfer is deemed to be a transfer of undertaking.

8 To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees?An employer cannot apply less favourable employment terms to temporary workers compared to permanent employees merely because of the duration of the employment agreement or working hours.

Generally, agency workers are entitled to the same rights and benefits as permanent employees. However, the employer's obligations to the employee are divided between the agency and the temporary employer.

There are no specific qualifying periods for temporary and agency workers.

9 What statutory data protection rights do employees have?

There are particular data protection provisions that apply only to employees, and general provisions that concern all personal data.

The Act on the Protection of Privacy in Working Life 2004 applies to any data processed in relation to employees. In addition to the general requirements for processing personal data, the Act also includes special provisions on:

• Processing information on drug use;

• Requirements concerning tests and examinations (for example, drug tests or aptitude tests);

• Camera surveillance in the workplace;

• Retrieving and opening e-mail messages belonging to employees; and

• Communications network surveillance in the workplace.

Employers can only process personal data that is necessary to administer the employment relationship. Personal data must either be collected from the employee in person or from elsewhere with the employee’s consent. The Personal Data Act 1999 governs the processing of data after it has been collected. It states that personal data must be processed:

• Lawfully and carefully;

• In compliance with good processing practice; and

• So that the employee’s constitutional right to privacy and other basic rights are not restricted without legal justification.

10 What protection do employees have from discrimination or harassment, and on what grounds?Discrimination

The following statutes regulate employee protection:

• The Non-Discrimination Act ‚Äì this prohibits discrimination on any of the following grounds:

• racial or ethnic origin;

• religion or belief;

• disability;

• age; or

• sexual orientation.

In practice, this means that discrimination is prohibited in relation to, among other things, recruitment, working and employment conditions, and promotion. For example:

• when recruiting employees, employers must not require vocational skills or education that are not justified in view of the work and that can be considered discriminatory;

• when making a recruitment decision, the employer must not rank the applicants differently, unless this ranking is clearly justified and related to the work. For example, an employer can require a parish worker to be a member of the church, and selecting such a person is not considered discriminatory under the Non-Discrimination Act;

• decisions relating to the allocation of tasks and career advancement during the employment relationship must not be discriminatory;

• the use of incentives is only allowed for a certain personnel group if the incentives system is not otherwise unequally determined;

• discrimination based on membership of, or involvement in, an organisation of employees or employers, or other trade union is prohibited.

A mere statement is not sufficient basis for a discrimination claim. However, employees who experience discrimination can claim compensation if they present evidence from which it may be presumed that discrimination has taken place. In such a case, the employer must demonstrate that it has not acted in a discriminatory way. This reversed burden of proof is intended to make cases easier to process and encourage more individuals to start court proceedings based on discrimination.

• The Equality Act; this legislates on gender discrimination. It also covers placing a person in a different position due to:

• pregnancy;

• childbirth;

• parenthood; or

• other reasons relating to family responsibilities.

Direct and indirect discrimination are prohibited in all aspects of working life, including:

• selecting a person for a particular job or training;

• working conditions;

• employment terms;

• terms of payment and other benefits; or

• dismissing or laying off employees.

A public or private-sector employer that regularly employs at least 30 people must include workplace-specific measures to promote equality between men and women in its annual personnel and training plan or its action plan for labour protection.

Both the Non-Discrimination Act and the Equality Act include provisions on victimisation. Therefore, if an employer worsens employees' working conditions or terms of employment after the employees have demanded that their rights under these Acts be respected, the employees can bring a discrimination claim. The rules on the reversed burden of proof apply also to equality trials.

In addition, a general principle in the Employment Contracts Act requires employers to treat their employees equally.

Harassment

Harassment is prohibited as a form of gender discrimination under the Equality Act. Harassment is defined as an employee acting in a certain way, knowing on ordinary consideration that the behaviour and/or actions are not welcome. An employer's actions can be deemed discriminatory if necessary measures are not taken to eliminate sexual harassment or abuse in the workplace.

