Employment termination in Finland is governed by the Employment Contracts Act, which sets out the conditions under which an employer can dismiss an employee. Both employers and employees have rights and obligations during the termination process, and strict adherence to legal procedures is essential to avoid potential disputes and claims of wrongful dismissal. Understanding the specific requirements for notice periods, valid grounds for termination, and procedural steps is crucial for employers operating in Finland.
The legal framework aims to provide a degree of job security for employees while allowing employers the flexibility to manage their workforce under specific, legally defined circumstances. Navigating these regulations requires careful attention to detail and awareness of both individual employment contracts and applicable collective agreements, which may supplement or modify the statutory provisions.
Notice Period Requirements
The length of the notice period in Finland depends primarily on the duration of the employment relationship. These are minimum statutory notice periods that apply unless a longer period is agreed upon in the employment contract or a collective agreement.
| Duration of Employment | Minimum Notice Period (Employer Initiated) |
|---|---|
| Not more than 1 year | 14 days |
| More than 1 year, not more than 4 years | 1 month |
| More than 4 years, not more than 8 years | 2 months |
| More than 8 years, not more than 12 years | 4 months |
| More than 12 years | 6 months |
Employees also have statutory minimum notice periods when resigning, which are typically shorter than employer-initiated periods.
| Duration of Employment | Minimum Notice Period (Employee Initiated) |
|---|---|
| Not more than 5 years | 14 days |
| More than 5 years | 1 month |
These periods begin on the day following the date the notice is given.
Severance Pay
Finnish law does not mandate statutory severance pay upon termination, regardless of the grounds for dismissal or the length of service. Unlike some other countries, there is no legal requirement for employers to provide a specific payment calculated based on years of service when an employment contract is terminated according to the law.
However, severance-like payments can arise in specific situations:
- Collective Agreements: Some collective agreements may include provisions for additional payments or benefits upon termination, particularly in cases of redundancy.
- Settlement Agreements: In cases of disputed termination or as part of a mutual agreement to end the employment relationship, employers and employees may negotiate a settlement package that includes financial compensation. This is not legally required but is often used to avoid litigation.
- Re-employment Support: In certain redundancy situations, employers may be required to offer support for re-employment, which could include financial assistance for training or job search, but this is distinct from traditional severance pay.
Therefore, employers should primarily focus on adhering to notice period requirements and ensuring the grounds and procedure for termination are legally sound, rather than budgeting for statutory severance pay.
Grounds for Termination
Employment contracts in Finland can be terminated based on different grounds, broadly categorized as termination with cause (summary dismissal) and termination without cause (ordinary termination).
Termination with Cause (Summary Dismissal)
Summary dismissal allows an employer to terminate an employment contract with immediate effect, without a notice period. This is reserved for extremely serious breaches of contract or conduct by the employee. The grounds must be so severe that it would be unreasonable to expect the employer to continue the employment relationship even for the duration of the notice period. Examples include:
- Serious dishonesty or theft.
- Violent behavior or harassment in the workplace.
- Gross negligence causing significant harm.
- Repeated and deliberate refusal to follow lawful instructions.
The employer must act promptly once they become aware of the grounds for summary dismissal.
Termination Without Cause (Ordinary Termination)
Ordinary termination requires a valid and weighty reason. These grounds are typically related either to the employee's person or to the employer's financial or production-related circumstances.
- Grounds related to the employee's person: These reasons must be serious and substantial breaches of the employee's obligations under the employment contract or law, or significant changes in the employee's ability to perform their work. Examples include:
- Serious breaches of work duties (e.g., repeated lateness, poor performance) after warnings have been given.
- Significant changes in the employee's capacity to work due to illness or injury (under specific conditions).
- Serious misconduct not amounting to summary dismissal but still significantly impacting the employment relationship.
- It is crucial that the reason is not trivial and that the employer has typically attempted less drastic measures first (like warnings or retraining).
- Grounds related to collective, financial, or production reasons (Redundancy): An employer can terminate employment contracts if the work has decreased substantially and permanently for financial or production-related reasons, and the employee cannot be reasonably reassigned or retrained for other available work within the company. This requires demonstrating a genuine need to reduce the workforce.
Termination cannot be based on discriminatory grounds (e.g., age, gender, religion, union activity) or for reasons like pregnancy, parental leave, or illness (unless the work ability is permanently and substantially reduced).
Procedural Requirements for Lawful Termination
Adhering to the correct procedure is as critical as having valid grounds for termination. Failure to follow the process can render an otherwise justified termination unlawful.
| Step | Description | Applicable Grounds |
|---|---|---|
| Warning (for personal grounds) | For performance or conduct issues, a formal written warning is usually required before termination. It must specify the issue and state that continued behavior could lead to termination. | Employee's personal conduct/performance (ordinary termination) |
| Hearing/Opportunity to be Heard | The employer must give the employee an opportunity to be heard regarding the grounds for termination before the decision is made. The employee can be accompanied by a representative. | All grounds (personal, redundancy, summary dismissal) |
| Consultation (for redundancy) | If terminating due to financial/production reasons affecting multiple employees, employer may need to engage in co-determination negotiations (consultations) with employee representatives. | Redundancy (collective/financial/production reasons) |
| Written Notice of Termination | The termination notice must be given in writing. It should state the grounds for termination and the effective date (considering the notice period). | Ordinary termination, Summary dismissal (stating grounds) |
| Delivery of Notice | The notice must be delivered personally to the employee. If not possible, it can be sent by registered mail, deemed delivered on the 7th day after sending. | All termination types |
| Reason for Termination (upon request) | The employee has the right to request a written statement of the reasons for termination. The employer must provide this. | All termination types |
For summary dismissal, the employer must notify the employee of the termination and its grounds without undue delay after becoming aware of the reason.
Common procedural pitfalls include failing to give a warning when required, not providing the employee an opportunity to be heard, incorrectly calculating the notice period, or failing to conduct required co-determination negotiations in redundancy situations.
Employee Protections Against Wrongful Dismissal
Finnish law provides significant protection against unfair or unlawful dismissal. If an employee believes their termination was unlawful (e.g., no valid grounds, incorrect procedure, discriminatory reason), they can challenge it.
- Negotiation: The employee or their union representative can first attempt to negotiate with the employer.
- Legal Action: If negotiation fails, the employee can take legal action, typically through the district court.
- Remedies: If the court finds the termination was unlawful, the employer may be ordered to pay compensation to the employee. The amount of compensation is typically based on the employee's salary and can range from a few months' salary up to a maximum of 24 months' salary, depending on the severity of the breach and other circumstances. Reinstatement is also a theoretical possibility but is rarely ordered in practice.
Employees are protected from dismissal during certain periods, such as during sick leave (for a limited time), pregnancy, and parental leave, unless the termination grounds are unrelated to these circumstances and would have existed regardless. Union representatives also have enhanced protection against dismissal. Employers must be able to demonstrate that the termination was based on valid grounds and that the correct legal procedure was strictly followed.
