Working Life in Motion: A Look at Current Employment Law Reforms

The year 2025 was an exceptional year of change in Finnish employment law, and the pace is set to remain almost as intense in 2026. The reforms affect the everyday operation of workplaces across the entire employment lifecycle, from agreeing on employment terms to terminating employment relationships.

Local agreements, cooperation and industrial peace

In 2025, the scope for local agreements was extended to non-organised workplaces. This gave companies greater opportunities to agree on deviations permitted under collective agreements even without membership in an employers’ association. For example, where a collective agreement permits the parties to agree differently on the pay period, such an agreement may now also be concluded at workplaces where the employer is not a member of an employers’ association. At the same time, the rules governing industrial action were tightened. Political strikes and sympathy action were restricted, and the applicable sanctions were increased with the aim of reducing disruption in the labour market. An export-led wage model was also established as the new general framework for collective bargaining. This means that export sectors will in future set the general scope for pay increases across the labour market. The revised Act on Co-operation within Undertakings significantly reduced the obligations of companies with fewer than 50 employees and shortened the statutory change negotiation periods for all employers falling within the scope of the Act. As a result, negotiation processes relating to organisational changes will become considerably less frequent in companies employing between 20 and 49 people. At the same time, companies with fewer than 50 employees may conduct dialogue with their personnel more informally and in a manner suited to the particular workplace. The information and dialogue obligations relating to transfers of undertakings, mergers and demergers continue to apply to all companies covered by the Act. Companies with fewer than 20 employees remain entirely outside its scope, while companies with fewer than 50 employees are now subject to the Act in a substantially more limited range of personnel change situations.

The reform of the Act on Co-operation within Undertakings will continue during 2026. The threshold for employee representation in company administration is expected to be lowered from 150 to 100 employees. Employee representation refers to the personnel’s right to participate in the employer’s decision-making, executive, supervisory or advisory administrative bodies. In future, representation would be arranged either on the board of directors or in the management team, depending on the employer’s decision. The government proposal is expected to be submitted during spring 2026.

Obligations throughout the employment lifecycle are changing 

From the beginning of 2026, a proper reason will be sufficient for terminating an employment relationship on grounds related to the employee. Previously, the reason had to be both proper and weighty. A warning will generally continue to be required before termination is considered, meaning that the employee must be given an opportunity to correct their conduct. Grounds related to the employee may continue to concern not only breaches of employment obligations, but also changes in the employee’s ability to perform the work, such as a substantial and permanent reduction in working capacity. In such cases, the employer must examine whether the employee could be reassigned to other duties in order to avoid termination. Underperformance was ultimately not expressly included in the legislation as a ground for termination. However, it may still constitute a proper reason for terminating employment if the employee fails to improve their performance despite appropriate performance management.

As before, the existence of grounds for termination must always be assessed on a case-by-case basis and in light of the circumstances as a whole. Minor misconduct, such as a single instance of lateness, will not generally meet the threshold for a proper ground for termination.The rules on fixed-term employment agreements are also expected to become more flexible. According to the proposed legislation, the parties could conclude a fixed-term employment agreement for a maximum of one year without a specific justification where it is the first employment agreement between them.

A fixed-term agreement could also be concluded without justification if the parties’ previous employment relationship ended at least two years before the new fixed-term agreement begins. The proposed legislation would allow such an agreement to be renewed no more than twice during the year following the conclusion of the first agreement, provided that the combined duration of the agreements does not exceed one year. A fixed-term agreement concluded without specific justification could also be terminated by either party after six months. It should nevertheless be remembered that an employer would still need statutory grounds for terminating the agreement.

Under the proposal, an employer would also be required to offer work to the employee after the end of the fixed term if the employer recruits additional personnel for the same or similar duties. This obligation would remain in force for a period corresponding to one third of the combined duration of the fixed-term agreements concluded without justification. For example, if the agreements had lasted for a total of one year, the employer would be required to offer work for four months after the end of the fixed-term employment. However, the obligation would not apply if the parties could still conclude another fixed-term agreement without justification under the conditions described above.

It is also worth noting that replacement recruitment would not trigger the obligation. The corresponding position becoming available would need to represent an actual increase in the company’s headcount.

Although the purpose of the reform is to make recruitment more flexible, it appears likely to introduce a new set of deadlines and assessment criteria that employers will need to keep track of.

The statutory lay-off notice period is expected to be shortened from the current 14 days to seven days. Where a collective agreement provides for a notice period longer than the statutory seven days, the workplace could agree locally on a seven-day notice period with either the shop steward or the personnel.

