KPMG CONFEDERATION OF FINNISH INDUSTRIES EK. Employment Conditions in Finland

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1 KPMG CONFEDERATION OF FINNISH INDUSTRIES EK Employment Conditions in Finland

2 Foreword This booklet entails the essential parts of the Finnish social and employment legislation as well as the mechanisms of the labour market. The purpose of this booklet is to help foreign companies to quickly grasp the principles of employment conditions, employment legislation and norms, social security, corresponding contributions and taxation of the employees in Finland. The booklet has been prepared by KPMG Finland, in cooperation with Confederation of Finnish Industries (EK). The information provided in on the following pages is neither exhaustive nor is it intended to be so. Decisions concerning operations and employment in Finland should be made only on the basis of specific and detailed advice. KPMG Finland March 2010

3 1 EMPLOYMENT AND LABOUR LEGISLATION ACTS AND REGULATIONS COLLECTIVE AGREEMENTS LABOUR COSTS THE LEVEL OF LABOUR COSTS INDIRECT LABOUR COSTS EMPLOYMENT RELATIONSHIP BASIS OF EMPLOYMENT PROBATIONARY PERIOD TRAINEESHIP FIXED-TERM EMPLOYMENT EQUAL OPPORTUNITIES EMPLOYMENT OF YOUNG PEOPLE TRANSFER OF UNDERTAKINGS CONTRACTOR S OBLIGATIONS AND LIABILITY WHEN WORK IS CONTRACTED OUT PRIVACY AT WORKPLACE INTELLECTUAL PROPERTY RIGHTS WORKING HOURS FULL-TIME EMPLOYMENT PART-TIME EMPLOYMENT REST PERIODS OVERTIME SCHEDULING OF WORKING HOURS NIGHT WORK WORK ON SUNDAYS AND FINNISH RELIGIOUS HOLIDAYS ANNUAL HOLIDAY AND OTHER LEAVES ANNUAL HOLIDAY SICK LEAVE PUBLIC HOLIDAYS PARENTAL LEAVES HEALTH AND SAFETY AT WORK EMPLOYER S OBLIGATIONS SAFETY ORGANISATION OCCUPATIONAL HEALTH SERVICES SECTORAL SAFETY BOARDS HEALTH AND SAFETY EXECUTIVE

4 4 EMPLOYEE PARTICIPATION CO-OPERATION WITHIN UNDERTAKINGS CO-OPERATION WITHIN A GROUP OF COMPANIES EMPLOYEE REPRESENTATION IN THE MANAGEMENT OF COMPANIES PERSONNEL FUNDS DISMISSAL JOB SECURITY TERMINATION BY NOTICE TERMINATION WITHOUT NOTICE ILLEGAL DISMISSAL COLLECTIVE DISMISSAL PROTECTED EMPLOYEES IN CONNECTION TO A TRANSFER OF UNDERTAKINGS SOCIAL INSURANCE CONTRIBUTIONS AND BENEFITS SOCIAL INSURANCE COVERAGE SOCIAL INSURANCE CONTRIBUTIONS PAYMENT OF SOCIAL INSURANCE CONTRIBUTIONS SOCIAL INSURANCE BENEFITS UNEMPLOYMENT BENEFITS SICKNESS BENEFITS STATUTORY ACCIDENT INSURANCE PENSION SCHEMES PARENTAL BENEFITS TAXATION TAXABLE INCOME DEDUCTIONS TAX RATES COLLECTION OF TAX FOREIGN EMPLOYEES IN FINLAND IMMIGRATION VISITORS NORDIC CITIZENS EU/EEA/SWISS CITIZENS THIRD COUNTRY CITIZENS Residence permit for an employed person

5 Residence permit FAMILY MEMBERS FUTURE CHANGES APPLICABLE TERMS OF EMPLOYMENT POSTED WORKERS ACT LIABILITY TO TAX SOCIAL INSURANCE ENTITLEMENTS EMPLOYER S OBLIGATIONS FOREIGN EMPLOYER S OBLIGATION TO NAME A REPRESENTATIVE RELEVANT CONTACTS AND ADDRESSES KPMG FINLAND EK CONFEDERATION OF FINNISH INDUSTRIES

