There has recently been an update to Finnish legislation regarding non-competition agreements with employees, which will result in the employer having to pay the employee a monetary compensation during the time of the non-competition restriction. These changes will take effect on 1 January 2022. For non-competition agreements entered into before the new legislation takes effect, the new rules would apply after a one-year transition period i.e. 1 January 2023. During the transition period, the employer is entitled to terminate any unnecessary non-competition agreements that have been made before the new law comes into force, without the notice period set out in the new legislation.
The key changes are:
The employment contract can be terminated under two scenarios:
- Production, financial and reorganisation related grounds
- Employee’s person related grounds
To terminate the employment under option one, the available work has to have reduced substantially and permanently, and there must be no other suitable positions vacant. If the employer employs regularly at least 20 employees, the employer has to undergo consultation negotiations before making decisions about termination(s).
To terminate with option two, the employee has to have seriously breached or neglected their substantial obligations arising from the employment relationship. Option two also offers the possibility to terminate employment with immediate effect without notice if there’s a serious breach of obligations on the part of the employee.
Worker’s compensation insurance
Workers’ compensation insurance is part of Finnish social security. It provides cover for all employees and compensation is paid, in accordance with the Employment Accidents Insurance Act, for injuries resulting from an accident at work or an occupational disease.
In Finland, the statutory workers’ compensation insurance is administered by private accident insurance companies. PEO Worldwide has a policy with If P&C Insurance — a private accident insurance company.
The Employment Fund (Työllisyysrahasto) was launched on 1 January 2019 through the merger of the TVR and the Education Fund. It’s an organisation established by law, regulated by the Finnish Financial Supervisory Authority and forms part of the Finnish social security system.
Unemployment insurance contributions are used to finance costs such as earnings-related unemployment benefits, adult education allowances, pension benefits and Kela benefits. The employee and employer are obliged to make unemployment insurance contributions.