The employer’s re-employment obligation applies to employees whose employment has been terminated on financial and production-related grounds. It requires the employer to offer the former employee the same or similar work that becomes available, provided that the employee is registered as a jobseeker. The re-employment period is currently four or six months, depending on the duration of the terminated employment relationship. In future, the obligation would apply only to companies employing at least 50 people.

Equality is receiving greater emphasis in employment and pay 

The Ministry of Social Affairs and Health has been preparing amendments to the Act on Equality between Women and Men concerning the equal treatment of employees and family-friendly working life. The work focuses on matters including the prohibition of discrimination against fixed-term employees in recruitment on the grounds of pregnancy, parenthood or family care responsibilities, including in temporary agency work. The aim is also to encourage a more equal distribution of family leave between parents. Concrete legislative proposals are expected no earlier than spring 2026. The amendments are expected to clarify the provisions intended to prevent discrimination on the grounds of pregnancy and family leave, increase the resources of the Ombudsman for Equality and extend the time limits for bringing claims concerning suspected discrimination in recruitment.

The EU Pay Transparency Directive must be implemented nationally by 7 June 2026. The legislative preparations are still ongoing, and the government proposal is expected in spring 2026.

The purpose of the Directive is to strengthen equal pay for equal work or work of equal value. Although the legislation already requires equal pay, the Directive will introduce additional rights for employees to receive information about the average pay levels for the same work or work of equal value and the criteria used to determine pay. Job titles must be gender-neutral, and information about pay must be provided during the recruitment process. These obligations will apply to all employers.

The current Finnish equality legislation requires companies with at least 30 employees to conduct regular pay surveys. On the basis of these surveys, unjustified pay differences between women and men must be assessed and corrective action taken where necessary.

Other current legislative initiatives

Under the Annual Holidays Act, employees may save part of their annual leave to be taken at a later date. At present, the employee may decide when to take this saved leave. The legislation is being amended so that, in future, the employer would determine the timing of saved leave in the same way as other annual leave, unless otherwise agreed. A legislative project is also under way concerning data protection in working life. Its primary purpose is to clarify the processing of employees’ personal data in relation to the EU General Data Protection Regulation.

The national Act on the Protection of Privacy in Working Life regulates matters including the processing of employee data such as health information, technical monitoring in the workplace, and the retrieval and opening of employees’ email messages. During 2025, a working group assessed issues such as the general necessity requirement for processing under the current legislation and the processing of employee data on the basis of consent. No specific legislative amendments have yet been announced.

The limitation periods and time limits for bringing claims concerning working time-related wage receivables are also intended to be clarified. At present, different courts have interpreted the limitation periods and time limits applicable to claims based on collective agreements in different ways, creating uncertainty for both employers and employees. In addition to working time-related claims, annual holiday claims are also being assessed. Legislative proposals are expected no earlier than spring 2026.

The taxation of legal costs and financial penalties paid by an employer on behalf of an employee has changed. From the beginning of 2026, the Finnish Income Tax Act allows an employer to pay, on a tax-exempt basis, an employee’s legal costs and financial penalties arising from civil, criminal or administrative proceedings connected with the employment relationship. In addition to the employer having an interest in the proceedings, tax exemption requires that the proceedings arose in connection with the performance of the employee’s duties and that it was not evident at the time of the conduct that the employee should have understood it to be unlawful. The amendment follows a court case from a few years ago in which criminal proceedings arising from the performance of the employee’s duties resulted in legal costs that were treated as taxable salary income for the employee.

The national implementation of the Platform Work Directive will introduce rules for work performed through digital labour platforms. Key issues include assessing whether the person is an employee or an entrepreneur, the transparency of algorithmic management, the applicable restrictions and obligations, and the legal remedies available to platform workers. A working group operating under the Ministry of Economic Affairs and Employment is currently preparing the necessary legislative amendments.

Greater flexibility or more employer obligations?

The employment law reforms clearly aim to introduce greater flexibility. At the same time, employers are being required to operate more transparently, and some of the reforms will create entirely new obligations. For employers, the changes therefore bring both opportunities and responsibilities. Companies may, for example, be able to respond more flexibly to changes in workforce numbers. However, equality and non-discrimination requirements will require operating practices to be assessed carefully to ensure that the employer does not unintentionally discriminate against anyone.

HR functions and company management should prepare for the changes well in advance, not simply because regulation requires it, but because anticipation helps ensure that day-to-day operations continue to run smoothly.

Kaisa Salo

Counsel

kaisa.salo@legalfolks.fi

+35840 168 1418

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