6 1 Employment and labour legislation 1.1 Acts and regulations Employment law in the widest sense of the word means a considerable complex of statutes, both national and supranational, that are to be observed by the parties of individual employment relationship and their collective representatives in employer associations and employee unions. The following three parliamentary acts form the backbone of Finnish employment law regime but in addition to those there are statutes covering co-operation matters, occupational health and safety rules and a substantial amount of legislation dealing with social insurance rights. Furthermore, in various fields of trade there are trade-specific provisions dealing with health and safety requirements, such as Government Decree on the Safe Use and Inspection of Work Equipment (403/2008) Employment Contracts Act The Employment Contracts Act (55/2001) is the general statute in Finnish employment law regime and is applicable in both private and public sectors. The application of ECA requires that the constituent elements of an employment relationship are found simultaneously. The elements are i) a contract, ii) working on behalf of an employer, iii) remuneration and iv) working under the direction and supervision of the employer. Working Hours Act The provisions regarding working time have been laid down in the Working Hours Act (605/1996).The act is applicable in both private and public sectors but there is a limited number of special acts regarding working hours of certain trades, such as the Seamen s Working Hours Act and the Act on Working Hours on Vessels in Domestic Traffic. Annual Holidays Act Excluding certain cases, the Annual Holidays Act (162/2005) applies to both private and public sector employment. It lays down provisions on annual holiday rights: the length of the annual holiday, holiday pay, holiday compensation and the time of the annual holiday. 1.2 Collective agreements A collective agreement is an agreement concluded between a number of employees (normally a trade union) and one or more employers (normally an employers' association) governing pay and working conditions. A collective agreement normally covers a limited period of time (typically a two-three year period). Most agreements contain provisions governing: working hours, pay schemes and pay regulation 5

7 overtime, irregular working hours and shift work rules on public holiday payments, holiday pay and additional holiday pay pay period, method of payment special rules on sickness, industrial injury, pregnancy and child birth other rights and duties, e.g. with respect to working clothes, time clocks, etc. notice of termination of employment (often the same provisions as laid down by the law) regulations on employees representatives and industrial safety delegates term of collective agreements and rules governing term of noticing and expiration rules on procedures for labour disputes. The General Agreement of 1997 between the central organisations of the private labour market, the Confederation of Finnish Industry and Employers (EK) and the Central Organisation of Finnish Trade Unions (SAK) lays out the foundations of the labour market in several important sectors. The General Agreement contains rules on the following: basic rights (freedom of association) the employer's right to hire and dismiss employees and issue instructions on the execution of work advance notice of industrial disputes co-operation in enterprises employees representatives health and safety at work employer's obligation to give certain information training use of external work force The member associations of EK, SAK and other central organisations may deviate from the General Agreement in their collective agreements with the exception of the provisions concerning the employment protection of the employees representatives. In 1940, during Winter War, the central organisations of the private labour market concluded an agreement (so called Engagement of January ), which confirms that pay and employment conditions are matters to be dealt with at collective bargaining rounds. At the same time the trade unions were accepted as negotiating partners. As a rule collective agreements are concluded between an employers' association and the corresponding trade union. Some collective agreements cover several employers' associations and trade unions and, in some cases, they cover only one enterprise. Collective agreements usually cover a period of two or three years. If the parties fail to agree on the renewal of the agreement the negotiations should normally continue with assistance from the office of the State Official Conciliator and the old collective agreement is applied until the new agreement has come into force. The State Official Conciliator s duty is to determine if there is a possibility to present a settlement proposal satisfying both parties. If he does not succeed in mediating, the trade unions may call a strike, and the employers can respond by issuing lockout notices. 6

8 2 Labour costs 2.1 The level of labour costs The level of labour costs in Finnish industry is above the EU and Euro average. The charts below show the level of employer s labour costs for worked hour in various countries. The cost competitiveness of Finnish industry has improved considerably because industrial productivity has risen faster than in other EU and OECD countries. Labour costs in the EU countries in 2008 Industrial workers Denmark Sweden Belgium Luxembourg Netherlands Finland Germany Austria United Kingdom France Ireland Italy Spain Greece Cyprus Slovenia Portugal Malta Czech Republic Hungary Poland Slovakia Estonia Lithuania Latvia 8,84 8,11 7,38 7,18 6,66 6,24 5,41 4,89 13,81 12,27 12,27 11,54 16,43 22,24 21,62 24,96 26,10 28,26 27,66 27,14 29,02 34,74 33,18 32,86 32, Euro/hour Source: Confederation of Swedish Enterprise, Confederation of Finnish Industries EK Saukkonen 7

9 Labour costs in various countries in 2008 Industrial workers Denmark Norway Sweden Belgium Netherlands Finland Germany Austria United Kingdom France Italy Australia Canada USA Spain Japan Portugal Rep. of Korea Singapore Taiwan Brazil Hong Kong Mexico Philippines Sri Lanka 0,79 0,44 2,08 4,25 4,13 4,70 5,96 11,54 11,44 14,10 16,43 17,55 20,64 21,62 21,54 24,96 26,10 27,66 27,14 28,26 29,02 34,74 34,67 33,18 32, Euro/hour Source: Confederation of Sw edish Enterprise, U.S. Department of Labor, Confederation of Finnish Industries Saukkonen Cost competitiveness of Finnish industry in compared to the OECD average Index Relative unit labour costs Exchange rate Productivity Labour costs * 2009* 2010* Source: The Research Institute of the Finnish Economy (ETLA). The rise of the curve indicates that the relative position of Finland is getting better compared to the other OECD countries. The relative unit labour costs are indexed in the average of Saukkonen 2.2 Indirect labour costs The following table indicates estimated indirect labour costs in industry in year 2010 calculated as a percentage of wages for time worked. The table is based on estimated average costs for all employees. The estimated total figure for workers is about 79 % and for salaried employees about 64 %. 8

