Lay-offs or dismissals of staff ahead

Production and economic reasons can lead to lay-offs or dismissals of staff. Employment may also end for other reasons. At Job Market Finland you will find information on employee and employer negotiations, lay-offs, dismissals, and options regarding them.

If your company’s financial situation has deteriorated, laying off employees or ending their employment may be the first solutions that come to mind. However, you should familiarise yourself with the different options, especially when a difficult situation only seems temporary.

Working hours arrangements 

Using working hours arrangements, such as a work hours bank, you can regulate the working hours of your employees and create flexibility for seasonal work, for example. With working hours arrangements, you can have your employees work more in busy times and have them accumulate paid leave for a quieter period. Remember to take care of your employees’ well-being particularly well during busy times.    

Transfer of annual leave 

You may be able to avoid dismissal or lay-off of an employee by transferring annual leave. Remember to negotiate the transfer first with your employee. 

Complementary training 

You can develop your employees' skills in a changing work environment through complementary training. First, discuss with your employee whether they are interested in the training and the new tasks it enables. 

Offering other work 

Offering other available work before dismissing employees is an employer’s legal obligation. As an employer, you should always determine whether your company would have another possible job for the employee about to be dismissed. You should arrange training for a new position if it is reasonable for both you and your employee. 

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If the organisation of your employees' working hours or additional training does not solve your company's difficult situation, you can avoid dismissals with lay-offs. In this case, the employee's work and payment of salary will end, but the employment relationship will continue.

In the lay-off process, your employee's work and payment of salary are temporarily interrupted, but your employment relationship does not end. Lay-offs can be either full-time or part-time. In part-time lay-offs, your employees only work part of their daily or weekly working hours.

As an employer, you can decide on the need for lay-offs unilaterally, but you can also agree on lay-offs together with your employee.

Lay-offs always require justifications

As an employer, you can lay off your employees either indefinitely or for a fixed term. You may lay an employee off on two different grounds.

You may lay off an employee for an indefinite period if you would have a financial or production-related reason to also dismiss the employee. The amount of work must have decreased substantially and permanently, and you must not be able to offer the employee any other work or training.

If your opportunity to offer work has been temporarily reduced, you can lay off your employee for a fixed term. Fixed-term lay-offs can last up to 90 days. In this case, too, the precondition for lay-offs is that you cannot offer your employee other work or training.

Lay-offs primarily apply to your permanent employees. You can lay off a fixed-term employee only if they work as a substitute for your permanent employee and you would be entitled to laying off said permanent employee.

As the employer, you may only agree with your employee on a lay-off for a fixed period and on the basis of the employer's activities and financial status.

The employee must be notified of the lay-off

You must always give notice of the lay-off to the employee who will be laid off. The notice of lay-off must be given in person. If this is not possible, you can submit the notification by letter or electronically. The notice of the lay-off must also be delivered to the representatives of the employees to be laid off.

You must give notice of the lay-off 14 days before the start of the lay-off at the latest. The notice period may also be longer, so check the possible collective agreement for your field.

The notice of lay-off must state

  • the grounds for lay-off,
  • the start date of the lay-off, and
  • The duration of the lay-off or an estimate of duration.

In case of fixed-term lay-offs, state the exact duration.

You must provide a written certificate of the lay-off if your employee requests it.

Training can be used to develop the expertise of laid-off personnel

As an employer, you can train your laid-off personnel using Targeted Training (TäsmäKoulutus) or Change Training (MuutosKoulutus). These joint procurement training programmes are organised and funded together with TE Services. The company must always agree on organising the training with the TE Office or the ELY Centre.

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Change negotiations are joint activities between the employer and the personnel, the aim of which is to ensure the employees' possibilities of influencing their working conditions.

As an employer, you are subject to a statutory obligation to negotiate if you regularly employ at least 20 employees, and your organisation is about to experience 

  • changes in at least one employee's work tasks, working methods or arrangements for working facilities or working hours, 
  • actions that may lead to laying off or dismissing one or more employees or changing their full-time work into part-time work on economic or production-related grounds, 
  • a decision on lay-offs, or 
  • a transfer of business. 

Before starting the change negotiations, you must submit a written proposal for the negotiations, which must include at least the date and location of the negotiations and a proposal on the issues to be discussed. The negotiations shall address the rationale, impact, and options of measures directed at personnel. Often both parties have a separate representative in the negotiations. In the change negotiations, the parties must act constructively and negotiate in a spirit of cooperation in order to reach consensus. 

