Employment relationship
Lay-offs
General information on topic
An employer may lay off an employee only for one of two reasons:
- the employer has a financial or production-related reason for terminating the employment contract, or the work has diminished substantially and permanently, and there is no other work or training to be offered to the employee. In these cases, the employer may lay off the employee until further notice.
- An employer may also lay off an employee when the employer’s potential for offering work has diminished temporarily and the employer cannot reasonably provide the employee with other suitable work or training. The work or the potential for offering work are considered to have diminished temporarily if they may be estimated to last a maximum of 90 days. In the latter case, the lay-off will be for a fixed term.
Lay-offs principally concern permanent employees. The employer is entitled to lay off an employee in a fixed-term employment relationship only if the employee is working as a substitute for a permanent employee and if the employer would be entitled to lay off the permanent employee if the permanent employee were working.
The above applies to the employer’s right to lay off employees unilaterally. Employer and the employee may also agree on a lay-off for a fixed period if this is needed in view of the employer’s operations or financial standing.
A lay-off may be a full-time lay-off, in which case the obligation to work is completely removed, or a part-time lay-off, in which case the daily or weekly working hours are reduced. The employment relationships of laid-off employees remain in force.
There may be provisions in the applicable collective agreement as to the order in which employees must be laid off. Also, matters may be agreed upon in local codetermination talks that must be taken into account when implementing lay-offs.
Employees are entitled to take employment with another employer during the lay-off. When the work situation improves, the employer will notify the laid-off employees of the resumption of work.
Lay-off notice
As soon as the need for lay-offs becomes known, the employer must present employees or their representative with an advance explanation of the lay-off. This may be given verbally or in writing.
The advance explanation must indicate:
- the grounds for the lay-off
- the estimated extent
- how it will be implemented
- when it will begin, and
- its duration or estimated duration.
The employer must give the employees or their representative an opportunity to be heard concerning the explanation given.
It is not necessary to present an advance explanation or to consult the employees in enterprises with at least 20 regular employees. In such enterprises, the procedures provided for in the Act on Codetermination in Undertakings must be followed.
Employees to be laid off must be notified in person no later than 14 calendar days before the beginning of the lay-off. Collective agreements may specify longer notice periods.
Instructions for employee
Rights and responsibilities before the lay-off
As an employee about to be laid off, you must be given the employer’s lay-off notice in person. If this is not possible, the employer may deliver the lay-off notice by mail or electronically.
The employer must, at your request, give you a certificate stating:
- the grounds for the lay-off,
- the starting time of the lay-off
- its duration or estimated duration.
If you are laid off and you need to apply for unemployment benefit, contact the TE Office (the Employment and Economic Development Office).
Rights and responsibilities during the lay-off
As a laid-off employee, during the lay-off you have the right:
- to accept other employment
- to live in housing provided as compensation in kind or on a lease tied to your employment contract
- to use your fringe benefits (e.g. a company phone or car), if it has been agreed that they will remain in force during the lay-off
- terminate your employment contract with immediate effect.
You will continue to accrue annual holiday during the first 30 days of lay-off.
During the lay-off, you must not:
- disclose any commercial or professional secrets of your employer
- establish a competing enterprise
- cause harm to your employer.
Resigning during a lay-off
While you are laid off, you can resign with immediate effect as long as you terminate your contract more than seven days before the date on which your employer has scheduled you to resume work. If you resign with less than seven days to go until the date on which you are due to resume work, you will need to work your notice period. If you have a fixed-term contract that does not specify a notice period, you will need to work out your contract.
Your employment will end as soon as you hand in your resignation to your employer. If you send your resignation by post or email, your employer is deemed to have received it on the seventh day after the date on which you sent it.
If you resign after you have been continuously laid off for more than 200 calendar days, you will be entitled to severance pay as well as holiday compensation. For example, a laid-off employee has a notice period of six months so he or she is, according to the Annual Holidays Act section 17, entitled in addition to monthly pay also to holiday compensation for that time. The holiday compensation will be paid at the end of the employment relationship. This does not apply in the case of part-time lay-offs. Your severance pay will be calculated on the basis of the period of notice specified by your employer. Severance pay is a form of compensation, and you will therefore have no obligation to work out your notice period.
If you sign an employment contract with another employer while you are laid off, you can terminate the second contract at five days’ notice regardless of the term of the contract.
To request a lay-off certificate, you may use this form: Document request to employer (doc, in Finnish).
Instructions for employer
Laying off is only allowed if one of the grounds given in the Employment Contracts Act is fulfilled. Employees are entitled to take employment with another employer during the lay-off.
Employees to be laid off must be notified in person at least 14 calendar days in advance. A longer period of notice for lay-offs may be specified in the applicable collective agreement.
An employee is always entitled to receive a written certificate of the lay-off, indicating its grounds, start time and duration. A lay-off notification must be given to the shop steward representing the employees to be laid off.
The following form may be used for preparing a lay-off notification and certificate: Lay-off notification and certificate (pdf, in Finnish).
Cancelling and ending a lay-off
The employer must cancel a lay-off already announced before the lay-off begins if the grounds for the lay-off no longer exist. This is the case for instance if the employer finds new work for the employee(s) to be laid off to do.
A lay-off may only be ended under the Employment Contracts Act. An employee laid off until further notice must be notified by the employer of the resuming of work at least one week in advance unless otherwise agreed.
If temporary work ends and a new lay-off is to begin, the employer must again observe the 14-day period of notice. Differing procedures and means for inviting employees to return to work more flexibly in the middle of the lay-off may be provided for in collective agreements.
A laid-off employee may return to work immediately when the grounds for the lay-off no longer exist, if that is convenient for both employer and employee.
Termination of the employment relationship of a laid-off employee
If the employer terminates a laid-off employee’s employment contract by giving notice so that the contract ends during the lay-off, the employee is entitled to severance pay. The employer may deduct a sum equal to 14 days’ wages from the severance pay if the employee has been laid off using a notice period of more than 14 days based on law or an agreement. Collective agreements may contain provisions derogating from the above.
Artificially interrupting a lay-off is not acceptable. For example, annual holidays do not interrupt a continuous period of lay-off.
If an employer is paying a terminated employee’s wages during their notice period, the employee must return to work according to the terms of their employment contract if work becomes available. This effectively interrupts the employee’s lay-off for the duration of their notice period. Employees who have resigned after being laid off for a period of at least 200 days have no obligation to return to work.
Legislation
Employment Contracts Act (55/2001)
- Chapter 5 Lay-offs
Annual Holidays Act (162/2005)
- Chapter 2, Section 7: Period equivalent to time at work
Forms (in Finnish)
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