10 Estimated Indirect Labour Costs in Finnish Industry 2010 Obligatory costs as a percentage of wages for time worked Indirect wages: 1. Pay during annual vacation Extra annual vacation bonus Pay during holidays Pay during sickness Pay during absence due to other causes TOTAL 37.4 Social insurance contributions: 6. Social insurance Industrial Injury Insurance Unemployment Insurance Employment Pension Insurance Group Life Insurance (approximately) TOTAL TOTAL OBLIGATORY COSTS 69.4 TOTAL VOLUNTARY COSTS 3.5 TOTAL INDIRECT LABOUR COSTS Employment relationship 3.1 Basis of employment The basic provisions regarding conditions of employment are included in the Employment Contracts Act, which applies to both blue-collar workers and salaried employees. Only managing directors in limited companies and co-operatives fall outside the scope of these provisions. Collective agreements complement the Employment Contracts Act. Many crucial provisions are solely laid down in the Act. The grounds for dismissal, for instance, are defined in the Employment Contracts Act. The management of a company and salaried employees in leading positions are not normally covered by collective agreements. The Employment Contracts Act, however, covers these groups, excluding managing directors as mentioned above. Employment contracts may be written, electric or oral or they may be of an implied/tacit character. In the case of an oral agreement the employer is, without a request, obliged to give a written specification of the main conditions of the employment to the employee. The employment contract must not include terms and conditions that are in contravention of the mandatory law or provisions laid down in the applicable collective agreements. 9

11 3.2 Probationary period At the commencement of employment, the parties may agree on a probationary period of a maximum of four months counted from the beginning of the employment. If the employer offers the new employee a training period exceeding four months, the probationary period may be prolonged to a maximum of six months. However, the probationary period can in no case exceed one half of the employment contract s duration. During the probationary period, either party is free to terminate the employment contract without notice. However, the employment contract cannot be terminated due to discriminatory reasons or reasons against to the probationary period s purpose. 3.3 Traineeship According to the law, an employer and a person over the age of 15 years can enter into an agreement for practical training of the person in question. The trainee, by such an agreement, obliges himself to work under the guidance, instruction and control of the employer. The majority of the training period consists of vocational experience at the relevant business under guidance from the employer in return for a wage specified in the collective agreement. The theoretical part of the education, for which the employer pays no wage, takes place at governmental employment training centres. Pursuant to the collective agreement the trainee s minimum wage might be lower than that of a skilled worker. 3.4 Fixed-term employment As a main rule the employment contract applies for an indefinite period. Fixed-term employment contracts may be entered into, if the employer has legal grounds such as hiring a substitute or in case of seasonal work. A fixed-term contract may also be entered into, if in connection with the operation of the enterprise or the character of the work it is well-founded to do so. A fixed-term contract may always be entered into on the employee s own initiative. If someone has entered into a fixed-term employment contract under circumstances not approved by the law, the contract shall be considered to apply for an indefinite period. The Employment Contracts Act does not require written employment contract in case of fixed-term employment but it is highly recommended. If the employment contract has not been made in written form employer has to give the main conditions of the employment to the employee under penalty of fine. A fixed-term contract can not be terminated on individual grounds with notice but it can be terminated without notice on same grounds as indefinitely valid contract. 3.5 Equal opportunities The Employment Contracts Act imposes on the employer the responsibility to treat all employees equally irrespective of sex, religion, age, political affiliation or the like. The principle of equal opportunities also applies when an employee is recruited. According to the Act on Equality between Women and Men the employer acts in a discriminatory way, if a person who is better qualified than a person of the opposite sex is ignored when deciding who to recruit or who to offer training. The act of the employer is considered discriminatory, unless opposite can be shown with a reference to the character of work. Similar rules on discrimination apply during the employment. 10

