New Government Programme: An Overview of Proposed Employment and Labour Law Reforms

New Government Programme: An Overview of Proposed Employment and Labour Law Reforms

Vaaleanpunaiseen puseroon sonnustautunut nainen istuu tuolilla tietokone sylissä selkä kameraan päin

1. Introduction

The Finnish Government has changed during the summer and the Programme of the new Government was published on June 16, 2023. The Government Programme outlines the Government’s aims and areas of focus, serving as a political action plan for its term of office.

The Government Programme includes numerous legislative reforms related to employment and labour, which would significantly change the Finnish labour markets and working life. The planned reforms aim to make the Finnish labour market more flexible, enhance incentives to work and promote employment and wellbeing at work, among other things. The Programme’s employment law reforms have already generated a lot of discussion in Finland, receiving praise from the employers' side and criticism from the employees' side.

In this newsflash, we have outlined the relevant legislative changes related to working life that the Government intends to execute during its four-year term of office. It is important to note that the measures set forth in the Government Programme may not necessarily be implemented as they are or at all.

For some of the reforms included in the Government Programme, legislative preparations have already begun. It is expected that over the course of autumn, the law reforms will progress.

2. Promoting Local Bargaining

The new Government intends to expand the possibility of local bargaining. Local collective bargaining will be made equally possible in all companies irrespective of their membership in an employer association or the nature of the employee representation system in the company. The Government will remove from the current legislation bans on local bargaining in non-organised companies that comply with a generally applicable collective agreement.

Company-specific collective agreements will be granted the authority to derogate, by agreement, from the same labour legislation provisions from which a derogation is now only allowed by means of a national collective agreement. Such authority will require that the company-specific collective agreement has been concluded from the employee’s side either by a national employee association or an employee association belonging to it.

At a company level, local bargaining will be allowed so that a shop steward, an elected representative, another representative elected by employees or the entire personnel can be a party to the local agreement. The legal protection for such representatives will be at the same level as currently stipulated by law for a shop steward.

A working group was set up on 3 July 2023 to prepare the legislative changes related to local bargaining. The Government is to submit the law proposal to Parliament during the spring of 2024.

3. Preventing Industrial Action and Promoting Voluntary Mediation

In order to reinforce the export-driven labour market model, where unions in export sectors would define the maximum pay increases, the Government will legislate that the general level of pay adjustments cannot be exceeded by a settlement proposal issued by the National Conciliator’s Office or a conciliation board.

The Government seeks to improve industrial peace. It will limit the exercise of the right to political industrial action to protests lasting one day at the most. In the future, solidary action will have to be reported in accordance with the Act on Mediation in Labour Disputes. Solidary action will also become subject to proportionality assessment, and legal solidary actions would be those that are proportionate in relation to their objectives, and the effects of which only affect the parties involved in the labour dispute.

The level of compensatory fine imposed for an unlawful industrial action will be increased. Continuing a strike that the Labour Court has found to be unlawful will result in a penalty payment of EUR 200 for an employee for participating in an unlawful industrial action.

The legislative changes related to industrial peace are currently being drafted, and the Government intends to submit the law proposal to Parliament during the fall of 2023.

4. Making Employment More Flexible

The Government plans to make several amendments to employment legislation to promote recruitment and dismantle the barriers to employment.

In the future, employment contracts could be established for a fixed term of one year without requiring a special reason. At the same time, it would be ensured that the reform does not result in unjustified use of consecutive fixed-term contracts.

Currently, in order for an employer to terminate an employment contract, proper and weighty reason is required. In the future, it would be sufficient that the employment contract is terminated with proper reason alone - weighty reason would no longer be required.

The legislation on sick pay for employees will be amended with a “waiting day”. Employers will not be obliged to pay sick pay for the employee’s first day of sick leave unless otherwise agreed in the collective agreement or employment contract. The payment obligation for the first day of sickness will however exist if the sick leave lasts five days or more, or if the incapacity for work results from an occupational accident or occupational disease.

The obligation to re-employ an employee who has been given notice on financial or production-related grounds will be removed from employers employing less than 50 persons.

The lower limit of the scope of application of the Co-operation Act will be raised to companies employing at least 50 employees, while the current threshold is 20 employees. In addition, the minimum negotiation periods for change negotiations will be shortened. The Government intends to assess other potential needs for changes to the Co-operation Act, including matters related to board representation.

The minimum notice period for layoffs will be shortened to seven days from the current 14 days, and it can be applied regardless of the provisions of the collective agreement.

The Government seeks to raise the amount of full-time work contracts as well as to ensure balanced terms of employment for part-time work. For this purpose, the Government will particularly monitor the impacts of the law reforms that came into effect on 1 August 2022 (mostly regarding variable working hours contracts) and evaluate the need for further measures.

5. Equality and Wellbeing at Work

The Government Programme includes several references to promoting equality and non-discrimination in working life. For example, compliance with the obligations laid down in the Equality Act will be monitored more effectively and special attention will be paid to preventing discrimination related to pregnancy leave and family leave. Pay transparency will be promoted in accordance with the minimum provisions of the EU Directive.

The Government aims to improve wellbeing at work and decrease the rate of absences from work with various measures. Among other things, the Government will strengthen the management of employees’ psychosocial stress by clarifying and compiling the relevant regulation as well as by increasing the collaboration between the workplace and occupational healthcare.

6. Other Changes Related to Working Life

The Government aims to address the shortage of skilled labour in Finland by investing in international recruitment. For example, tax incentives for foreign key personnel will be promoted, and the payments related to the entry process will become tax-exempt personnel benefits for companies.

Several changes will be made to migration legislation, impacting also individuals coming to work in Finland. The preconditions for residence permits based on employment will be tightened, and some new obligations will be imposed on the employer in this regard.

The Government plans to develop employment services, pensions and the social security of employees. Among other things, significant changes will be made to the unemployment security, and the current model of labour market support will be renewed. The Government will reform pay subsidies and allocate them especially to the private sector and third sector.

7. Takeaways

How should employers prepare for the planned changes at this stage? First, it is important to keep in mind that the Government Programme is about objectives and guidelines which might not be implemented at all. Many of the planned changes have garnered criticism and will probably not go through without opposition.

In any case, it is recommended to keep watch on the implementation of the Government Programme, as the planned changes are significant and would have a substantial impact on labour markets if realized. Considering the great number of reforms related to employment law, we have compiled below the planned changes that we believe are the most important for employers to pay attention to:

  • Limiting the right to strike
  • Expanding the possibility of local bargaining
  • Lowering the threshold for employment contract termination
  • Allowing fixed-term contracts without special reason

Merilampi’s employment and labour law team continues to closely monitor the legislative process related to the Government Programme. We are more than happy to provide further guidance on the upcoming legislative changes and how to prepare for them.

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