Employing People in Finland by International Firms

By Pekka Valo, Aliant Finland. The general rule is that when people are employed or usually work in Finland the Finnish employment legislation is applied. Finland has adopted Regulation (EC) 593/2008 on the law applicable to contractual obligations (Rome I) and therefore the parties to an employment contract can choose which law governs their relationship. However, the Finnish mandatory employment legislation, and the provisions of any applicable collective agreement, will still apply even if another jurisdiction’s law is identified as the governing law in the employment contract.

The main laws regulating employment relationships in Finland are the following:

Employment Contracts Act

Working Hours Act

Annual Holidays Act

Act on the Protection of Privacy in Working Life

Act on Co-operation within Undertakings (Co-operation Act)

These acts are generally applicable to all employment relationships in Finland. In addition, the provisions of any national collective agreement applicable in the relevant business sector must also be observed as minimum conditions of employment.

A written employment contract is not required in Finland. However, the employer must provide the employee with a written statement of the key employment terms by the end of the employee’s first salary period. Although employment contracts need not take any specific form, it is customary to have written employment contracts in Finland. The general principle of the employment legislation is protecting the employee, which includes absolute legal provisions that cannot be departed from if that departure would be detrimental to the employee. These include, among other things, protection against dismissal, and provisions concerning maximum working hours and annual holiday.

A collective agreement may apply to employment relationship depending on the business sector. Collective agreements are negotiated between trade unions and employers’ organisations for a particular trade or industry. They play a central role in the Finnish labour market. The main distinguishing feature of employment law is therefore the prevalence of collectively agreed terms and conditions of employment. Certain collective agreements can be declared generally applicable, provided that the agreements are considered representative in the specific sector in question. These collective agreements must be applied as minimum conditions of employment to all employment relationships in the sector concerned.

Collective agreements are usually very detailed and in some business sectors complicated. As any errors made by the employee may impose penalties it is recommended to use expert advice when setting up procedures relating to employment relationships and when there are any major changes in business operations.