12 According to the Equality Act an employer that regularly has at least 30 employees should have an annually updated equality plan. The content of the equality plan is now specified in the Equality Act. It is for instance required that the equality plan includes a specific wage survey that covers the whole personnel. In addition, the Non-Discrimination Act is to foster and safeguard equality. The Act is applied to both existing employees and recruitment procedure. 3.6 Employment of young people A person under the age of 18 years is defined as a young employee and the young employee s work conditions are defined in the Young Worker s Act. The employer is under an obligation to ensure that the work does not harm the young person's physical, mental or moral development. The character of the work must be in accordance with reasonable expectations. Young persons at the age of 14 may, under certain circumstances, take a job during their holidays. Provisions on working conditions and rest periods for young persons are stricter than those for adults. Young persons are not allowed to carry out certain categories of work and in some cases a young person needs a special permission. 3.7 Transfer of undertakings Upon the transfer of undertakings the transferee automatically takes over all the transferor s rights and obligations according to the Employment Contracts Act. The new owner may give notice to terminate the employment contracts, if there is a valid reason to do so. Furthermore, the provisions of the Act on Co-operation within Undertakings (334/2007) have to be taken into consideration. All transferor s employees in the scope of the transfer are transferred to the service of the transferee as an so called old employees with same benefits and salaries as they had before transfer. The transferee employer does not have a right to terminate the transferor s employees contracts due to the transfer. However, both the transferee and the transferor may resort to normal dismissal grounds. In case of transfer of undertakings transferee and transferor should note the information and dialogue regulations as defined in the Act on Co-operation within Undertakings if applicable. These co-operation obligations are applied also to mergers and demergers. 3.8 Contractor s obligations and liability when work is contracted out The Act on the Contractor s Obligations and Liability when Work is Contracted Out (1233/2006, Contractor s Liability Act) entered into force on 1 January The objective of this act is to combat the negative effects of so called grey economy and unhealthy competition. The Act obliges the contractor to acquire certain information about their contracting party before signing the contract to ensure that the contracting party is reliable and that they intend to act in compliance with Finnish legislation. The contractor referred to in the Contractor s Liability Act is a party that uses temporary agency workers or workers employed under a subcontract. A temporary agency worker refers to an employee who has signed an employment contract with an employer who has assigned the employee with his or her consent for the use of another employer. Small subcontracts and contracts on the use of temporary agency workers are excluded from the scope of application of the Act by setting limit values. The Act is not applied if the total duration of the work for which a temporary agency worker or workers are hired does not exceed 10 working days or in the case of a subcontract the value of compensation, excluding VAT is less than EUR 7,

13 3.9 Privacy at workplace The Act on the Protection of Privacy in Working Life (756/2004) lays down provisions on matters such as the processing of personal data, retrieving work-related messages, the processing of information on drug use and camera surveillance in the workplace. In Finland employers are allowed to gather and process personal information on their employees for their own needs but only when such information is directly necessary for the employee s employment relationship. The protection of privacy also includes the right of a jobseeker or employee to know and decide on the content of their personal data and how it is handled and processed. The jobseeker and employee have the right to assessed on the basis of accurate personal information. The employer has the right to process employee s health information only if the information has been collected from the employee him/herself or with the employee s written consent and the information needs to be processed in order to pay health related benefits or to establish whether there is a justifiable reason for absence Intellectual property rights Intellectual property rights are usually divided into two main sectors which are industrial property rights and copyright. Industrial property rights include for example patents, utility models, trademarks and trade names. Copyright generally belongs to the creator of the work and it is therefore important to agree with employees in their employment contracts about the assignment of copyright of all works created in the employment relationship. There are specific provisions in Copyright Act (404/1961) regarding computer programs, databases and circuit designs created in an employment relationship. The inventor normally has full rights to his or her invention but The Act on the Right in Employee Inventions (656/1967) automatically entitles the employer to at least part of the right, depending on the circumstances under which the invention was made by the employee. Full rights can be claimed by the employer when an invention is a result of a particular work assignment or if the outcome is significantly influenced by the experience gained while working for the employer. The inventor is entitled to a reasonable compensation for the work done in the benefit of the employer and in practice many companies have pre-determined compensation rules for employee inventions Working hours A majority of the employees are covered by the Working Hours Act. Usually the employees with director or similar independent position are not covered by the Working Hours Act. The Working Hours Act is a general law, which applies to all sectors. Separate provisions on working hours apply to seamen. Legislation covering young employees also contains provisions on working hours. The collective agreements contain trade specific provisions on working hours. As a rule these provisions are additional to the legislation on working hours. Generally, working hours only cover the time it takes to carry out the task in question. Time spent while travelling to or from work, if the employee is not working during such travel, is not considered working time, unless separately agreed in the collective agreement or in the individual employment contract. Training is not usually working time, unless the employer has obliged the employee to participate in training considered essential to perform his or her professional duties. 12

