Finland's employment laws provide a framework for terminating employment contracts, balancing the employer's need for flexibility with the employee's right to fair treatment and protection against arbitrary dismissal. Understanding the legal requirements for notice periods, severance pay, permissible grounds for termination, and procedural steps is crucial for employers to ensure compliance and avoid costly disputes. Finnish law distinguishes between terminations initiated by the employer and those initiated by the employee, as well as terminations with and without cause, each carrying different obligations.
Navigating these regulations can be complex, especially for international companies expanding into Finland. This guide provides an overview of the key aspects of termination procedures and severance in Finland as of 2025, offering practical insights for employers to manage terminations effectively and in accordance with Finnish law.
Notice Period Requirements
The length of the notice period in Finland depends on who is terminating the employment contract (employer or employee) and the duration of the employment relationship. Generally, longer periods of service result in longer notice periods.
Employer's Notice:
| Length of Employment | Minimum Notice Period |
|---|---|
| Less than 1 year | 14 days |
| 1 to 4 years | 1 month |
| 4 to 8 years | 2 months |
| 8 to 12 years | 4 months |
| More than 12 years | 6 months |
Employee's Notice:
| Length of Employment | Minimum Notice Period |
|---|---|
| Less than 5 years | 14 days |
| More than 5 years | 1 month |
These are minimum requirements, and collective bargaining agreements (CBAs) may stipulate longer notice periods. It's essential to consult the applicable CBA, if any, to determine the correct notice period. The notice period begins on the day after the notice is served.
Severance Pay Calculations and Entitlements
Finnish law does not mandate statutory severance pay in all termination cases. However, severance pay may be required under specific circumstances, such as when termination is due to financial or production-related reasons (economic grounds). Collective bargaining agreements may also provide for severance pay.
When severance pay is applicable, the amount is typically determined based on the employee's salary and length of service. The calculation method can vary depending on the CBA or the specific agreement between the employer and employee.
It is important to note that severance pay is distinct from compensation for damages arising from an unlawful termination.
Grounds for Termination
Termination of an employment contract in Finland can occur with or without cause. The permissible grounds for termination differ significantly depending on whether the employer or employee initiates the termination.
Termination by Employer:
-
With Cause (Justified Reason): The employer must have a valid and weighty reason for termination. These reasons generally fall into two categories:
- Personal Reasons: Relate to the employee's conduct or performance. Examples include serious breach of contract, persistent negligence, or inability to perform work duties.
- Economic Reasons: Result from financial or production-related difficulties faced by the employer. This could include restructuring, downsizing, or closure of a business unit.
-
Without Cause: Finnish law generally does not allow employers to terminate employment contracts without a valid reason. Fixed-term contracts, however, expire automatically at the end of the agreed term.
Termination by Employee:
- An employee can terminate their employment contract without providing a specific reason, subject to the applicable notice period.
Procedural Requirements for Lawful Termination
To ensure a lawful termination, employers must follow specific procedural requirements:
- Consultation Obligations: In cases of termination due to economic reasons, the employer must engage in consultations with employee representatives (if any) before making a final decision. These consultations aim to explore alternatives to termination and mitigate its impact.
- Notice of Termination: The termination notice must be delivered to the employee in person or by mail. The notice must clearly state the reason for termination (if applicable), the effective date of termination, and information about the employee's rights and obligations.
- Opportunity to Be Heard: Before terminating an employee for personal reasons, the employer should provide the employee with an opportunity to be heard and respond to the allegations.
- Documentation: Employers should maintain thorough documentation of the reasons for termination, the consultation process (if applicable), and the delivery of the termination notice.
Employee Protections Against Wrongful Dismissal
Finnish law provides several protections for employees against wrongful dismissal:
- Unjustified Termination: An employee who believes they have been unfairly dismissed can challenge the termination in court. If the court finds the termination unlawful, the employer may be required to pay compensation for damages.
- Discrimination: Termination based on discriminatory grounds (e.g., age, gender, religion, ethnicity) is illegal.
- Protection During Pregnancy and Family Leave: Employees are protected from termination during pregnancy and family leave, except in very limited circumstances.
- Reinstatement: In some cases, a court may order the employer to reinstate the employee to their former position.
Employers should be aware of these protections and take steps to ensure that all terminations are conducted fairly and in accordance with the law. Seeking legal advice is recommended when dealing with complex termination cases.