In the case of discrimination or harassment, the employer may be ordered to compensate affected employees, up to a maximum of €15,000. The employer can also be held criminally liable and subject to a fine or prison sentence.

11 Do whistle-blowers have any protection? If so, please give details.There is no specific protection for whistleblowers. However, under the Employment Contracts Act the employer must have either:

• A proper and substantial reason to terminate an indefinitely valid employment contract.

• A very substantial reason to terminate any other employment contract.

To avoid creating such a reason, the employee must not make an unfounded decision that could be interpreted as a breach of obligation or loyalty.

12 What rights do employees have when their employment contract is terminated? Please provide information on:

12.1 Notice periods.The parties can agree on the notice period, provided that it does not exceed six months. If no agreement is made and no collective agreement sets out any relevant provisions, the employer must give between 14 days' and six months' notice, depending on the length of the employment relationship.

The employee's notice period must not be longer than that of the employer. In addition, if the employer's notice period is shorter than that of the employee, the latter is entitled to observe the shorter notice period agreed for the employer.

12.2 Severance payments.If the parties have not specifically agreed on a severance payment, an employer does not have to make one when an employment contract is terminated, except for dismissals without valid grounds.

12.3 Any procedural requirements for dismissal.Before a contract is terminated, an employee must be given the opportunity to respond to the stated grounds for dismissal at a hearing. The employee is entitled to be accompanied by another person (e.g. a shop steward or legal adviser) at this hearing.

If a dismissal is to be carried out as part of a redundancy, more detailed procedures must be followed in the hearing process.

There must be serious grounds to terminate an employment contract without notice (for example, where a breach of contract is so severe that it is unreasonable to expect the employer to continue the employment for the notice period). These grounds must be invoked within 14 days after the breach of the employment contract takes place and the employer has received information on it.

12.4 What protection do employees have against dismissal? Are there any specific categories of protected employees?An employer must pay compensation if it dismisses an employee without cause. The compensation must be equivalent to a minimum of three months’ and a maximum of 24 months’ salary. For shop stewards and other official employee representatives, the maximum compensation is 30 months’ salary. Factors influencing the size of the compensation are, among others:

• The expected period of unemployment and loss of earnings;

• The length of the employment;

• The employer’s compliance with procedure; and

• Whether the employee contributed to the grounds for dismissal.

Employee representatives such as shop stewards, and employees who are pregnant or on family leave, have increased protection against arbitrary dismissal. The nature of this increased protection depends on the relevant grounds for dismissal. For example, if employment is terminated for financial or production-related reasons, the protection is at its maximum level:

• Shop stewards can only be dismissed if the work for which they are hired is completely ended.

• Employees on family leave can only be dismissed where there has been a close down of business.

Where employment is terminated on individual grounds:

• Shop stewards can only be dismissed under a special procedure. The employer must obtain an approval for dismissal from the majority of the employees represented by the shop steward prior to the dismissal.

• Employees on family leave are protected by the burden of proof; the employer must prove that the dismissal was not based on the use of family leave or other illegal reasons.

13 What rules apply on redundancies?An employer can dismiss employees on collective grounds if the amount of work available has diminished substantially and permanently because of either:

• Financial or production-related reasons.

• A reorganisation of business operations.

Before the dismissals, employers must first attempt to find alternative employment within their organisation and, if necessary, provide retraining. In addition, if within nine months after terminating contracts, an employer needs extra employees for the same or similar work that the dismissed employees had been carrying out, it must first offer the work to any dismissed employees who are still seeking work through an employment office.

An employer with 20 or more employees must follow a co-operation procedure before terminating employment contracts on collective grounds. The procedure is as follows:

• The employer must submit a written proposal for negotiations with affected employees at least five days before the procedure takes place.

• Before starting the procedure, the employer must provide certain information to affected employees.

• Once the co-operation procedure begins, the negotiations must continue for at least 14 days (or at least six weeks if an employer employs 30 or more employees on a regular basis and is contemplating dismissing ten or more employees).