14 Full-time employment The normal working hours according to the law are eight hours a day and 40 hours a week at maximum. A normal working week consists of five days (normally from Monday to Friday) of eight hours each. The working week can be organised as an average. This means that the total working hours make an average of 40 hours in a period not exceeding 52 weeks. Most collective agreements, though, contain provisions on flexible working-time arrangements. Special working hours arrangements are allowed for certain trades within the transport and service sector such as hotels, provision shops, transport of persons and goods, the police, customs service, postal services and telecommunication, radio stations and hospitals. For employees working in these kinds of branches normal working hours are maximum 80 hours during a period of two weeks or 120 hours during a period of three weeks. The regular daily and weekly working hours are not subject to restrictions. Collective agreements on reducing working hours by 12.5 days a year have reduced the current annual working hours for employees working 40 hours a week (so called Pekkanen-leave). Special agreements on how to distribute these days have been concluded in collective agreements. Several collective agreements also include a working week shorter than 40 hours. For example salaried employees in the industrial sector generally work 7.5 hours a day and 37.5 hours a week Part-time employment Finnish legislation does not have special provisions for part-time employment. It is governed by the same rules as full-time employment. However, special provisions on annual holidays apply to part-time employment Rest periods Employees, whose working hours exceed 6 hours a day, are entitled to at least one break of one hour each working day. This break may be cut down to 30 minutes by agreement. The employee may leave the work place during the break. In case of shift work exceeding 6 hours, the employee is entitled to a short meal break. If the employee is allowed to leave the work place during the break, it is not included in the working hours. Employees are entitled to a total rest period of at least 11 hours within each 24-hour period, calculated from the commencement of normal working hours. However, deviations of this provision can in several cases be made. Employees are entitled to a continuous weekly rest period of at least 35 hours Overtime Overtime is work performed outside the normal, maximum working hours as defined in the legislation and collective agreements. Overtime always requires the employee's consent on a case-by-case basis. If the actual normal working hours are less than those stipulated in the legislation, overtime is defined as work exceeding the maximum working hours mentioned in the law (i.e. 8 hours a day, 40 hours a week). Additional work is working hours that are not covered by the definition of working hours set in collective agreements or the statutory working hours. Normally this kind of additional work does not entitle the employee to higher pay rate. Work that exceeds eight hours a day is called daily overtime and work exceeding forty hours a week is called weekly overtime. Employees are not allowed to work overtime for more than 138 hours within a period of four months or 250 hours within a calendar year. A special local agreement to exceed the limits mentioned above by 80 hours in calendar year can be concluded. 13

15 Overtime pay, which is paid in addition to the normal pay amounts, is either 50 % or 100 % of the hourly rate 50 % of the hourly rate for the first two hours after the 8 ordinary working hours and thereafter 100 %. Weekly overtime pay amounts to 50 % of the hourly rate. In some collective agreements 100 % overtime pay after 8 weekly overtime hours has been agreed upon. It is possible to agree between employer and employee that overtime can be given as an overtime leave followed by same rules as compensating overtime. In connection with periodical working hours, overtime is defined as work exceeding 80 hours within a period of 2 weeks or 120 hours within a period of three weeks. There is no difference between weekly overtime and daily overtime Scheduling of working hours There is no legislation regulating the scheduling of working hours except the rules applying to night work and obligatory rest periods. The employer, however, is obliged to provide a timetable showing the commencement and termination of working hours as well as lunch and rest breaks at least one week before the working period starts Night work Night work is defined as work carried out between p.m. and 6.00 a.m. Night work is only permitted under conditions defined in the law. Jobs that typically necessitate night work are jobs requiring periodical working hours, shift work, life-saving services and certain other services and maintenance. The legislation does not provide for night work pay increases. However, increases are included in most collective agreements Work on Sundays and Finnish religious holidays Work on Sundays or Finnish religious holidays requires the employee s consent. However, it does not apply in emergency situations or when an employee normally is required to work on Sundays. The pay increase for work on Sundays and religious holidays is l00 % Annual holiday and other leaves Annual holiday The Annual Holidays Act (162/2005) came into force in The current Act features improved holiday rights of part-time and fixed-term employees and introduces more flexibility to the timing of the holidays than before. According to the Annual Holidays Act an employee becomes eligible for paid annual vacation based on the length of his or her employment. The employee is entitled to 2 or 2.5 days' holiday each full holiday credit month. Annual holiday year defined as the period between 1 April and 30 March. A full holiday credit month is a calendar month during which an employee has worked for at least 14 days, or at least 35 hours. The Annual Holidays Act contains a comprehensive and detailed description of absence which is comparable with workdays when determining the full holiday credit months. Such are for example absence due to sickness or maternity leave. According to the Annual Holidays Act, an employee who works for less than 14 days or 35 hours during all calendar months is entitled to two weekdays of leave for each calendar month if he or she so desires. For the first year of employment the employee is entitled to 2 days holiday per month. After one year s seniority the number of holiday days per month is increased to 2.5. The number of vacation days accrued during one year is 24 or 30 respectively. Sundays and public holidays are not considered vacation days, 14

