European Trade Union Institute, ETUI.

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Labour market reforms in Finland: background summary

After the round of negotiations which took place in 2013, new social laws and regulations came into force in January 2014, affecting unemployment benefits, parental leave or the development of workers’ skills. The government elected in 2015 obliged the social partners to accept a new labour market pact in order to boost Finland’s competitiveness, by decreasing companies’ costs and increasing the working time.

Main reforms

  • In January 2014, labour laws were modified with measures on work-life balance and to develop skills. People with children under the age of 3 receive a ‘flexible care’ allowance if they work part-time and stay with their kids the rest of the time. In addition, it was decided that Finnish employees are entitled to three training days a year to develop their professional skills. The employer, who can get a tax rebate if training meets certain criteria, has to pay for the training and the salaries during the training, and each company with 20 workers or more must implement a program for the development of their staff, after consulting with the trade unions on it.
  • At the same time, the minimum duration of unemployment insurance contributions before being entitled to income-based unemployment benefits decreased from 8 to 6 months. The waiting period for these benefits was decreased from 7 to 5 days of unemployment. The maximum duration for jobseekers to receive benefits now depends on the duration of the salaried activity: less than 3 years, the person will receive benefits for up to 400 days; more than 3 years they can get benefits for up to 500 days.
  • In 2015, a new government led by the centre party (agrarians) in a coalition with the conservatives (National Coalition Party) and the populists (True Finns) has applied pressure on the trade unions, threatening to impose by law unpopular cuts on public spending, targeting families, students, pensioners and tax-payers, and limit negotiation powers of the trade unions and employers in order to produce an economic stimulus. After a very agitated autumn, serious discussions in March 2016, finally resulted in a labour market pact, the so-called competitiveness contract with the following measures:
    • The annual working time will be 24 hours longer without an increase of wages, and the holiday pay for those working in the public sector will be cut by 30 percent for the next three years (These changes should be conducted separately in each of the some 300 collective agreements before the end of May. The unions can negotiate which is the best way to add 24 more working hours in their various fields).
    • Employees' pension insurance contribution will be raised by 1.2 percent, and employers’ share of the contribution is to be cut by the same amount. The unemployment insurance payment for the employees will also be raised by 0.85 percent. This means an average loss of 1,367 euros for employees from the private sector earning the average salary (3,284 euros before taxes), and 1,860 euros a year for employees in the public sector.
    • The existing collective agreements will last an additional 12 months with a freeze of wages for this period.
    • A new crisis clause is introduced to help businesses overcome extraordinary difficulties, which means that, at company’s level, it would be possible to adapt the terms of employment (salaries included) in order to help the company overcome the crisis.
    • All these decisions will be implemented through collective agreements at the branch level, which will describe how the measures are implemented.
  • The Finnish government will be launching from January 2017 a basic income experiment. Participants in the experiment will receive a tax-free €550, but the tax on their other incomes will be increased to finance the experiment.