The change negotiations involve fixed time periods. Violating these can incur compensation payments or fines. Read the instructions for change negotiations carefully.  

If you have under 20 employees, the change negotiations will not apply to you. However, before dismissal, you must provide your employees with an explanation of the reasons and alternatives for dismissal and inform them of the employment services available to them

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You can only dismiss your permanent employee for a justified reason. Dismissal of an employee in a fixed-term employment relationship is only possible if it has been agreed upon separately. If your employee has violated their obligations very seriously, you can terminate the employment relationship. After the dismissal, you also have obligations regarding the offer of work and the reinstatement of the employee.

Dismissal of a permanent employee

You must have a justified reason for dismissing an employee with a permanent work contract. Also remember that the dismissed employee's employment relationship does not end immediately, but after the period of notice. The length of your employee's employment relationship affects the duration of the period of notice. You must consult the employee before ending the employment relationship.

However, your employee may resign from a permanent employment relationship without a reason. They are still obliged to observe the period of notice.

You may have a reason for dismissal if

  • your employee violates the obligations of the employment relationship,
  • your employee's prerequisites for carrying out work change significantly, and they can no longer do their work, or
  • the tasks you offer will be permanently reduced, and you are not able to offer another job to which your employee could be transferred or trained.

Read carefully the accepted and prohibited grounds for dismissal on the website of the Occupational Safety and Health Administration in Finland.

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Termination of fixed-term employment

A fixed-term employment relationship ends at a time agreed in advance in the employment contract or when your employee has completed the work agreed in the employment contract. It is only possible for you to dismiss your fixed-term employee in the middle of the employment relationship if you have separately agreed upon it either in the employment contract or during the employment relationship.

If you enter into a fixed-term employment contract with your employee for more than five years, the practices of terminating a permanent employment relationship apply to the employment relationship.

Termination of employment relationship

In the case of termination of an employment relationship, the employment relationship is cancelled immediately without a period of notice. As an employer, you can only terminate an employment relationship if your employee has violated their obligations very seriously. Your employee may also cancel the employment relationship if you have seriously violated your obligations as an employer.

During the trial period, both you as an employer and your employee can terminate the employment relationship without a specific reason.

You can find detailed instructions on terminating an employment contract and its possible reasons on the website of the Occupational Safety and Health Administration in Finland.

Obligation to offer work and provide training

When you dismiss your employee, you have an obligation to offer them employment, primarily employment corresponding to their current duties. In the absence of such work, the employee is to be offered other work corresponding to their training, professional skills, or experience.

You must provide the employee with the training required for new tasks given that organising and participating in it are reasonable for both you and the employee.

If you also control human resources matters in another organisation, you must determine whether the obligation to offer work or training can be fulfilled in these other organisations. A person who has been dismissed is not required to be a job seeker for this obligation, and their status must not be checked from the TE Services. The fulfilment of this obligation does not eliminate any subsequent readmission obligation.  

Please remember that when you need more employees for tasks that are suitable for part-time employees, you must first offer work to your part-time employees.

Re-employment obligation

If you employ new personnel within four months of termination of the employment relationships of persons dismissed for production-related and financial reasons, you have the obligation to first offer the work to the employees dismissed from the same or similar work.

If the employment relationship has lasted for 12 years, the rehiring period is six months. For municipal office holders, the duration of the re-employment obligation is nine months. The duration of the re-employment obligation for civil servants is 12 months and for employees nine months. Longer re-employment periods may also be agreed upon in collective agreements or change negotiations. The re-employment obligation does not apply to lay-offs.

If your organisation has a vacancy that would be suitable for an employee subject to the re-employment obligation, you can check by secure email whether the employee is a job seeker in the TE Services, unless otherwise agreed during the change negotiations. The TE Office or the local government pilot will record the query in its information system. If the person is a job seeker at the time of the check, you must offer them employment. You are responsible for keeping the employee's contact information, offering employment, and for ensuring that it is a genuine need for labour.

The obligations described above also apply to the employer who has dismissed employees as a result of the restructuring procedure.

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If you need to dismiss employees for production-related and financial reasons, familiarise yourself with change security. Change security helps both the employer and the employee who is to be dismissed.

The objective of change security is to help the dismissed employee and make the change situation easier for you as an employer.

The change security operating model includes

  • enhanced communication,
  • preparation of an action plan to promote employment together with personnel,
  • preparation of an employment plan in TE Services for a dismissed person,
  • paid leave for dismissed employees to look for a new job,
  • arranging training or participating in the costs of studies organised by other parties so that the dismissed person may acquire training during the period of notice or in the early stages of unemployment, and
  • providing occupational health care to the dismissed person for six months from the end of the obligation to work.