16 which means that one holiday week consists of maximum 6 days. 24 and 30 days of holiday thus entitle the employee to either 4 or 5 weeks holiday annually. The employer shall take into consideration the wishes of the employee and then determines the timing of the annual holiday. The employee is entitled to a total of 24 days of summer holiday during the holiday season (between May 2 and September 30). If the granting of the holiday during the holiday season results in substantial difficulties for the employer s operations in seasonal work, the summer holiday may be granted outside the holiday season during the same calendar year. The winter holiday must be granted by the start of the following holiday season. Only employees with more than one year's seniority are entitled to winter holiday. The employer and the employee may agree that the employee will take the portion of the holiday that exceeds 12 weekdays in one or more periods. It can also be agreed that the portion of the holiday that exceeds 12 weekdays is taken within one year of the end of the holiday season, and that the portion of the holiday that exceeds 18 days is taken during the following holiday season or thereafter as carried over holiday. On the initiative of the employee, the portion of the annual holiday exceeding 24 weekdays can be converted into shortened working hours (for example as half-days). The employee has a right to postpone the holiday in case he or she is incapacitated because of childbirth, illness or accident when the holiday was to begin or if he or she is incapacitated for more than 7 days during the holiday. In the latter situation postponing of the holiday days is only applicable for the days which exceed the 7 days. An employee with holiday entitlement will receive holiday pay for the period of his or her holiday. The employee is entitled to receive the holiday pay when the holiday starts. According to collective agreements, the employees are paid a holiday bonus ( lomaraha in Finnish), which normally amounts to 50 % of the statutory holiday pay. The employer is required to pay the employee holiday compensation for possible unused holiday days when an employment relationship comes to an end Sick leave In Finland, the most common reason for employees absence from work is illness. In case of illness or accident, the employee is entitled to the absence but the employer must be informed of such disability without undue delay. The employer is liable to pay wages during sick leave. Please see section 6.4.2, below for applicable provisions and rates. At the request of the employer, the employee is obliged to present a doctor s certificate containing a diagnosis. Collective agreements commonly contain further provisions regarding absence due to illness, including a stipulation omitting the sick pay if the employee has caused the absence deliberately or by grave negligence Public holidays According to the Finnish law, the First of May, Independence Day (December 6), Christmas Eve, Midsummer Eve and Easter Saturday are public holidays. If any of these holidays fall on a weekday, the employees are entitled to salary. Collective agreements contain provisions on further holidays with full salary entitlement. Such holidays include New Year's Day (January 1), Twelfth day, Good Friday, Easter Monday and Ascension Day. 15

17 Parental leaves Employee is entitled to maternity and paternity leave and also parental leave. The total period of the leaves is 263 weekdays (Saturdays included). The employee herself can choose to commence maternity leave from weekdays prior to the birth of the child. Maternity leave amounts to 105 weekdays, during which the employee receives a daily maternity benefit from the Social Insurance Institution. The compensation rate is approximately 90 % for the 56 first weekdays and 70 % for the rest of the period. Most collective agreements contain provisions, which oblige the employer to grant the employee full pay in the beginning of the maternity leave. For this period the daily maternity allowance is accrued to the employer. Parental leave follows immediately after the maternity leave. Parental leave covers 158 weekdays and can be obtained either by the mother or the father. Part-time parental leave is also possible. The legislation contains rules on terms of notice and on the staggering of parental leave. During the parental leave the employee receives a benefit, which corresponds to the daily maternity benefit. The father receives a benefit of the same amount as during parental leave. The father is allowed to take an up to 18 weekday long leave from work to participate in child care. The paternity leave may be extended with the daddy month by 1-12 days if the father takes the last 12 weekdays of the parental leave (total 24 days). In the autumn of 2010 the daddy month period is to be extended to a maximum of 36 days. Upon returning from maternity or parental leave the employee is entitled to get back his or her former job or a similar job. Child Care Leave After parental leave and until the child reaches the age of three years, a parent is entitled to be absent from work to take care of the child. During child care leave the employee receives a benefit consisting of a basic rate and an income-tested supplement. The basic rate in 2010 for the first child under three years is EUR 314,28 per month, EUR per month for other children under three years, and EUR per month for other children under school age. The full income-tested supplement is EUR per month. Also most of the communities pays child care benefits and the amounts vary between the communities. Partial Child Care Leave The employee is entitled to reduce his or her working hours to 30 hours or less when taking care of a child under three years old or until the end of the child s second year at school. The legislation stipulates that reduction of working hours should be agreed upon between the employer and the employee. If an agreement cannot be obtained, working hours will be reduced to 6 hours a day and 30 hours a week. The employer can refuse a reduction of working hours only on the basis of well-founded reasons as, for instance, shift work. The employee on partial child care leave is entitled to a monthly allowance of EUR 90 (2010). The benefit is taxable income. Child Allowance Child allowance is paid for each child under the age of 17 residing in Finland. The value of the child allowance is scaled in accordance with the number of children in the family. In 2010 EUR 100 a month is paid for the first child and EUR a year for the second child, EUR 141 a month for the third child, EUR a month for the fourth child, EUR 182 a month for the fifth child and further children. Child allowance is not subject to tax. 16