• The employer can make the final decision on redundancies only after the co-operation procedure is duly finalised.

If an employer dismisses employees without following the co-operation procedure, the dismissed employee is entitled to compensation of up to €31,570.

If employees are dismissed on legitimate collective grounds, they are not entitled to any extra compensation or redundancy pay.

14 Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them?Employees are entitled to management representation on the board of directors for issues concerning company business (Personnel Representation in the Administration of Undertakings Act 1990). This representation is agreed between the company and the employees. If a company has more than 150 employees and no agreement can be reached, the Act applies. Employee representatives essentially have the same rights and duties as managers appointed by the company, but can be excluded from participating in certain matters.

The Act on Co-operation within Undertakings applies to companies with more than 20 employees. An employer must, before making final decisions on certain changes that may affect employees, consult employees regarding the effects of, and possible alternatives to, a proposed action. It does not have to consult with employees on whether the action can go ahead. The most important issues requiring consultation include:

• Major changes in duties, work methods or other work arrangements, including transfers from one job to another.

• Major acquisitions of machinery and equipment, major rearrangements of the working premises or changes in the range of goods and services provided, which will affect employees.

• Changes to the undertaking or any part of it (including expansion, reduction, closure or transfer).

• Terminations of, or reductions in, contracts (for example, from full-time to part-time) and arrangements for training or reassignment as a result of a business transfer, division or merger.

• Terminations of, or reductions in, contracts for production-related or financial reasons, and the related arrangements for reorganising the undertaking.

Directive 94/45/EC on the establishment of a European works council has been implemented and incorporated into the Act on Co-operation within Undertakings, and required changes have been made to national legislation.

14.1 Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?Directive 2001/23/EC on safeguarding employees’ rights on transfers of undertakings, businesses or parts of businesses (Transfer of Undertakings Directive) has been incorporated by the Employment Contracts Act. This gives employees certain rights to be consulted on, for example, the harmonisation of their employment terms with the buyer’s existing employees.

In addition, the Act on Co-operation within Undertakings requires consultation in relation to business transfers.

15 What are the remedies that are available if an employer fails to comply with its consultation duties?If an employment contract is terminated without complying with the Act on Co-operation within Undertakings, the employer may be ordered to compensate affected employees, up to a maximum of €31,570 per employee. This is regardless of whether the failure to follow procedure has caused loss to the employee or not. The employer can also be held criminally liable and subject to a fine. An employee cannot claim reinstatement.

16 Can employees take action to prevent any proposals going ahead?Employees cannot take any action to prevent proposals going ahead.

17 Is there any statutory protection of employees on a business transfer? In particular:

17.1 Are they automatically transferred with the business?When an enterprise is transferred, the rights, obligations and employment benefits agreed between the employer and the employee that are valid at the time of the transfer to the new employer are transferred.

17.2 Are they protected against dismissal (before or after the disposal)?The disposal of a business is not a valid ground for dismissal, and the buyer of a business cannot terminate employment contracts merely because of a transfer.

17.3 Is it possible to harmonise their terms of employment with other (existing) employees of the buyer?To harmonise the general terms of employment between existing and transferred employees, employers must follow a mandatory consultation procedure. The new employer cannot unilaterally harmonise the terms of employment but must negotiate individual employment contracts with each of the transferred employees. If employees terminate their contract because the employment terms have substantially worsened due to the transfer, the employer is deemed responsible for terminating the employment relationship

18 Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded? If so, please give details.Bonus schemes are relatively common in Finland, but no official guidelines have been issued. According to a precedent of the Supreme Court of Finland (Supreme Court 2008:28), when introducing or applying bonus schemes, the employer cannot impose less favourable terms on part-time or fixed-term employees than on permanent employees merely because of the duration of the employment agreement or working hours. This does not apply if the employer has a proper and justified reason for its actions. This precedent confirms the principle laid down in the Employment Contracts Act.

