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Employment Agreement Essentials

Understand the key elements of employment contracts in Finland

Types of employment agreements

In Finland, employment agreements are categorized based on their duration and purpose. The most common types include:

Indefinite Contract (Toistaiseksi voimassa oleva työsopimus)

This is the most common type of employment agreement in Finland. It remains valid until terminated by either party with a designated notice period as outlined in the Employment Contracts Act (Työsopimuslaki, 55/2001). Employers need a legitimate reason for dismissal, while employees can resign without providing a reason.

Fixed-Term Contract (Määräaikainen työsopimus)

These contracts are for a predetermined period and terminate automatically upon the expiry of the term, unless extended through a written agreement. Employers must have a justifiable reason for employing someone on a fixed-term contract, such as:

  • Acting as a substitute.
  • Seasonal work.
  • Fixed-term project.
  • One-time work.
  • Training period.

Apprenticeship Agreement (Oppisopimustyösopimus)

This agreement combines vocational education with on-the-job training. It's a fixed-term contract specifying working hours, wages, and the applicable qualifications being pursued. Collective agreements in the relevant sector may also apply.

Temporary Agency Work (Työntekijän vuokraus)

This involves working for a temporary work agency that assigns you to various client companies. The employment contract is with the agency, and the terms are typically fixed-term.

Collective agreements, which are negotiated by labor unions and employer organizations, often play a significant role in determining employment terms and conditions in Finland, including wages, working hours, and holidays. It's crucial to check if a collective agreement applies to your specific sector and position.

Essential clauses

Finnish employment agreements, although not required to be in writing, are more beneficial when they clearly outline the working relationship. Here are some essential clauses to consider:

Basic Employment Information

  • Parties: Include the names and contact details of the employer and employee.
  • Type of Contract: Indicate whether it's an indefinite or fixed-term contract.
  • Start Date and End Date: Define the commencement and potential termination of the contract.

Job Description and Duties

  • Job Title: Provide a clear description of the employee's position and responsibilities.
  • Location: Specify the primary workplace or guidelines for remote work arrangements.

Working Hours and Schedule

  • Regular Working Hours: Define the typical weekly or monthly working hours.
  • Overtime: Outline procedures and compensation for overtime work, if applicable.

Compensation and Benefits

  • Salary: Specify the gross salary amount and payment frequency.
  • Benefits: List any additional benefits offered, such as health insurance, pension contributions, or holiday pay.

Leave and Holidays

  • Annual Leave: Outline the entitlement to annual paid vacation days.
  • Sick Leave: Reference the statutory sick leave regulations and any supplementary company policies.

Termination Clauses

  • Notice Period: Define the required notice period for termination by both employer and employee, as mandated by the Employment Contracts Act.
  • Grounds for Termination: Outline the potential justifications for dismissal by the employer, following the principles outlined in the Act.

Additional Clauses (Optional)

  • Confidentiality: Include a clause protecting sensitive company information, if necessary.
  • Intellectual Property: Specify ownership rights over any intellectual property created during employment.
  • Non-competition Agreement: This clause restricting post-employment activities requires careful consideration and legal advice.

Probationary period

In Finnish employment law, as outlined in the Employment Contracts Act (Työsopimuslaki, 55/2001), employers and employees can agree on a probationary period (koeaika) at the start of employment. This period acts as a trial phase for both parties to evaluate suitability before the full rights and obligations of the employment contract take effect.

Maximum Duration of Probationary Periods

The maximum probationary period is typically four months. However, under certain circumstances, it can be extended to six months. If the fixed-term employment contract is shorter than eight months, the probationary period cannot exceed half the contract duration. For employers providing special work-related training lasting more than six continuous months (excluding regular job orientation), the probationary period can be extended.

Termination During Probation

During the probationary period, either party can terminate the contract with immediate effect without needing a specific reason. However, reasonable notice periods may apply in some situations based on collective agreements.

Documentation of Probationary Periods

While not mandatory, it's advisable to clearly outline the probationary period in the employment contract, including its start and end date.

Collective Agreements and Probationary Periods

Collective agreements in specific sectors may have stipulations regarding probationary periods, including limitations on their duration. It's important to check if a relevant collective agreement applies to your employment.

Confidentiality and non compete clauses

In Finland, employment agreements can encompass both confidentiality and post-employment competition. This article will delve into the legal aspects of these clauses.

Confidentiality Clauses

Confidentiality clauses are often included in employment agreements to protect confidential business information. These clauses prohibit employees from disclosing such information to unauthorized parties during and after their employment. The clauses should explicitly define what is considered confidential information, which could range from trade secrets and customer lists to marketing strategies and unpublished inventions.

Non-Compete Clauses

The Finnish law is relatively strict when it comes to non-compete clauses. The Employment Contracts Act permits such clauses only under specific circumstances:

  • Weighty Reasons: There must be a particularly strong justification for restricting the employee's ability to work for a competitor. This justification is assessed based on factors like the nature of the employer's business, the need to protect trade secrets or specialized training provided, and the employee's position and responsibilities.

  • Compensation: Since January 1st, 2022, employers are obligated to provide compensation to employees for the duration of the non-compete period. The compensation amount, maximum non-compete period, and payment schedule are all regulated by the Act.

  • Maximum Duration: The maximum duration of a non-compete clause is six months.

Important Note: Agreements entered before January 1st, 2022, are subject to a transitional period ending December 31st, 2022. The new compensation requirements fully apply to such agreements from January 1st, 2023 onwards.

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