18 Child's Sickness The employee is entitled to temporary absence from work in order to nurse his or her sick child under the age of ten years. Temporary absence covers 4 workdays maximum. According to most collective agreements the employee receives salary during these days, normally for three days Health and safety at work The working environment is governed by the Health and Safety at Work Act (738/2002). Section 2 in the Act refers to the employer's general obligations. The employer shall, when organising the work, take into consideration the employee's personal qualifications and the work s nature and conditions so that the employee is protected against accidents, injuries and diseases in connection with his or her work. Furthermore the Health and Safety at Work Act contains additional special provisions as to working conditions and detailed provisions on the quality of the working environment. The same Act applies to the employer who uses the leased workforce in its activities Employer s obligations The employer is responsible for the observance of the Health and Safety at Work Act and the executive orders applying to this area. Generally, the obligations can be divided into three categories: 1) The technical obligation The workplace must observe the technical requirements on a sound working environment. 2) The duty of employee information The employer has a duty to inform the employees about the risks for accidents and diseases in connection with their work. The employer also has a duty to direct the employees in finding safe working methods. 3) The duty of supervision The workplace's technical installations must be under constant control and the employer has a duty to supervise that the work is carried out according to the safety rules. The employer is subject to punishment if non-observance in the provisions of the Health and Safety at Work Act occurs or if the executive orders either intentionally or unintentionally are not observed Safety organisation According to the Act on Supervision and Cooperation in Safety at Work Matters (44/2006) the employer and the employees are obliged to co-operate on matters relating to health and safety at work. The co-operation is also governed by collective agreements. According to the Act the employer appoints a safety manager/executive, who is responsible for the co-operation. Enterprises with 10 or more employees are obliged to elect a safety representative who represents the employees in matters of health and safety at work. The salaried employees may elect their own safety representative. The scope of the co-operation is decided locally. If nothing else is agreed, enterprises with 20 or more employees are obliged to set up a safety committee Occupational health services According to the Act on Occupational Health Service (1383/2001) the employer is obliged to organise certain statutory occupational health services. The Act includes all employers who are obligated to observe the Act on Health and Safety at Work. 17

19 The employer may set up the Occupational Health Services alone or together with other employers; by buying the services from a private institution; or through a public health centre. Under the Act on Sickness Insurance the public authorities have to reimburse the employer 50 % (60 % in some cases) of the necessary and reasonable costs accepted by the National Pension Institute Sectoral safety boards Co-operation on matters relating to health and safety at work also takes place at a sectoral level through the sectoral safety boards. Their main task is to follow the sector s development in the safety work and to find solutions to problems, which might occur as a consequence of the technological development. The sectoral safety boards issue advisory leaflets on health and safety at work for use in the relevant sectors Health and safety executive The task of the Health and Safety Executive is to ensure that the rules on health and safety at work are observed. Supervising authorities are the Ministry of Social Affairs and the local labour protection authorities. The most visible part are the inspections at the work place. 4 Employee participation The employee representation in Finland is covered by the co-operation procedures which affects to companies and group of companies as well as the employee participation in transnational companies. 4.1 Co-operation within undertakings The Act on Co-operation within Undertakings (334/2007) applies to companies with 20 or more employees on regular basis. The Act provides some exceptions for enterprises with employees regarding cooperation with different plans and to obligation to negotiate with employees in case of collective dismissal. According to the Act the employer has to negotiate with the employee representatives or employees before making decisions affecting the employment relationship. The employer also has to give information regarding the basis and the consequences of the decisions and possible alternatives regarding the planned decisions. Issues subject to negotiation are listed in the Act on Co-operation. The objective of the Act is to contribute to the company s internal development and to increase the employee participation in areas such as personnel, business transfers, closing down or moving an company or parts of it and redundancies due to finance or production related grounds. Also, according to the law, issues subject to negotiation are: principles and practices applied in recruitment, plan regarding personnel and training objectives, principles of the use of temporary workers, internal communication, handling plans, principles and practices based on other legislation and all other changes in employer s activities affecting to the personnel and arrangement of work. The co-operation parties are the employer and the personnel normally represented by employee representative(s) of different personnel groups. Co-operation implies that the employer is obliged to negotiate with individual employees or employee representatives regarding the consequences of planned managerial decisions. In certain cases, negotiation 18

20 should include possibilities to relocation and retraining. The co-operation system seldom implies a duty to reach a mutual agreement, although it is the aim defined in the law. As a rule, the employer makes the final decision. Unless otherwise has been agreed between the parties, the negotiation period of six weeks concerns termination of the employment on finance or production related grounds, redundancies, moving to part-time working and lay-offs for more than 90 days affecting minimum of 10 employees. The negotiation period is 14 days if such measures concern 9 or less employees or lay-offs for maximum of 90 days. However, the negotiation obligation of 14 days is applicable to all cases where the employer employs employees. The negotiation proposal must be given five days in advance in case of possible terminations, moving to part-time work or lay-offs. The maximum compensation is EUR 30,000 per employee if the employer neglects the procedural rules or negotiation obligation regarding the grounds, consequences and alternatives regarding redundancies and other measures in relation to the financial and production grounds. In addition, some collective agreements define some additional provisions regarding for example negotiation procedure and dismissals, moving to part-time working and lay-offs. The Act on Co-operation also includes rules regarding the obligation of informing the employees on the financial situation of the enterprise twice a year, to give salary information, information of employment relationships and the principles for use of external employees. 4.2 Co-operation within a group of companies The Act on Co-operation within Finnish and Community-wide Groups of Undertakings (335/2007) includes the rules on information and hearing of the employee representatives within the Finnish groups of companies, which applies to groups of companies employing at least 500 employees. The provisions of the community-wide co-operation including informing and hearing are applied when a Finnish based company is employing a minimum of 1,000 employees in EEA countries of which a minimum of 150 employees in two EEA countries each. The employer and its employees may agree on the character of such co-operation. If the parties do not agree, the legislation stipulates what information the employees are entitled to receive. 4.3 Employee representation in the management of companies According to the Act on Personnel Representation in the Administration of Undertakings (725/1990), employees are entitled to be represented in decision-making bodies of the companies employing at least 150 employees. If the parties agree, they are allowed to decide the number of employee representatives. If they do not reach an agreement, the legislation contains detailed provisions on employee representation. In cases where no agreement has been reached, the company may decide on whether its employees should be represented in the management group, the board or the supervisory board. 4.4 Personnel funds The employees have the possibility to establish a personnel fund with the purpose of managing the profit bonus items and other assets referred to it. The personnel fund for the profit distribution is optional and requires the agreement between the employer and employees. The Act on Personnel Funds (814/1989) includes rules regarding the administration of the fund and the distribution of its assets. The fund may decide to invest its money in the parent company or outside. The statutes of the fund establish whether fund members have equal rights and whether the profit shares should be fixed as a proportion of wages. 19