19 Is it possible to restrict an employee’s activities during employment and after termination? If so, in what circumstances can this be done? Must an employer pay its former employees remuneration while they are subject to post-employment restrictive covenants?Employees’ competing activities are restricted under the Employment Contracts Act. During their employment, employees cannot work for another employer or engage in activity that would, taking into account the nature of the work and the individual employee’s position, cause material harm to their employer. Planning any such competitive activities is also prohibited. An employer that recruits a person, when knowing that the employee cannot work for it because of this rule, is jointly liable for any loss caused to the other employer.

An employer can create a non-compete agreement at the start of (or during) the employment relationship to limit the employees’ right, after the employment relationship has ended, to either:

• Enter into employment with an employer who engages in operations that compete with the previous employer; or

• Engage in such operations on their own account.

However, a non-compete agreement:

• Can only be made for a particularly significant reason relating to the employer’s operations.

• Does not bind the employee if the employment relationship is terminated due to a reason relating to the employer.

• Can only restrict employees’ rights for up to six months after the employment relationship is terminated. If the employee is deemed to receive reasonable compensation for the restrictions imposed by the non-compete agreement, a restriction period can apply for up to one year.

Instead of compensation for loss, the agreement can include a liquidated damages provision, which cannot exceed the amount corresponding to six months’ salary before the employment relationship ends.

Notwithstanding the above, the restrictions on the term of a non-compete agreement and the amount of the liquidated damages available do not apply to managing directors or employees who, in view of their position, are deemed to be involved mainly in managerial duties.

20 Are there any proposals for major reform of employment law or pensions law in your jurisdiction?There are currently no proposals for any major reforms of employment law in Finland.

21 Does an employer need to have a subsidiary company, branch or other legal entity to employ people? If so, is there a requirement for a general manager or other key personnel?The employer does not need to be a legal entity, the employer can also be a private person. There are no requirements for any key personnel.

22 Does salary need to be paid in the country in which the work is done?Under Finnish law there is no obligation to pay the salary in the country in which the work is done.

23 Do meetings and documents need to be in your local language even if both parties speak good English?Meetings and documents can be in English, however, there should be a possibility for translation, should it be necessary.

24 What legal limitations are there on the notice period the parties can agree (for example minimum notice periods)?The agreed notice period may not exceed six months. If a longer period has been agreed on, a six-month notice period shall be observed instead. If the agreed notice period to be observed by the employer is shorter than that of the employee, the employee is entitled to observe the notice period agreed for the employer. The parties can also agree that the employment may be terminated without a notice period. In some cases collective bargaining agreements restrict the possibility to agree on the notice period.

25 What benefits does the employer have to provide in addition to salary?The employer has to provide the employees with free occupational health care. The necessary services can be bought from municipal health centres or private clinics. The obligatory occupational health care covers only health risks arising from work.

26 Are there circumstances where it is possible to engage someone as a consultant rather than an employee? If so, what are those circumstances?In some cases independent consultants can be used instead of employees. The consultant should be fairly independent and not be under the employer’s direction and supervision. For example, consultants can be used as expert advisors.

26.1 Where applicable, what are the advantages and disadvantages of engaging as a consultant rather than an employee?Benefits in using consultants include flexibility and that the employer does not need to pay employer’s social security and insurance contributions for the remuneration.

Disadvantages include the risk that the consultant could be considered an employee in which case the social security contributions could become payable by the employer.

27 What other key issues should a company employing someone be aware of?None.

For further information please contact:

Roger James

DDI: +44 (0) 1223 225286

Email: roger.james [at] taylorvinters.com

www.taylorvinters.com

Articles in this publication are intended as an overview of the subject area and should not be relied on as legal or other professional advice. You should seek specific legal advice before taking action on any of the issues raised.

Taylor Vinters is a trading name of Taylor Vinters LLP. Taylor Vinters LLP is a limited liability partnership registered in England and Wales (registered number OC343503) which is authorised and regulated by the Solicitors Regulation Authority and is authorised and regulated by the Financial Services Authority for investment business. A list of members is available from our registered office.

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