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Finland – The winds of change in employment legislation

Written by
Dittmar & Indrenius, a leading Finnish law firm focused on creating exceptional added value to demanding corporate clients.
This article discusses recent moves towards liberalisation of the Finnish labour market, how they have been received and explores the possible direction of future employment law developments.

Finnish labour market tradition has been under pressure for change for several years. The same goes for Finnish employment legislation. There is no need to reinvent the wheel: in fact today’s laws and labour market structures provide a good foundation for building the future. But changing times and new ways of working benefit from and also require new ways of thinking, new ways of working together and changes in legislation.

The need for more flexibility, predictability and simplicity has led to a lively debate on whether Finnish employment laws should be reshaped to better support the common objective of creating jobs and decreasing unemployment rates. The legislator has identified this need and there are attempts to make it easier and less risky for companies of all sizes to recruit employees. This may be most important for very small companies operating in the particularly lively current start-up scene, but it would also help larger companies. Not to mention that it would most definitely help attract investment in Finland.

What should be fixed?

It is difficult to identify and comply with all relevant aspects of the current law. Simplicity and more predictability are needed. The legal regulatory structure relating to terms and conditions of employment has been built, and remains in place; there is a notably large and complicated set of legal acts and their interpretations to navigate. In addition to legislation, the principal distinguishing feature of Finnish employment law is the prevalence of collectively agreed terms and conditions of employment, which promote the labour unions to major players in the field.

Many workplaces also desire more freedom to determine specific local ways of working. What is best for one is not necessarily best for another. Through laws and collective labour agreements, the employer and employee’s freedom to contract with one another has been limited in many ways. The central principle of protecting the employee as the weaker party has led to a tradition of limiting local freedom to contract, as the employee has been considered incapable of protecting his or her own interests against the employer. More and more employees would like to see a change in this. In many fields of business, employees are willing and perfectly capable of negotiating with their employer and agreeing upon the terms of employment that best fit them and the organisations in which they work. Or, as some raised voices say, if not a single employee alone, then a company’s personnel or the employees in one working place should be granted the possibility of agreeing on issues collectively.

What to expect?

First steps in the direction desired by many companies and the economy in general have been taken. Baby steps and too few of them, say many. The changes made thus far have perhaps not been substantial in the eyes of employment law specialists but there may be more to them than meets the eye. More important than the substance of these changes, is the signal they give: the preferred direction now is towards easier, leaner and more flexible laws instead of laws that seem merely to protect those who are already employed. For the first time in years, the purpose of new legislation is to encourage companies to employ more people.

The recent developments making termination of employment easier in small companies, prolonging trial periods, shortening rehiring obligation periods and trimming of some of the less critical (but nevertheless burdensome) employer obligations in an attempt to make way for leaner legal obligations can hardly be considered groundbreaking. They are a start, nevertheless. Hopefully they will encourage companies in recruiting employees. Companies also need protection against sub-optimal recruitments, not to mention the means to react effectively when an employee’s contribution or behaviour takes an unwanted turn south. This is also only fair to the hard working majority that makes up the workforce in many organisations.

Even these minor changes have caused major uproar from the Finnish labour unions and many employees. At the same time, more and more people are displaying critical attitudes towards the traditionally very powerful labour market organisations. The status quo has been, if not disrupted, at least shaken.

There is plenty at stake in the parliamentary elections that will take place in the spring of 2019. Should the ruling political parties change significantly, changes to the current trends can be expected once again. But one thing is certain: employment legislation remains a hot topic!

Petteri Uoti
Partner - Finland
Dittmar & Indrenius

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