21 The Act applies to enterprises with 30 or more employees and to enterprises with employees with restrictions. 5 Dismissal 5.1 Job security Rules on job security protect the employee against unfair dismissal. The rules on job security are laid down in the Employment Contracts Act and in the collective agreements. 5.2 Termination by notice The employee and the employer may agree of the maximum six months notice period in the employment agreement. The notice period for the employee may not be longer than for the employer. If the notice period is not agreed in the employment contract, the Employment Contracts Act and the collective agreements shall define the applicable notice periods. The employee can give notice of termination without stating the contributing reasons. According to the Employment Contracts Act the terms of notice are 14 days if the employment length with the current employer is no more than 5 years and one month if the employment length exceeds 5 years. The employer may dismiss an employee only for proper and weighty reasons. The relevant legislation contains a list of reasons, which are not considered proper and weighty. The list is not exhaustive and each case must be evaluated individually. According to the law employees who have neglected their duties arising from the employment contract or committed a breach thereof have to be warned and given a possibility to amend their conduct before giving the notice of termination. The employer has to pay normal salary during the notice period and the employee has to work normally unless otherwise agreed. The employer s statutory notice period depends on the length of the employment: Term of notice Length of employment 14 days up to 1 year 1 month more than 1 and up to 4 years 2 months more than 4 and up to 8 years 4 months more than 8 and up to 12 years 6 months more than 12 years 5.3 Termination without notice Irrespective of the agreed work period or term of notice, an employment contract may be terminated without a notice period if extremely weighty grounds exist. Termination without the notice, in other words, requires a weightier reason than termination by means of a notice. 20

22 The party wishing to terminate the employment agreement without the notice period must do so within 14 days after receiving the information on the grounds for termination. 5.4 Illegal dismissal If an employee is dismissed without just cause, the dismissal is considered illegal and the employer might be ordered to pay compensation. According to the law, employees may be awarded compensation equal to 3-24 months' pay (maximum of 30 months pay to employees representative). The employer cannot be forced to re-engage the employee. If the employer fails to give a sufficient term of dismissal notice, the employee is entitled receive an amount of pay equivalent to the pay due for the non-observed part of the notice period. If the employer or the employee terminates the employment agreement without the notice period and lacking a just cause, the employer or the employee is liable to pay compensation. On the assumption that there was a just cause for termination of the employment contract, but not for a termination without the notice, the employee is entitled to compensation corresponding to his pay for the period of notice. Within a period of two years from the termination of the employment contract, the employee may institute legal proceedings against the employer. Under the Finnish legislation, the employment terminates at the point of expiration of the term of notice even if the employee has already instituted proceedings against his or her employer. 5.5 Collective dismissal The employer is entitled to dismiss an employee if the work to be offered has diminished substantially and permanently for financial or production related reasons or for reasons arising from reorganisation of the employer s operations. Employer s right to dismiss has been restricted if employer will hire in the near future or has hired in the near past a new employee for same or similar work or work has not in fact diminished after reorganization of the employer s operations. Employer has to, before dismissal, offer reasonable conversion training, relocation or transfer if this kind of work is available in the same enterprise or in certain cases in the group of companies. The statutory provisions for collective dismissals contain no limitation as to the number of persons to be included in such a dismissal. This implies that the dismissal of only one person based on the financial and production-related grounds is to be considered a collective dismissal. Finnish legislation does not include any provisions on the order according to which dismissals should take place. Most collective agreements, however, stipulate that persons of crucial importance to the operation of the enterprise, and persons who have lost part of their working capacity in their employment for the same employer, are the last to be dismissed. In addition, seniority and the number of persons dependent on the employee in question are taken into consideration. Employer is not allowed to dismiss fixed-term contract employees unless closing down the entire business. As regards collective dismissals, the provisions as to terms of notice and time-limits for appeal are the same as those mentioned in 5.4, above. The compensation system is the same as mentioned above (5.4) with the exception that no minimum is set for the compensation, only the maximum of 24 (30) months pay. 21