The TE Office also offers you change security services in regions that are part of the local government pilot on employment. There are designated change security experts at TE Offices who are responsible for TE Services in change security situations. Additionally, the TE Office is responsible for preparing an employment plan for job seekers who are part of the municipal experiment when the job seeker who is covered by the change security has not yet transferred to the local government pilot on employment.

Change security includes obligations that apply to you as an employer. The obligations depend on the number of your subordinates and the number of people you are about to dismiss.

Extended restructuring protection for those aged 55 or over

Extended restructuring protection is intended for you if you are 55 or older. The purpose of the service is to promote your rapid employment and to improve your position in the labour market.

You are entitled to restructuring protection for those aged 55 or over if

  • you have turned 55 at the latest on the date of your dismissal,
  • your employment contract has been terminated for financial or production‑related reasons on 1 January 2023 or later,
  • you have worked for the dismissing employer for at least five years with interruptions of no more than 30 days,
  • you have registered as a jobseeker with the TE Office within 60 days of the dismissal.

Restructuring protection for those aged 55 or over includes

  • restructuring protection allowance,
  • restructuring protection training,
  • an employment leave of 5, 15 or 25 days.

The restructuring protection allowance corresponds to your average monthly salary. Remember to apply for restructuring protection allowance to your unemployment fund or Kela within three months of the end of your employment relationship.

Restructuring protection training is a service intended for persons aged 55 or over who have been dismissed from their employment relationship. The TE Office must arrange and grant it once information on the person’s dismissal has been gained from the employer.

Extended restructuring protection for those aged 55 or over
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Prepare an action plan to promote employment with the personnel

If you intend to dismiss at least ten employees, you must prepare an action plan to promote employment together with your personnel. This must be prepared when the cooperation procedure begins.

The action plan must include

  • the planned timetable for change negotiations,
  • procedures to be followed in the change negotiations,
  • the plans for principles to be observed during the period of notice while using the services of TE services, and
  • the principles to be used in helping the affected employees find new employment or training.

Please notify the TE Office of the termination of the employment relationship of the dismissed employees. Inform the TE Office of the number of employees to be dismissed, their professions, work duties, and the dates of termination of their employment relationships. Inform the employees that they are entitled to an employment plan.

You can submit a notification using the form ‘Employer's notification’. Use e-Identification to log in to the Enterprise and Employer E-service, select ‘Contacts and documents’ on the front page and send the completed form.

If there are fewer than ten employees to be dismissed, you must explain in the change negotiations how your employees can apply for other jobs, training, or TE Services during their period of notice.

Provide coaching or training for dismissed employees

If you regularly employ at least 30 employees, you must offer those dismissed the opportunity to participate in coaching or training that promotes employment. This applies to employees who have been employed by you continuously for at least five years. You can offer the possibility either during the period of notice or in the early stages of unemployment.

You must pay for the coaching or training you offer. You can also agree with the employee that you will pay for the training or coaching that they themselves acquire.

The principles governing the organisation of training or coaching are recorded in the work community development plan, which must be updated after the change negotiations.

If you fail to comply with the obligation to provide coaching or training, you must pay your employee a sum equivalent to the value of the coaching or training.

Arrange occupational health care for the dismissed employee

If you regularly employ at least 30 employees and the dismissed employee's employment has lasted for at least five years, as an employer, you are obliged to arrange occupational health care for six months as of the termination of the obligation to work. For this period, you will receive compensation under the Health Insurance Act.

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The collective agreement applicable in the field and the employee's personal employment contract restrict the employer's unilateral right, i.e. the right to supervise work.

However, as an employer, you must comply with the following principles.

  • The right to supervise work only applies to working hours.
  • Provisions that violate the law or good practice are prohibited.
  • The employee's physical and professional capacity to perform the assigned task must be considered.
  • Changes that significantly affect the position of the employee must be negotiated in accordance with the cooperation procedure.
  • The employee's privacy must not be violated.

In addition, matters that restrict the right to supervise work may be agreed upon in the employment contract. For example, if working hours or tasks have not been recorded in the employment contract, you must provide a written report to the employee at the latest after the end of the first pay period.

Remember that as an employer, you cannot usually unilaterally change the terms and conditions of employment described in the employment contract, but they must be re-agreed with the employee.

The occupational safety and health website contains a detailed list of the employer's obligations laid down in legislation.

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